These are heady days for Tippmann Innovation, which designs and builds cold storage facilities. Near the end of June, company president Rob Adams hopped from a ground-breaking ceremony of an extremely large, refrigerated warehouse in Sioux Falls, South Dakota, to a ribbon-cutting ceremony, which marked the opening of an even more massive, newly completed cold storage facility near Seattle’s Sea-Tac Airport. “We started one on Thursday. We opened one on Friday,” said Adams, back the following week in his Fort Wayne, Indiana office. The boom in the construction of mammoth, dry-goods distribution warehouses is well chronicled. This decade-long upsurge reflects everything from the outsourcing of warehousing and growing dominance of 3PLs to the rush of Amazon and other ecommerce giants and the needs of “last mile” delivery. Cold storage in the US has been in many ways a bit of a laggard. That appears to be changing. Data compiled by the research group Industrial Info Resources at the beginning of 2017 reported that 24 greenfield refrigerated warehouses projects would break ground this year, at an investment cost of $948 million. “What we’re finally seeing is [cold storage] playing catch up,” said Jack Ampuja, president of the consultancy Supply Chain Optimizers, and a veteran in food industry logistics. Several trends are converging to push for new refrigerated warehouses. Anthony Lydon, a Phoenix-based managing director at real estate services and investment management company Jones Lang LaSalle, or JLL, and member of the firm’s supply chain and logistics group, ticked off a half-dozen: • Population growth. There are just more people to feed in Metropolitan Phoenix and other sun-belt cities. • Product proliferation. Glutton-free, fat-free, organic are all examples of what Lydon called the “segmentation” of fresh foods. Add to that the whole issue in grocery stores of fresh and refrigerated versus canned. Canned is losing the battle. “Look at any supermarket,” said Adams. “Look at the refrigerated and frozen sections. Those are the areas that are growing.” • Ecommerce. While fresh and frozen food may lag dry-goods ecommerce, that segment of the marketplace is growing, and quickly. “More and more people are ordering food to be delivered to their home,” Lydon said. With it come new demands for cold storage infrastructure that is materially different from the past, where supermarket chains delivered to retail outlets, so-called “direct to store distribution,” and wholesalers made their rounds to retailers as well. Services now include home grocery delivery such as Peapod and FreshDirect. But Lydon also cited services like Freshly, a company that cooks and delivers some 120,000 fresh meals weekly from a kitchen/distribution center in Phoenix. “That’s a brand new vertical market that didn’t exist before,” he said. Add to that Amazon’s announced acquisition of Whole Foods supermarkets, which could rocket the ecommerce giant into fresh food home delivery. • Food importation and seasonality. Americans increasingly demand fresh fruits and vegetables year-round. Producers in Mexico and Latin America are happy to provide the produce. Mexico, alone, exported to the US last year almost $12.5 billion worth of fresh fruits and vegetables. Mexico is now the source of a majority of the US’s fresh produce during winter months. Aggregating and stockpiling that produce in the US, as opposed to shipping it directly from Mexico to customers in the US, is making more and more sense, especially as the Trump administration rails against Nafta and foreign trade. Tippmann Innovation just broke ground on a 60,000 square feet refrigerated warehouse to be constructed in Pharr, Texas, which is connected by bridge to Reynosa, Mexico. The facility will be dedicated to storing, staging and distributing one item—avocados. • Design. Cold storage facilities are not only getting bigger, they’re getting much taller. This maximizes storage, which is measured in cubic feet and pallet positions, not square feet, and enables automated picking and robotics. Capacity and efficiency are the watchwords of the day. The Win Chill facility in Sioux Falls and the Western Distribution Facilities in Washington both have 50-foot vertical clearance, double the old warehouse designs of 20 years back. Target operates a cold storage distribution facility in Southern California that has a phenomenal 110-feet high vertical clearance. •Technology. This includes everything from new, energy-efficient blast freezing and refrigerated loading docks to LED lighting, state-of-the art insulation panels and advanced pallet racking. Flexible architecture and temperature control enable food to be stored anywhere from 40 degrees F to minus 20 F, and in a stable, constant, climate-controlled environment. Food producers, distributors and retailers demand the highest degree of cold chain integrity, which this new technology can now bring. Cold Cash Of course, all this new technology and larger warehouses carry with them a cost. A 2014 study by JLL said cold storage construction costs averaged $150 to $170 per square foot, or about triple the amount necessary to build a dry warehouse. The Win Chill South Dakota cold storage project is estimated to cost $40 million. Industrial Info cited a plan by the Philadelphia-based logistics company XTL, which focuses on ports warehousing, to build a $60 million cold storage facility in Houston. These kinds of oversized price tags favor the well-heeled investors and large dedicated companies with necessary capital. What’s more, industry consolidation is accompanying the push for bigger and more state-of-the art refrigerated warehouses. In its 2014 study, JLL tallied more than 600 operators in cold storage in the US. But the top ten, it said, controlled 80% of the market, a trend that is expected to increase over time. “Warehousing, dry or frozen, used to be dominated by families,” said Ampuja. Not anymore. “A lot of family companies are selling out, saying there’s no way they can compete with big companies,” he said. One example is Lineage Logistics. Lineage, based in Novi, Missouri, rolled up 20 separate, mostly family-owned companies since its founding in 2008. It says it now controls “over 100 locations and 609 million cubic feet of temperature-controlled capacity.” In June, the company moved into Europe. It announced it had purchased for an undisclosed amount Partner Logistics, based in the Netherlands, and with operations in the Netherlands, Belgium and the UK. Partner Logistics, with more than one million cubic feet of space, claims to be the world’s largest automated cold storage company. Major facilities and companies that own several warehouses can spread investment costs over a larger footprint. They can absorb higher operating costs. At the same time, they can attract the giant food companies that no longer want to be in the warehousing business. The JLL study predicted cold storage facilities could grow on average 3.4% annually between 2014 and 2019. But, if anything, that figure understates the prospect of even more, new refrigerated warehouses. According to Adams, the move toward greater automation dictates new, state-of-the-art facilities. Retrofitting an existing warehouse, especially a dry facility, makes no sense, he believes. “It’s economically prohibitive to convert a dry facility,” he said. Demand for new refrigerated warehouses is growing. “Most cold storage facilities are at capacity. Supply is tight,” said Adams.