26 Jun LIBN: Quinn, Brown: Cold storage development heats up in NY region
Quinn, Brown: Cold storage development heats up in NY region
Keith Brown and Eileen Quinn//June 20, 2025
The cold storage sector is one of the most sought-after opportunities in commercial real estate. As e-commerce grocery, pharmaceutical distribution and fresh food logistics grow, demand for temperature-controlled warehousing is surging. It should be noted that “U.S. cold storage construction is projected to reach $18.6 billion by 2027, growing at nearly 14% annually.”
Cold storage developers often target sites near population centers and logistics corridors. Long Island, Westchester County, and the Hudson Valley offer strong prospects due to their access to dense urban markets, ports, and growing residential populations. However, these are also among the most challenging areas to build.
The numbers speak volumes. Online grocery sales are projected to reach 21.5% of U.S. grocery sales in 2025, up from 13% in 2021. In 2021, refrigerated and frozen food categories saw 58% year-over-year growth in e-commerce. U.S. cold storage real estate exceeds 214 million square feet, with vacancy rates under 4%.
CBRE’s 2022 U.S. Investor Survey shows 40% of respondents target cold storage assets, compared to 7% in 2019. The reasons are clear: cold storage leases are typically long-term (15–30 years), stable across economic cycles, and offer higher yields than conventional warehouses.
However, nearly 80% of U.S. cold storage was built before 2000 and often lacks ceiling heights, energy efficiency and racking systems required by today’s users.
Cold storage warehouses often require higher construction investment than standard warehouses, with costs from $175 to $300 per square foot, depending on cooling or freezing needs.
“There can be some hesitation from developers, due to their increased complexity in design, construction, and operation,” according to Michael Adler, director of business development at Aurora Contractors, which has built numerous cold storage facilities in New York. “That’s why experience in designing and constructing sophisticated refrigerated facilities is critical. Understanding local municipal processes and maintaining strong relationships with regional subcontractors is also essential.”
These facilities often need high clear heights (often exceeding 50 feet), reinforced slabs, automation infrastructure, backup power and specialized climate control systems. They can be energy-intensive, with costs making up 25% or more of operating expenses. However, efficiency technologies like transcritical CO2 refrigeration, solar panels, and efficient envelope assemblies help lower costs.
“Water and power demands are significantly higher for cold storage than a typical warehouse to support the various temperature-controlled chambers within the facility” according to Dale Koch, branch manager at Bohler. “As land development consultants, we typically evaluate available utilities early in due diligence and identify potential cost implications if the proposed facility requires significant upgrades or offsite extensions to the existing infrastructure.”
Pre-leasing is often essential, as few lenders will finance cold storage projects without committed tenants. Developers often pursue build-to-suit deals where an operator leases the facility and sublets pallet space to smaller users, providing revenue stability.
Long Island is a hotspot due to limited industrial supply and expanding last-mile delivery networks. The demand is reflected in projects such as ARES Black Creek Bellport warehouse and Amazon‘s growing footprint in Melville. By 2021, industrial vacancy fell to 2.7%, and asking rents reached $13.11 per square foot. Over 18 million sf of warehouse space has been proposed, including 7 million square feet in Brookhaven.
In response to overdevelopment concerns, towns like Brookhaven and Riverhead enacted moratoriums on warehouse projects over 100,000 square feet. Cold storage could be a welcome answer to this issue, as these facilities are tenant-driven, offering tax benefits and reducing vacancies. Westchester and the Hudson Valley are also poised for growth as population and logistics expand. Yet, these regions often lack zoning classifications for distribution centers, requiring community engagement and negotiation for approvals.
Local zoning codes on Long Island rarely identify cold storage as a permitted use, triggering discretionary approvals, SEQRA review, and community engagement. Even where permitted, bulk standards—such as height limits, impervious coverage and setbacks—can restrict design.
Cold storage is no longer niche–it’s essential infrastructure. However, success in New York’s competitive markets requires more than a good site and tenant. It requires tailored legal strategy, local credibility and intimate knowledge of the development landscape.
Keith Brown is a founding partner of Brown Altman LLP in Melville, where he represents a wide range of corporations in real estate matters.
Eileen Quinn serves as an associate within the firm.