Looking into the future, where should you put your money or your efforts if you are looking for a commercial real estate project that can offer decent returns. Perhaps you should think about one of the things we Americans, and people and animals everywhere, really need, food. According to Esther Fung, WSJ, the best performing real estate investment trusts this year are in the area of food storage —cold food storage.
Right now, according to Rick Romano, head of PGIM’s global real estate securities, “cold storage is about as defensive an investment strategy as it gets.” American Realty Trust, the only publicly traded cold storage real estate investment trust, has risen 50% since the start of the year.
He also says that only 2% of groceries are bought online, but as people work longer hours and avoid long commutes and extra trips to the grocery store, that number could rise. If it goes up to 5% or 10%, he suggests, there will be a continued demand for cold storage facilities in densely populated urban areas.
Cost of Building or Remodeling for Cold Storage
Cold storage might be a very good investment for an investor interested in commercial real estate construction or a commercial fix-and-flip project.
I know there are cold storage facilities operating near me, near the train warehouse area, because I have a friend who went to work there and in a cold storage facility, even the office space is a cool 40°.
According to Joshua Everage at A-N-C- cold storage, investment management firm JLL says the “cost of building a new cold storage facility is $150 to $170 per square foot, compared to $50 to $60 dollars a square foot for regular warehouse construction. Most cold storage facilities are new builds, but you can expand or upgrade existing warehouse space at a cost of $60.00 to $70.00 a square foot. That is about 40% of the cost of building a new facility from the ground up. ”
−Everage also says that when you are looking at costs, consider the usual items, like location, but also the unique requirements of a cold storage facility, the freezing equipment. Do you need a unit that can flash freeze product like fish, or a chiller? There is a difference in cost. Also consider the height of the docks, the height of the building itself, exterior and interior wall finishes, and plumbing requirements. For a free cold storage construction guide, visit http://www.anccold.com/blog/cold-storage-construction-cost and download a guide.
For help coming up with a lender or someone willing to tackle the project, call me. I’m based in Austin, but I can meet you where you are at, in Dallas, Houston, or San Antonio.
Everage, J. 2017. Cold Storage Construction Cost Per Square Foot. Blog, at http://www.anccold.com/blog
Fung, E. WSJ, December 2018, Real-Estate Stocks Beating S&P 500 for First Time Since 2015. https://www.wsj.com/articles/real-estate-stocks-beating-s-p-500-for-first-time-since-2015-11545134402