Multiple factors are driving demand for cold storage warehouse space: online ordering, even for perishable items, is on the rise; panic-buying during the pandemic accelerated e-commerce; and health-conscious consumers are exhibiting an interest in frozen foods not seen since the mid-1900s. An unprecedented surge in demand for warehouse and distribution space was recently noted by World Property Journal, which reported “a net 99.2 million square feet of industrial space absorbed in fourth quarter—the strongest quarter on record—and 203.7 million square feet absorbed for the year, a 27 percent increase over 2019's net growth.” An article by Bisnow, “The Cold Storage Market is Maturing Beyond a Niche Industry,” stated, “The outbreak of the coronavirus has accelerated America's growing dependence on industrial real estate, and cold storage is among the fastest-growing parts of the sector.”
Considering that warehouses and cold storage facilities can be run more efficiently and cheaply than supermarkets, many retailers are eager to embrace the converging trends. However, cold storage facilities are costly to build (and take longer to construct, compared to a dry warehouse), discouraging speculative development. Nevertheless, it is time for the market to accelerate its response and ramp up construction in order to meet the new demands.
Performing a thorough constructability evaluation, along with choosing an effective project delivery method, can improve the ROI of cold warehouse construction. Owners should commit to a project delivery method such as design-build or at a minimum design assist, which engages the entire team as early as possible during concept planning. This sets the stage for a rigorous pre-construction phase that weighs multiple options and accounts for many variables. Given the expense of refrigeration, having a contractor-led design-build process (in which the contractor weighs in early on various engineering scenarios and their cost) can help balance the cost of equipment vs. life-cycle costs for the facility. It also decreases the facility’s service life energy usage, achieving simpler maintenance and more. A guaranteed maximum price contract can also help manage project costs, as well as aid in fast-tracking construction.
New locations for warehouses and distribution facilities
Traditionally, warehouses have been constructed on sites that are close to manufacturing locations or close to where food is grown and harvested. Considerations when choosing a location for these facilities include access to an interstate, site grades, and a building area that can accommodate the additional structural requirements of cold storage facilities. But a variety of considerations are driving construction of facilities in non-traditional locations. For example, the “last mile problem,” which refers to the expense and difficulty of moving a given product through the final stage of distribution, has encouraged redevelopment of existing buildings in urban/regional locations, which can meet the demand for tighter turnaround. To achieve hyperlocal distribution points, some large grocers, including Walmart, are investing in micro-fulfillment centers. As small as 10,000 sq. ft., these thoroughly automated facilities support delivery to customers within hours of an order receipt. Like larger distribution centers, micro-fulfillment centers are candidates to take over vacant retail spaces.
One thing almost all modern cold storage facilities have in common is the need for tall volumes. Automated storage and retrieval systems (AS/RS) usually operate in vertically-oriented spaces. This dovetails well with the fact that building “up” reduces a building’s footprint and is a logical way to use tight urban lots and reduce real estate costs. When looking to repurpose an existing structure, building height and/or floor-to-floor heights are clearly major considerations. According to CBRE, “the standard clearance height for a modern freezer/cooler building ranges from 40 to 60 feet, compared with 34 to 36 feet for a dry warehouse,” and this is up from the 30-foot clearance that was state-of-the-art for cold storage facilities just a few years ago.
When existing buildings are to be repurposed, the first task to complete is a review—including an in-person assessment—of the space. The team should examine the building’s load capacity, the condition of its floor slab and the ability to retrofit the structure with modern vapor barriers. Picking and packing in vertically arranged spaces involve many interaction points, so exact ceiling heights and system layouts must be achieved. To identify issues that are not obvious using visual inspection alone, technological tools such as 3D laser scanning can help capture accurate as-built conditions. This aids in identifying potential clashes with newly designed elements—or it can even lead to early discovery if the site is not a viable candidate for redevelopment.
For both new-build and existing structures, all decisions should be made in accordance with local zoning and building codes. Environmental assessments are a good idea if there is a possibility that the site’s surroundings have low air quality or other environmental risks. Traffic assessments will also be important in any non-industrial zone. Availability of labor is a critical consideration; the number of sophisticated systems that must be installed in a cold storage facility require multiple teams of skilled construction workers. Several factors can make acquiring this labor difficult. Storage and distribution facilities being built in zones not previously used to such a market may not have attracted workers to the area. Moreover, there has been a longstanding industry-wide workforce shortage, which has been exacerbated by the disruptions of the 2020 pandemic. For the same reasons that labor may be difficult and expensive to procure in zones that have not typically seen warehouse construction, specialized equipment and materials may be hard to source.
