The U.S. cold storage market may be nearing the end of a slowdown, which was sparked by a record surge in new facility construction and slowing consumer spending. As a result of pandemic-driven overbuilding and declining trends in food inventories, vacancy rates have risen to a 20-year high. Despite these headwinds, the market recorded approximately 3.5 million square feet of positive absorption in 2025, indicating underlying demand is strong, according to a Newmark report.
Thursday’s market report from the commercial real estate services firm noted several headwinds that still weigh on the near-term outlook. Persistently high food prices continue to put pressure on consumer budgets, which is “straining consumption growth.” Inventory carrying costs remain high as rents have doubled since 2020 and interest rates remain elevated.
The firm expects the gap between supply and demand to narrow this year as the development process moderates. “The US cold storage pipeline has fallen from record levels to approximately 5.9 MSF, its lowest level since 2020,” the report says. However, supply is likely to continue to outpace absorption for the foreseeable future as projects currently under construction are completed.
Newmark noted that a “flight to quality” is creating a bifurcated market between new and old assets. Occupiers are exploring custom construction projects and increasingly prioritizing automation, energy efficiency and high-performance capabilities. The exodus of older facilities facing functional obsolescence accounted for 73% of industry vacancies last year. Legacy locations had a vacancy rate of 7.6%, while modern sites that came into service before the pandemic remained vacant at 2.7% in the fourth quarter.
Beyond the cyclical reset, several favorable catalysts support the long-term health of the sector, the company said.
“Fundamentally, the sector continues to benefit from long-standing structural drivers: population growth; expansion of domestic food production and North American agricultural trade; the rise of online grocery sales; and the complex and growing needs of pharmaceutical and biologics cold chains.”
It noted that e-grocery sales increased 32% year over year in the fourth quarter. These networks require larger footprints to meet tight customer delivery deadlines.
“As the order mix continues to shift toward delivery and shipping (both with a more intense cold chain than pickup), retailers are expanding their capacity by leveraging existing stores, partnering with 3PLs, and selectively developing dedicated fulfillment nodes to meet increasing expectations for speed and flexibility,” the report says.