For the cold storage industry, the past several years has been a lesson in just how quickly market fundamentals can change.
The sector entered the pandemic with strong demand and rising valuations, only to face a series of disruptions that eventually pushed occupancy, pricing and investor sentiment lower. Now, according to two analysts who closely follow the sector, the market may finally be approaching a turning point.
At the CREDA I.CON Cold Storage conference in Dallas this week, an opening session on “Wall Street’s Perspective on Cold Storage Trends, Risks and Opportunities,” featured Michael Carroll, managing director and head of U.S. real estate research at RBC, and Michael Griffin, research analyst at Evercore ISI. They were joined by moderator Ryan Murphy, managing director at Lazard Freres & Co., to discuss what investors see ahead.
The message was cautiously optimistic: The sector appears to have reached a trough, but the recovery is likely to be gradual, and investors will be watching the data closely for evidence that fundamentals are actually improving.
From Pandemic Boom to Prolonged Reset
Cold storage initially benefited from the pandemic as consumers shifted toward at-home food consumption. More food moved through the system, helping publicly traded cold storage REITs such as Americold and Lineage post stronger results and command higher valuations.
But the boom was followed by a complicated reset.
As food producers struggled to manufacture products and hire workers, inventory levels initially fell and labor costs increased. Once those pressures eased, consumers pulled back, prompting food companies to reduce inventories and reassess their supply chains. For investors, the problem was uncertainty.
“The one thing that public investors hate the most is uncertainty,” Carroll said. Expectations for stabilization in 2024 and then 2025 failed to materialize. “Now it’s starting to see that there is some stabilization. So the REIT stocks are bouncing up a little bit more.”
That stabilization is showing up in the underlying data. Griffin said the analysts closely track the U.S. Department of Agriculture’s monthly cold storage inventory data, and seasonal inventory builds during the first seven months of 2026 have been better than in the previous two or three years, although still below pre-COVID trends.
The key question now is: Has the sector truly troughed?
Griffin’s answer was cautiously affirmative. Customer destocking appears to have largely run its course, and both the REITs and other industry participants are signaling that the market may be at a fundamental trough.
“The question then becomes: how quickly can fundamentals accelerate?” he said.
That distinction matters. Investors are less interested in simply seeing conditions stop deteriorating than they are in seeing evidence of an actual recovery.
Occupancy is the Opportunity – And the Challenge
For cold storage operators that recovery is closely tied to occupancy.
Carroll estimated physical occupancy at roughly 70% for Americold and in the mid-70% range for Lineage, with frictional vacancy suggesting the companies could potentially push occupancy another 500 basis points. That creates significant operating leverage because much of the cost structure is fixed.
“If you can just drive revenue growth a little bit above expense growth, that falls meaningfully to the NOI growth line here in the near term,” he said.
The opportunity is not simply to fill empty space at any price. Operators are looking for profitable business that can rebuild occupancy while maintaining pricing discipline.
M&A: Plenty of Interest, But Not Enough Deals
The long-term fundamentals may be attractive, but they have not yet translated into a major resurgence in mergers and acquisitions (M&A).
Murphy asked the question many in the room wanted answered: What types of opportunities are actually trading, and who is buying?
The answer: Activity has slowed considerably.
Part of the problem is valuation. Cold storage assets and platforms traded at exceptionally strong valuations during the sector’s boom, and sellers have been slow to reset expectations even as public market valuations have declined. That has created a disconnect between buyers and sellers.
Still, the panel expects consolidation to return. Institutional capital has entered the private market over the past four or five years, attracted by the sector’s long-term growth prospects and opportunities to take market share. Those investors will eventually need liquidity and returns.
Murphy predicted that could lead to a new wave of consolidation, potentially with more creative structures such as joint ventures and mergers among mid-tier operators seeking greater scale.
The slowdown in M&A has not eliminated investor interest, as investors remain attracted to the sector’s long-term potential. Capital is looking for ways to manage the risks of near-term volatility while preserving exposure to long-term demand.
Meanwhile, Americold and Lineage are focused primarily on strengthening their balance sheets rather than pursuing aggressive external growth and targeting investment-grade balance sheets. Public operators are prioritizing revenue-generating capital expenditures, operating improvements and selective development. Longer term, however, distressed assets or smaller operators seeking an exit could create acquisition opportunities.
GLP-1s: Headwind or Catalyst?
No discussion of the future of food demand would be complete without addressing GLP-1 medications.
Carroll sees skyrocketing GLP-1 adoption as a legitimate long-term risk. As the medications become cheaper, more effective and easier to take, broader adoption could reduce caloric consumption and therefore limit food-volume growth.
But the relationship is not necessarily straightforward.
Food companies could respond by developing new products aimed at GLP-1 users – including higher-protein, more nutritious frozen meals. And inventory requirements are influenced not only by volume but also by the number of stock-keeping units.
More products can mean more inventory even if consumers are eating less.
Still, the panelists characterized GLP-1 adoption as a potential headwind and, perhaps more importantly, a source of uncertainty about how food consumption patterns will evolve.
Development is Becoming a Game of Quality
Approximately 15% of the country’s current cold storage facilities have been constructed since 2020, according to Griffin. Much of that new supply came during a period when cold storage became an increasingly attractive institutional asset class and speculative development accelerated.
Today, that model is much harder to justify and most significantly impacts speculative development.
Build-to-suit projects with substantial customer commitments can still work, provided returns meet required thresholds. But speculative development faces the twin challenges of elevated construction costs and existing excess supply.
The result could be a widening divide between high-quality assets and obsolete facilities.
Griffin pointed to an estimated 10% excess supply in the system. Removing less competitive buildings could ultimately benefit stronger facilities by shifting customers and throughput toward more productive assets.
Location will also matter. Modern facilities near major metropolitan areas and ports, combined with strong customer relationships and operational capabilities, are likely to outperform older, less competitive properties.
The Bull Case – And the Bear Case
So where does Wall Street ultimately land?
Regarding the bear case, Carroll pointed to continued uncertainty. If food companies respond to inflation by raising prices to protect margins, consumers could reduce food purchases, putting pressure on volumes and forcing another round of supply-chain adjustments.
The bull case is more structural, Griffin said, noting that in the short term, continued improvement in U.S. Department of Agriculture inventory data could improve investor sentiment and signal that fundamentals are moving from stabilization toward recovery.
Longer term, the basic necessity of food consumption remains a powerful demand driver.
And cold storage isn’t limited to traditional food categories. Candy, pet food and pharmaceuticals could provide additional sources of demand.
Murphy ultimately said he was optimistic about the sector, pointing to the industry’s long-term moat, asset intensity and the continued shift toward products that require refrigerated or frozen storage.
For now, Wall Street appears to be watching for the same thing: evidence that the long-awaited recovery is finally gaining traction. The sector may not be back to the exuberance of the pandemic era – and analysts do not expect it to be – but improving fundamentals, disciplined supply, stronger assets and the potential for operating leverage could create an increasingly compelling opportunity for investors willing to look beyond the short term.
This post is brought to you by JLL, the social media and conference blog sponsor of CREDA’s I.CON Cold Storage. Learn more about JLL at www.us.jll.com or www.jll.ca.