Different from the outside in
The very structure of a cold storage facility is more sophisticated than that of a dry warehouse, since it needs an insulated building envelope. Choice of insulating system—typically either sandwich panels with insulating cores or spray foam –will be key. Heat transfer coefficients, or R values, must be identified and then designed for. In determining R-values, design teams should consider the temperature range of areas that will surround the refrigerated portion of a facility. For example, high outdoor temperatures or heat generated from nearby equipment will increase the need for insulation. Utility costs and other operating expenses should be factored into the design of the insulating system.
While it may seem counterintuitive, specialty heating equipment must be installed in cold storage facilities. This is because the temperatures required within the facility (which can be 20 degrees below zero or lower, depending upon the item being stored) can freeze the soil beneath the building and cause frost heave. Underfloor heating systems prevent this. These systems can be forced air, electric heat or pumped fluid (such as glycol).
Building openings must also be specially outfitted in order to achieve thermal control. Loading docks, for example, may need to be designed with shelters and/or seals, insulated doors, and dock levelers that can be stored inside the facility (thus maintaining the integrity of the building’s thermal envelope).
The ROI of other specialized construction procedures for cold storage facilities should be weighed. For example, investing in jointless floors may be worthwhile as these floors can ensure smooth movement of automated equipment in a finished facility. Conversely, time and money might be saved by using standardized units and prefabricated parts.
A recent form of specialized warehouse construction is rack-supported buildings. Rack-supported buildings are a conceptually different type of building, in which the independent storage rack system of the AS/RS forms the structural system of the entire facility. Walls and roofs are put in place as a “skin” after rack construction.
Rack-supported buildings offer time savings during construction because material lead times are often shorter and construction tasks occur faster. With no internal columns creating “wasted space,” rack-supported facilities have lower costs per square foot. They also save time during the facility’s operations phase because automated equipment moves product very efficiency. In addition to these benefits, rack-supported structures are stronger than conventional steel frames.
Rack-supported systems—and any other entirely automated facility where human occupation is unnecessary—are eligible for unique low-oxygen fire safety solutions. This is a significant benefit, because with their low level of humidity, cold storage facilities are especially vulnerable to fire. Low-oxygen fire suppression systems, sometimes called hypoxic systems, can actually prevent the occurrence of fire in unoccupied buildings by reducing the conditions necessary for combustion. The systems typically are cheaper than traditional ones as well.
Even when cold storage facilities occupy a more traditional site and configuration, room layouts are more demanding than they are for an ordinary warehouse. As consumers demand an increasing number of fresh and/or natural foods, storage facilities must provide specialized spaces with, for example, multiple temperature zones. Even foods that are already common staples, like bananas, need to move from one storage room to another as they ripen. Cold, hot, dry or humid conditions matter—greatly—when it comes to storing food, so facilities must be tailored to local climates. Sophisticated control systems may need to be designed into the facility to maintain optimal conditions.
Unsurprisingly, equipment and refrigeration installations add expense and complexity to cold facility design. These systems must be evaluated for how well they satisfy product-specific requirements, such as the item(s) being handled, required temperature ranges, length of product storage and logistics of moving ripening foods from one chamber to another. But they should also be evaluated according to how well they conform to overall building requirements. For example, rooftop penthouse refrigeration units can save interior space compared to indoor ceiling-hung units; conversely, where rooftop space is limited, ceiling-hung units may be a better solution.
Options for refrigerant type and refrigerant charge type are changing quickly. Liquid recirculation systems and systems using hydrofluorocarbons (HFCs) are being phased out. Low-charge ammonia-based systems, which are more ecofriendly, are especially popular alternatives. Carbon dioxide refrigerants and hydrofluoroolefins (HFOs) are other options.
Operational costs for refrigeration should be considered during pre-construction planning, since refrigeration systems are big consumers of energy. The team should also assess site utilities and infrastructure for their ability to support the high energy demand.
Consumer demands are likely to make cold storage warehouses an increasingly viable property investment. An industry-wide commitment to pre-construction and appropriate project delivery types are critical for success, since only up-front planning and data collection can mitigate the complexities of cold storage design, construction and operation.
Scott Skala serves as vice president and general manager and Jyot Parmar as construction manager with Graycor Construction Company.