Related Cos., the developer known for high-profile projects such as Manhattan’s Hudson Yards, is venturing into cold storage property with a planned $1 billion investment.
Related Fund Management, an affiliate of the New York-based developer with about $12 billion in assets under management, has unveiled RealCold, billed as a national cold storage provider. RealCold will begin by building its first two cold storage facilities in Lakeland, Florida, spanning 376,000 square feet, and Lockhart, Texas, with 310,000 square feet, RealCold said in a statement provided to CoStar News on Wednesday.
RealCold plans to break ground before the end of the year with the facilities available to the market in early 2025. It also plans to enter four “additional strategic markets” within the next three years, the statement said, while a Related spokesperson told CoStar News that $1 billion is planned for the venture.
Related Fund Management’s “entrance into cold storage was based on our view that there is not enough cold storage in the U.S., and that much of the existing stock is older and in the wrong locations given population shifts over the last few years,” Managing Director Michael Winston said in the statement.
Related, a company that's undertaken the high-profile development of the mixed-use Hudson Yards in New York City, isn’t the only company jumping on the cold storage bandwagon. About two-fifths of respondents in a CBRE investors survey last year said they were pursuing cold storage assets, up from 22% in 2021, and 7% in 2019.
The Lakeland facility is expected to serve 10 million people within 100 miles, and the Lockhart site to serve 6 million people within the same distance. The Wall Street Journal earlier reported the news.
RealCold CEO Keith Goldsmith is a logistics industry veteran who has had stints at both cold storage warehouse giants Americold Logistics and Lineage Logistics, according to his LinkedIn page.
Cold storage demand is expected to pick up as online’s share of total U.S. grocery sales is projected to jump to 21.5% by 2025 from 13% in 2021, according to a separate 2022 CBRE report, adding edible perishables represent a small but growing percentage of total online grocery spending.
Some 3.3 million square feet of speculative U.S. cold storage development, or projects without a lease lined up, was underway in the second quarter of 2022, more than 10 times from only 300,000 square feet in 2019, according to the CBRE study.
Related’s entry into the property type doesn’t come without challenges. According to the CBRE study, new cold storage entrants need to contend with a market that comes with “high construction costs, complex user requirements and other barriers to entry.” For instance, Lineage Logistics and Americold together accounted for 71% of North America's total cold storage space, according to the CBRE study, citing Global Cold Chain Alliance.
“There are few key players in this highly specialized and competitive industry,” according to CBRE. “As technological systems become more sophisticated, the benefits of economies of scale far outweigh the operational challenges brought on by increased size.”