Why a potential vaccine is creating a boom in cold storage
Parallel to the race to create a vaccine is a race to secure warehouses to store them
With nearly 400 potential COVID-19 vaccines in development, the race is on to secure temperature-controlled spaces required for storage and distribution.
Giant cold storage facilities – or freezer farms – are used to temporarily hold perishable goods, usually groceries. But now many of these vast industrial facilities are needed to securely store millions of vials of a vaccine.
“The pending vaccine is vital to save lives and help facilitate economic recovery,” says Peter Kroner, Investor Research, Industrial, JLL. "We expect to see an increase of hundreds of thousands of square feet of cold storage space in strategic locations across the globe in order to meet demand.”
Logistics company UPS announced in August that it was building two freezer farms – one in Louisville, Ken., and one in the Netherlands – to rapidly aid vaccine distribution across the globe.
“Some groups are building new assets, but construction has been limited historically,” Kroner says.
Hot sector, cool spaces
Warehouses have been one of the hottest sectors in commercial real estate in recent years, spurred by the rapid shift toward online shopping. Getting goods to customers quickly has increased demand for these properties, from large hubs to smaller urban nodes.
Demand for cold-storage warehouses in particular accelerated during lockdowns due to an increase in online grocery shopping.
These are also the types of spaces required for storing vaccines, which require specific, ultra-low temperatures, and spaces large enough for hundreds of custom, wheeled freezer boxes capable of maintaining -180 degrees Fahrenheit.
Once a vaccine is approved, a global rollout will begin that will require a massive, coordinated effort across the entire cold storage chain, including the transportation of the fragile vials to end users.
Vials will have to initially be transported by air freight, so proximity to airports will be key, says Kroner. “Industrial space located near airports is generally more expensive but the high value of this type of product will quickly offset the higher cost,” he says.
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Automation plays a key role in maintaining these very specific conditions with sensors needed on each freezer box to monitor and ensure consistent temperature.
This removes the need for employees to constantly check temperatures, reduces the number of hands-on workers needed for each facility, and, ultimately, gets the vaccines where they’re needed most, says Mehtab Randhawa, Director, Industrial Research, JLL Americas,
“Time is of the essence here, and the right automation equipment, in the right cold storage environment, can literally save lives,” she says.
Accelerated demand for cold storage
U.S. cold storage inventory is at nearly 250 million square feet, representing 1.8 percent of the total U.S. industrial inventory. Vacancies in cold storage assets have remained below 10% for nearly 20 years. In comparison, office vacancy rates have been at 15.3% during the same period, according to JLL.
But there are many reasons the sector has such low vacancy rates. Reshoring of essential sectors like food production and pharmaceutical manufacturing, the increased importance of last-mile delivery, consolidation of the public refrigerated warehouse sector, speculative construction, and increased investor appetite for the asset type have all contributed to its popularity. The pandemic has only increased the need.
“The Life Sciences industry is playing a pivotal part in creating COVID-19 vaccines and therapies, but that’s just a small portion of the almost 62,000 drugs in the pipeline for a variety of diseases. Freezer farms are key to keeping focus on all their life-saving medicines while ensuring a COVID-19 vaccine is viable,” says Roger Humphrey, Divisional President, Life Sciences at JLL.
But there’s a catch when it comes to fulfilling the growing need for this space.
Companies seeking cold storage space have varied building infrastructure needs and require the ability to maintain temperature tolerances for their specific product, says Trevor Ragsdale Executive Managing Director and Head of JLL’s Industrial Occupier Services.
“The majority of the existing vacancy in cold storage buildings is functionally obsolete for the majority of customers. The older cold storage product typically has inadequate dock and loading positions, low clear heights, and a lack of trailer storage,” he says. “We expect investor and tenant demand to stay strong for modern cold storage product. The only question is, can construction keep up?”
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