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Cold Storage Feels The Chill Of Inflation, Power Costs

cold-storage

Cold storage is one of a few benefactors of the dramatic shift in consumer tendencies that resulted from the pandemic, but as the ebbing effects of the virus ripple and collide with other forces, this subsector of the red-hot industrial real estate market faces growing pains.

Like many sectors, rising inflation and interest rates, labor challenges and general economic uncertainty pose a challenge for owners and operators in this specialized real estate type, but a steady stream of demand keeps the industry at least partially insulated with cash flows tied to a universal activity: eating.

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High Flow Through Logistics Drawing Investor Attention

Institutional appetite for high flow through (HFT) logistics real estate remains strong, with Realterm raising raised $630 million in LP commitments for its latest fund that focuses on this category.

The Realterm Logistics Fund IV (RLF IV) hit its contractual hard cap of $630 million in LP commitments. It’s the fourth fund in the firm’s US closed-end, value-add Realterm Logistics Fund Series. Realterm defined HFT properties as ones that facilitate the movement, not the storage, of freight through the nation’s supply chain.

Property types include cross-dock truck terminals, transload and related trans-shipment, final mile delivery facilities, industrial outdoor storage, and parcel sortation, among others.
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Industrial Real-Estate Developers Are Hot On Cold-Storage Warehouses

Industrial real-estate developers have been stepping up building cold-storage warehouses in the U.S. without tenants lined up for the space, betting that pandemic-driven changes in the way consumers buy groceries and meals are here to stay.

Nearly 3.3 million square feet of refrigerated warehouse space was under construction through the second quarter of this year nationwide without companies slated ahead of time to take up the sites, some 1,000% more than was built in 2019, according to a report just by real-estate services firm CBRE.

The growth in what is known in real estate as speculative construction follows an upheaval in consumer buying patterns during the Covid-19 pandemic, as Americans rushed to buy groceries online and stocked up on more frozen foods while supermarket chains and food suppliers recast their supply chains to meet the demand.

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