Near-Zero Vacancy, Strong Demand Make Greater Philly Hungry For More Cold Storage

Greater Philadelphia’s industrial boom has leveled off in recent months, but the region is still hot for cold storage space.

Low vacancy and an aging stock mean new cold storage construction is penciling for developers in the region as ports along the Delaware River remain a vital hub for U.S. food imports.

“There’s a lot of consensus out there that there is a lot of pent-up demand for cold storage,” Greek Real Estate Partners Managing Partner David Greek said. 

Philadelphia has the nation’s largest refrigerated port, and the region had the third-most cold storage space delivered in the country between 2019 and 2024, according to CommercialCafe.

Eastern Pennsylvania has 33.4M SF of cold storage space spread across 129 properties, according to data provided by Lee & Associates. The region’s vacancy rate sits at less than 2.5%.

Those properties are disproportionately old and Class-B or C, with 54% built before 1990 and just 14% built after 2015.

“A lot of those older facilities are just not really that functional anymore,” Greek said. “There’s a need to replace these properties at a much faster cadence.”

Vacancy for Class-A cold storage space, which makes up 18% of the market, is basically zero, Lee & Associates Regional Research Director Heather Kreiger said.

She said nearly 1M SF of cold storage is under construction and another 1.5M SF is in the pipeline across the region, but she doesn’t think it will add much to the vacancy rate. 

“The market is extremely tight,” she said

“It’s not going to take a long time to find tenants for that space.”

This stands in contrast to the Lehigh Valley's overall warehouse market, which has seen construction activity slow this year and vacancy rise to 8.8% as of the second quarter. 

Underpinning the strong demand for cold storage are major shifts in the food industry. 

Long-term health trends are leading home cooks to prioritize fresh foods over shelf-stable goods, Greek said. But he attributed much of cold storage’s juice to a booming restaurant industry. A greater share of Americans are eating out or ordering in from businesses that tend to eschew preserved food for fresh ingredients, which require cold storage.

The trend may have even stronger tailwinds in eastern Pennsylvania, which Kreiger said has a large food manufacturing sector.

That includes meat- and cheesemaker John F. Martin & Sons, which in 2023 purchased a site for a 180K SF build-to-suit facility with cold storage and freezer space in Newmanstown, about 20 miles outside of Reading.

Activity in the food sector has been a major boon for the Port of Philadelphia and other shipping facilities along the Delaware River. Collectively, the ports in Delaware, south Jersey and southeast Pennsylvania are the No. 1 destination for produce in the U.S., PhilaPort Director of Marketing Dominic O’Brien said.

About a third of the 7.4 million tons of cargo that pass through PhilaPort every year are refrigerated containers, he said.

PhilaPort is building a 165K SF cold storage facility with 65-foot ceilings for tenant Holt near the Packer Avenue Marine Terminal. It is expected to deliver in early 2027.

Construction is also underway in Northeast Philly, where Crow Holdings is building a 147K SF warehouse at 14515 McNulty Road with 57K SF of cold storage. The property, preleased by logistics firm Martin Brower, is scheduled to deliver by the end of the year.

Greek also said he sees opportunity in renovating greater Philly’s existing stock of cold storage buildings.

The roughly 25-year lifespan of a cold storage facility is much less than the seven decades a dry warehouse can be expected to last. Greek attributed this to the rate at which refrigeration systems tend to deteriorate. 

In south Jersey, the cold storage market totals 10.6M SF across 51 buildings, according to Lee & Associates. The region’s vacancy rate of 4.5% is spread across just three available spaces.

“To some degree, [South Jersey] might benefit from the north Jersey market being significantly more expensive,” Colliers Vice President Adam Gorodesky said.

Greek Real Estate Partners is building a 216K SF facility at 907 Pleasant Valley Ave. in Mount Laurel, New Jersey, for a joint venture between investment manager BentallGreenOak and cold storage firm RLCold.

BGO has invested heavily in cold storage. The company first entered the sector in 2015 and raised its first discretionary cold storage fund in 2021.

“We believe cold storage is resilient across cycles,” BGO Managing Director of the Americas Chase McWhorter said in an interview this summer.

“Food is an inelastic demand product, and that underpins the sector. Tenants make major investments into their space, and they operate as if they’re never going to leave, so leases are structured on a very long-term basis with many options.”

But BGO is one of the few institutional players in cold storage, Greek said. 

“A lot of the investment community sees it as a bit novel at the moment,” he said.

Colliers Vice Chair Richard Gorodesky said speculative cold storage projects can be a tough sell for investors. 

“There are opportunities, but it’s not something investors are going to want to spec,” he said. “If it’s a refrigerated building, you’re gambling on more than just the size. You’re gambling on the temperature.”

Greek also said speculative cold storage developments tend to be more expensive and unpredictable than those built with a tenant already signed on. Cold storage spaces cost roughly three times more to build than a dry warehouse. Tenants also typically have specific requirements for things like humidity controls and refrigerant systems.

“That stopped developers from guessing,” Greek said. “Inevitably, you were going to guess something wrong and have to retrofit the building.”

Greek said he sees promise in what he characterized as increased standardization for cold storage design requirements that have come with consolidation in the sector in recent years.

The industry used to be dominated by regional companies with limited financial capabilities, but Americold Realty Trust and Lineage Logistics began buying up those smaller firms over the past decade or so. 

“We remain pretty bullish on cold storage,” Greek said. “We like to build it. We like to own it. … We see this pent-up demand. We see the faster replacement costs, and we think this is a great business not only for a builder to be in long-term but for an investor or operator as well.”