Cold storage: investment and finance considerations

Cold storage is temperature-controlled warehousing built to keep food, pharmaceuticals and other perishable goods chilled or frozen. It is a specialised corner of the industrial property market, and it carries finance considerations that a standard dry warehouse does not. We arrange and introduce property finance rather than lend ourselves, and cold storage is one of the asset types where the conversation with a lender needs the most care, because the building, the plant inside it and the running costs all behave differently from ordinary logistics space.

This guide explains what makes cold storage distinct, why it can be a profitable investment, what it typically costs to build or buy, and how lenders approach funding it. We have written it for investors and operators considering cold storage, and we have been candid about where the figures are well evidenced and where they are not. There is no standalone published rent or yield series for UK cold storage in the way there is for big-box logistics, so we keep those points qualitative and focus on the considerations that genuinely shape a deal.

What makes cold storage different from standard warehousing?

Cold storage is warehousing fitted with refrigeration plant, heavy insulation and specialised floors, racking and doors to hold a controlled low temperature, often well below freezing. That specification is the heart of the difference. A dry warehouse is a shell; a cold store is a shell plus an integrated mechanical system that must run continuously, because a failure risks spoiling the entire contents. The plant is expensive to install, expensive to power and expensive to maintain, and it has a finite life that has to be planned and funded for.

This changes the economics in three ways. First, the capital cost per square foot is far higher than a standard unit because of the refrigeration, insulation and power infrastructure. Second, the running cost is dominated by energy, so the building's efficiency and the price of electricity bear directly on profitability. Third, the asset is more specialised, which means fewer potential occupiers and a narrower resale market than a generic warehouse. Each of these affects how an investment performs and how a lender views the security.

Demand for the sector is strong but supply is dated. CBRE has described the cold storage market shifting toward a development phase, with strong demand meeting an ageing, outdated existing stock that no longer matches modern requirements. That mismatch is the investment story: well-specified new cold storage is scarce and sought after, while older facilities may need heavy capital expenditure to remain competitive. Anyone funding cold storage should understand which side of that divide their building sits on.

Is cold storage a profitable investment?

Cold storage can be highly profitable, because temperature-controlled space commands a premium rent over dry warehousing and serves resilient, non-discretionary demand from the food and pharmaceutical supply chains. People buy chilled and frozen food in good times and bad, so occupancy tends to be stable, and the specialised nature of the building creates a degree of pricing power for well-located, well-specified facilities. Long leases to established operators can produce a dependable income stream that supports both the investment and the finance behind it.

Profitability is not automatic, though, and the costs are real. Energy is the single largest operating expense, and a poorly insulated or inefficient facility can see margins eroded quickly when power prices rise. The refrigeration plant depreciates and must eventually be replaced, a large capital event that has to be provided for. And because the market for the asset is narrower, a vacant cold store can take longer to re-let than a generic warehouse, which raises the cost of any void. A profitable cold storage investment is one where the rent and lease comfortably absorb these specialised costs.

There is no published UK rent or yield series specific to cold storage in the way there is for mainstream logistics, so we treat headline return figures qualitatively rather than quoting a precise market yield. For context, prime industrial yields generally held broadly stable at around 5.00 to 5.25 percent according to Knight Frank in December 2025, but cold storage trades on a case-by-case basis driven by the specification, the covenant and the lease. The honest position is that profitability depends heavily on the individual asset, which is why we model each deal on its own merits.

What does a cold storage facility cost to build or buy?

A cold storage facility costs considerably more per square foot than a standard warehouse, because the refrigeration plant, insulated envelope, specialised flooring and heavy power supply all add to the build. The exact figure varies widely with the temperature regime, the size, the location and whether the facility is single-temperature or multi-temperature, so a precise number is misleading without a specification in front of you. What is reliable is the direction: budget meaningfully more capital than an equivalent dry unit, and provision for the plant's eventual replacement as well as its installation.

The cash requirement extends beyond the bricks and the plant. An investor or operator must also fund the deposit, the arrangement and legal fees, professional advice on the mechanical systems and, for a development, the cost of the build period before any income arrives. We always model the full cash picture before a client commits, because a cold storage project that looks affordable on the headline build cost can become tight once the plant, the power upgrade, the fees and the void period are added together. Understanding the true figure early prevents a project stalling halfway.

Because the cost base is high and specialised, the funding route often differs from a standard purchase. A straightforward acquisition of an existing, let cold store may suit a term loan against the income, while building or comprehensively refurbishing a facility usually calls for development finance that releases funds in stages against the work done. We help clients identify which route fits, and we set realistic expectations on the deposit and the loan to value a lender will offer against a specialised asset of this kind.

How do lenders approach financing cold storage?

Lenders treat cold storage as a specialised asset, which usually means a more cautious loan to value than they would offer on a generic warehouse. The reason is re-lettability: if the borrower fails, a lender has to consider how easily it could sell or re-let a temperature-controlled building, and the narrower market for such assets makes that harder. A lender therefore leans heavily on the strength of the tenant, the length of the lease and the quality and remaining life of the refrigeration plant when sizing the loan and setting the rate.

The plant itself is a focus that does not arise with a dry unit. A lender will want comfort that the refrigeration system is sound, has a reasonable life ahead of it and is being properly maintained, because the value of the whole asset depends on it working. Energy efficiency increasingly matters too, both for the running cost the occupier faces and for the building's long-term marketability as standards tighten. We make sure these points are evidenced clearly in the case, because a lender that understands the plant is a lender more willing to fund it.

Matching a cold storage deal to the right lender is where our role pays off most. Not every lender has appetite for specialised industrial assets, and those that do vary widely in how they price the risk. Rather than a client approaching a single bank and being declined for a building outside its comfort zone, we identify the lenders genuinely active in temperature-controlled property and place the case with the one most likely to fund it sensibly. Because we arrange and introduce rather than lend, our incentive is simply to find the funding that fits.