Long Island demand for cold storage heats up

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Like most business owners, Glen Wolther is all about making dough. 

But for Wolther’s company, All Round Foods Bakery Products, keeping dough cold is the biggest priority, as the Westbury firm has been supplying frozen bakery products to foodservice and retail markets for the last 30 years. 

The company has been operating out of a 21,000-square-foot cold storage warehouse and distribution building on Railroad Avenue since 2007, but in the wake of the COVID pandemic, when customers returned to restaurants and grocery stores, Wolther’s business boomed and needed more space. 

“Within just two years, our operations doubled in size and given that we’ve always been rooted on Long Island, I began searching for additional cold storage warehousing in Nassau or Suffolk counties,” Wolther said. 

However, after exploring the tight Long Island industrial real estate market, he found that cold storage warehousing very limited and prohibitively expensive. 

“We also concluded that the best use of our Westbury property would be to expand our cold storage capabilities,” Wolther said. 

The demand for cold storage facilities here has grown significantly in recent years, as online grocery businesses, meal delivery services, and foodservice firms have flourished. 

“We have seen an increase in demand, and numerous inquiries, regarding cold storage facilities within our portfolio ranging from pure warehouse needs to full manufacturing facilities in all size ranges,” said Ted Trias, director of Acquisitions and Leasing for Plainview-based Rechler Equity Partners, Long Island’s largest commercial property owner. “The challenge with cold storage warehouse space is the design, implementation and costs associated with the infrastructure needed. In our opinion, ground-up construction allows for a more efficient build-out versus that of an existing facility.” 

Commercial real estate brokers are familiar with the challenges of developing cold storage facilities here. 

“Cold storage facility construction faces many challenges right now: strained capital markets, high constructions costs and new warehouse moratoriums which don’t differentiate between cold or traditional storage. In today’s market, you will need a credit tenant to sign a long-term lease before the construction process can begin,” said David Pennetta, executive managing director of Cushman & Wakefield of Long Island and co-president of the Commercial Industrial Brokers Society.  

Pennetta pointed out that construction of cold storage facilities requires concrete slabs that can handle temperature swings and heavy floor loads, massive and flexible HVAC and refrigeration systems and premium insulation and sealing. 

“Building a cold storage facility is a much more complex and costly process compared to a standard warehouse,” he said. “These specialized facilities require significant financial investment and have considerably higher upfront costs to outfit the infrastructure with the necessary features and equipment to operate effectively.” 

Ronkonkoma-based Aurora Contractors expects to break ground next year on a number of cold storage facilities ranging from 125,000 to 250,000 square feet in both Nassau and Suffolk counties. A little over a decade ago, Aurora built the 420,000-square-foot Sysco warehouse and distribution complex in Central Islip, nearly half of which is equipped for cold storage. 

“We’re seeing a rise in demand for cold storage facilities, from both developers and users alike,” Michael Adler, Aurora’s director of Business Development, told LIBN. “Part of the struggle that some may be faced with is due to the low amount of new cold storage inventory available to existing users in our area. This could lead to future developments considering larger overall buildings, however, offering flexibility design wise so that they can accommodate some of the smaller users that are out there.” 

Trias said Rechler Equity has been preparing for more cold storage users. 

“We have presented two of our newest development sites to many of these food companies for their consideration,” he said, adding that the firm’s property at 395 Oser Ave. in Hauppauge will be redeveloped into a new 103,000-square-foot high bay warehouse which can be divided. “Rechler Business District at Medford can accommodate any new construction ranging from 25,000 square feet and higher. Both sites offer sewers and IDA tax abatements.” 

And it’s expected there will be more cool opportunities for the area’s industrial real estate sector. 

“This specialized market will continue to be a vital part of the industry and remain constrained as e-commerce and the convenience of online grocery shopping continues to gain traction and the time-intensive nature of constructing cold storage facilities persists,” Pennetta said. “There is a legitimate need for cold storage and as additional adoption of online grocery services grows, we will see the next Long Island construction wave being a cold one.”