Zero cold storage vacancies in South East Queensland as developers struggle to keep up

Developers are struggling to keep up with the cold storage sector in South East Queensland with demand soaring and vacancy at zero.

While cold storage demand has reached unprecedented levels in the southeast of Queensland, logistics giants, wholesalers and retailers will have to wait for developers to catch up.

Cushman & Wakefield director brokerage, industrial and logistics Qld, Morgan Ruig, said there was up to 100,000sq m of unfilled cold storage requirement in the region.

“The market is incredibly buoyant from an occupier’s perspective. We are seeing a lot of demand from companies looking to store anything from 1000 pallets to 10,000 pallets (around 10,000sq m),” he said.

“At the moment there are requirements in total for about 100,000 pallet spaces and we’re in a market where right now there’s zero space available.”

Cold storage – a facility where temperatures are low so that perishable products can last longer – has been a niche industrial segment for decades.

It slowly grew as supermarkets got bigger and they realised customers demanded out-of-season fruit and vegetables, while technology meant online food purchases became part of daily life.

However, it took the Covid pandemic to accelerate the growth of online food purchases.

According to Cushman & Wakefield the pandemic generated an online retail revenue increase of 21 per cent from July 2020 to July 2023. In the same three-year period, online food retailing increased by 40 per cent.

As normality returned to a degree in the 12 months to July 2023, non-food online retail turnover decreased by 1.8 per cent while online food retailing posted growth of 5.5 per cent. This shift was bolstered by a population boom, with interstate migration being the main driver as the state reported an increase of about 113,150 people to Queensland in the 2022 calendar year.

Inside the cold storage facility at 31 Lahrs Rd, Ormeau.

While cold storage development has not kept pace in South East Queensland, there are sttill speculative projects being completed or on the way.

Mr Ruig said the Bird family is developing a 7705sq m cold store at Archerfield Airport in Brisbane’s western suburbs which is due for completion in April 2024.

“For cold storage you’re getting rent of up $350/sq m net with little or no incentives and for developers it’s definitely worth a look at over normal generic warehousing,” he said.

In a recent deal Auscool Logistics secured a long-term head lease for a speculatively built state-of-the-art cold storage warehouse at 31 Lahrs Rd, Ormeau, between the Gold Coast and Brisbane, that is owned by global real estate investment, development and property manager Hines.

An entity associated with Hines bought the 2.18ha site in May 2022 last year from developer Panak Pty Ltd for $8.8m. The fund through deal was struck to speculatively build the cold storage facility, which was completed early this year. Hines paid $51.2m for the property in January.

Cushman & Wakefield Matt Richards who struck the deal with Mr Ruig said the property had an “enormous amount” of inquiries because it was the only brand new vacant cold storage facility of its size available in south east Queensland.

“Multiple offers were received, with the successful tenant coming shortly after practical completion at the asking rental,” he said. It’s not just new properties, with investors keen to take advantage of the strength of the sector.

The cold storage facility at 160 Benjamin Place, Lytton sold for $6.17m.

In a recent deal WA property fund Westbridge Funds Management paid $6.17m for a fully-leased refrigerated logistics facility at 160 Benjamin Place, Lytton, on the doorstep of the Australian TradeCoast precinct in Brisbane’s eastern suburbs.

On a 2440sq m site, the building has a gross lettable area of 1530sq m, comprising a cold storage facility and modern dual level corporate office and it is fully leased to wholesale distributor Sunshine Seafoods, who have successfully operated out of the property for over 10 years.

The property last changed hands in 2021 for $4.125m when it was purchased by the Howson Investment Group.

Mr Ruig said demand has been so strong was that the collapse in April of Scott’s Refrigerated Logistics caused hardly a ripple in the sector. SRL, which was one of the largest refrigerated logistics companies in the country, alongside Linfox, Lineage, Americold and Lindsay, moved around 8000 pallets on average daily.

It occupied around 150,000sq m of warehouse space across the country, the largest share of which was in Queensland. Mr Ruig said the quality cold storage properties spent hardly any time vacant.

In June US cold storage transport giant Americold paid $33m to Dexus Industria REIT for an cold store facility at 84 Lahrs Rd, Ormeau, that was occupied by SRL.

“Scotts Refrigeration’s South East Queensland properties have all been absorbed,” Mr Ruig said. “There’s nothing available.”