Industrial cold storage facilities are specialized warehouses designed to maintain precisely controlled, low-temperature environments for storing temperature-sensitive products. These facilities can maintain temperatures ranging from just above freezing (around 33°F) to well below freezing (as low as -30°F), catering to the specific needs of various industries, including food and beverage, pharmaceuticals, and chemicals.
In Miami, and all of South Florida, these refrigerated facilities are vital part of supply chain. Food companies depend on these facilities to supply good to all supermarkets, hotels, cruises, airplanes. Additionally, Miami is home to a strong flower industry. Close to 90% of flowers imported into the United States, come through Miami International Airport.
Investors who build highly specialized facilities without considering future adaptability may find it challenging to pivot when market demands shift.
While investing in cold storage facilities in Miami or across the United States can be lucrative, many investors make critical mistakes that can impact their returns. Here are some of the biggest pitfalls to avoid:
Underestimating Operational Complexity
One of the most common mistakes users and investors make is underestimating the complexity of operating a cold storage facility. These warehouses require sophisticated refrigeration systems, including coolants, compressors, condensers, and evaporators, all working in harmony to maintain the desired temperatures. Investors who fail to understand these systems may face unexpected maintenance costs and operational challenges.
Overlooking Energy Efficiency
Cold storage facilities are energy-intensive operations. Investors often neglect to consider the long-term energy costs associated with maintaining low temperatures. Failing to invest in energy-efficient technologies and insulation can lead to skyrocketing operational expenses, eating into profits over time.
Developers and Tenant should confirm that sufficient electrical power can be brought in the building to meet the consumption of refrigerated spaces.
Flexibility in design and temperature control capabilities can be crucial for long-term success.
Ignoring Regulatory Compliance
The cold storage industry is subject to strict regulations, especially when storing food and pharmaceutical products. Investors who overlook regulatory requirements may face hefty fines and potential shutdowns. It's crucial to understand and comply with food safety regulations, pharmaceutical storage guidelines, and environmental standards.
There might also be local regulations for environmental concerns. Specially if there is floor drainage involved.
Misjudging Market Demand
Not all cold storage facilities are created equal. Investors sometimes fail to conduct thorough market research to understand the specific demand in their target area. For example, a facility designed for frozen food storage may not be suitable for flowers, produce or products that require ultra-low temperatures2. Misaligning the facility's capabilities with local market needs can result in low occupancy rates and reduced returns.
The cold storage market is dynamic, with changing consumer preferences and industry needs.
This is one of the main barriers for development of cold storage. It’s hard for developers to anticipate the right combination of temperatures a user might need. In larger industrial market, such as Miami, there can be more certainty for developers as supply is constrain and there is constant demand for refrigerated space.
Neglecting Location Factors
Location is critical in the cold storage industry. Investors sometimes focus solely on property prices without considering factors such as proximity to transportation hubs, access to major highways, and distance from suppliers and end-users. A poorly located facility can lead to increased transportation costs and reduced attractiveness to potential tenants.
In Miami for example, flower companies must be located within 3-5 miles from Miami International Airport. Outside this radius, the refrigerated facilities are not appealing to these users. Landlords’ outside of this area will have a smaller pool of prospective tenants.
Underestimating Maintenance Costs
Cold storage facilities require regular maintenance to ensure optimal performance. Investors who fail to budget for ongoing maintenance and equipment upgrades may face unexpected costs and operational disruptions. This includes not only the refrigeration systems but also specialized features like heavy-duty insulation and advanced inventory management systems.
Investing in industrial cold storage facilities can be a profitable venture, but it requires careful planning and a thorough understanding of the industry's unique challenges.
Failing to Plan for Technological Advancements
The cold storage industry is evolving rapidly, with new technologies emerging to improve efficiency and product tracking. Investors who don't plan for future technological upgrades may find their facilities becoming obsolete. This can include advancements in automation, IoT sensors for temperature monitoring, and more efficient refrigeration systems.
Underestimating the Importance of Flexibility
The cold storage market is dynamic, with changing consumer preferences and industry needs. Investors who build highly specialized facilities without considering future adaptability may find it challenging to pivot when market demands shift. Flexibility in design and temperature control capabilities can be crucial for long-term success.
In conclusion, investing in industrial cold storage facilities can be a profitable venture, but it requires careful planning and a thorough understanding of the industry's unique challenges. By avoiding these common mistakes, investors can position themselves for success in this growing and essential sector of industrial real estate.
The high barriers to entry create opportunities for users and investors owning existing facilities and for those to understand the industry.
The Industrial Team at ComReal has an extensive experience on refrigerated and cold storage facilities in Miami and South Florida. For decades, we’ve helped users and investors locate, lease and sell these facilities. Successfully navigating the complexities with leasing and owning refrigerated facilities. Contact our team for information on existing facilities and the current market for cold storage facilities.
The Industrial Team at ComReal specializes on the industrial properties in South Florida. For over 40 years, out team has help users and investors located the right industrial property. Contact us for more information on the market and our industrial properties.
Follow Us on Social Media:
Comments