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The View | How the pandemic is turning cold-storage logistics into a hot niche industry
- Demand for the facilities that maintain the shelf life of perishable products from vegetables to vaccines is likely to outlive the pandemic
- Investors are drawn by higher rental yields and longer leases due to the scarcity of high-quality and suitable assets, but the sector is not without its challenges
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For the less-well-trodden parts of the global real estate market, the Covid-19 pandemic has been a defining moment. Even before the virus erupted, interest in so-called “alternative” sectors – non-traditional types of property that offer higher rates of return and allow investors to diversify away from the most popular and expensive areas of the market – was rising sharply.
Although relatively immature and illiquid compared with the main commercial property sectors, alternative assets – which include data centres, school facilities and elderly care – are among the biggest beneficiaries of secular and structural trends in the global economy.
One of the effects of the pandemic has been a rapid acceleration of some of these trends, particularly when it comes to digitisation and life sciences. In the real estate industry, investors’ appetite for data centres has been fierce, helping catapult a niche sector into the premier league of property investment.
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However, another sector, which is even more of a niche market, has garnered a lot of attention since the virus struck. Cold-storage logistics – the facilities that maintain the quality and shelf life of different perishable and temperature-sensitive products ranging from vegetables to vaccines – is now firmly on investors’ radar.
The forces driving demand for cold-chain logistics have huge momentum, and are likely to outlive the pandemic. Unlike conventional dry warehouses, cold-storage facilities are equipped with mechanical and structural installations that keep temperature and humidity levels within a small range.
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The facilities provide the infrastructure needed to meet the explosion in demand for online grocery services and Covid-19 vaccines that have ultra-low-temperature cold chain requirements.
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