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Why Cold Storage Is So Hot

What's a hot segment in Phoenix industrial space? Cool space. Literally. Cold storage is in high demand.

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JLL managing director Anthony Lydon tells us "more than a dozen food and beverage users" are now hunting for cold storage space in greater Phoenix. It's tricky because it's specialized space that's expensive to build and not developed on a spec basis, he adds. That makes it challenging to find space that's the right size with the right mix of amenities. Anthony's snapped with managing director Marc Hertzberg.

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Large users with buying power—and particularly those with specialized needs—are finding design-build options more attractive. For instance, Michael Lewis Co is building a 380k SF, 40-foot clear height freezer/cooler/dry warehouse in Goodyear. Once users find the space they need, they tend to stick with it. "The buildings are so specialized that the user tends to stay in place for 15 to 30 years,” says Marc.

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Some users are able to lease the space they need, however. This week grocery giant Kroger inked a 200k SF lease with Prologis for cold storage space in Phoenix. Anthony and Marc repped Kroger, while CBRE's John Werstler repped the landlord. “There's already a limited supply of cold storage product in the Phoenix market, and given the cost to build, it's very unlikely any new product will be built in the next 36 months,” John says.