Cold storage and refrigerated warehouse property has become one of the most actively pursued specialist industrial sub-classes in Australia. The combination of growing third-party logistics demand, supermarket and quick-commerce supply chain expansion, agricultural export growth, and pharmaceutical cold-chain requirements has driven institutional capital into refrigerated logistics property. For private investors, the available stock ranges from single-tenant freestanding cold stores in the $5 million to $20 million range through to larger multi-tenant cold logistics facilities.
This guide covers what a buyer is acquiring with cold storage property, the operator covenant tiers, the building specification that drives functional value, the power cost question that is unique to refrigerated logistics, and the buyer-side underwriting framework specific to the sub-class.
Cold storage is industrial property with a refrigeration plant attached. The refrigeration plant is most of the value and most of the risk. A standard industrial DD on a cold store underestimates both.
What Cold Storage Property Is
Cold storage refers to refrigerated warehouse property used to store goods at controlled low temperatures. The standard temperature ranges are:
- Chilled. 0°C to 4°C. For fresh produce, dairy, deli, and similar.
- Frozen. -18°C to -25°C. For frozen food, ice cream, and bulk frozen export goods.
- Blast frozen. -40°C or lower. For initial freezing of fresh product, then transferred to standard frozen storage.
Some facilities serve a single temperature regime; multi-temperature facilities have separately-controlled zones. The buyer-side review needs to understand which regime the building is built for and what flexibility it has.
1 Operator Covenant
Major third-party logistics (3PL) operators
Lineage Logistics (the largest cold storage operator globally), Americold, Emergent Cold (acquired by Lineage), Aerodrome Logistics, NQ Cold Stores. Strong covenants with institutional backing in some cases; private companies with substantial balance sheets in others.
Supermarket and FMCG operators
Coles and Woolworths operate their own cold-chain distribution centres in some locations. Major FMCG companies (Goodman Fielder, Saputo, Bega) hold or lease cold storage for specific product lines.
Specialist operators
Pharmaceutical cold chain (Symbion, EBOS, DHL Pharma), meat processors (Teys, JBS, Australian Country Choice), and fresh produce wholesalers operate specialist cold storage tied to their core business.
2 Building Specification
Cold storage buildings have specific construction characteristics that differ materially from ambient industrial:
Insulation and envelope
Wall and roof insulation must maintain temperature differential of 20 to 40 degrees Celsius against external ambient. Insulated metal panels (typically 100 to 200 mm thick) are standard. Loss of envelope integrity is a major operational and financial issue.
Refrigeration plant
The cooling system (typically ammonia or HFC-based) is the operational heart of the facility. Plant capacity, age, redundancy (typically N+1 minimum), and energy efficiency all drive operational economics and remaining useful life.
Floors and structure
Cold store floors must accommodate freezing and the resulting structural movement; sub-floor heating prevents ground freezing under deep-freeze facilities. Racking systems are specialised for cold-store operations.
Loading docks and air locks
Dock seals, air locks, and dock-level door systems control temperature loss during loading and unloading. Modern facilities have automated dock door systems and rapid-open dock doors.
3 The Power Cost Question
Refrigeration plant runs continuously; cold storage facilities have substantially higher electricity consumption per square metre than ambient industrial. Power costs are a major operating expense and the trajectory of grid electricity prices in Australia matters for operator economics.
Power pass-through
Triple-net cold storage leases typically pass power costs to the tenant. The landlord is insulated from power cost variability over the lease term.
Solar and on-site generation
Many modern cold storage facilities have rooftop solar PV installed. The economic benefit accrues to whoever invested in the solar; lease arrangements vary.
Refrigeration plant efficiency
Older refrigeration plant is materially less energy-efficient than modern systems. A buyer-side review of plant age and efficiency rating is part of the underwriting; the next operator's economics depend on it.
4 Lease Structures
Typical terms
10 to 20 year initial term, with options to renew. Rent reviews are typically CPI plus a minimum or fixed annual increases. Outgoings recovery is structured as triple net with the operator paying all outgoings including power.
Capex provisions
Refrigeration plant replacement (typically every 15 to 25 years for major components) is a major capital event. The lease should specify whether the landlord or tenant bears the cost and how the lease term and rent adjust around capex events.
5 Buyer-Side DD Steps
- Lease abstract. All terms, options, reviews, outgoings, capex provisions for refrigeration plant.
- Operator covenant. Audited financials, rent coverage, parent guarantee.
- Refrigeration plant inspection. Independent specialist review of plant age, condition, capacity, redundancy, and remaining useful life.
- Building envelope. Insulation panel condition, dock seal integrity, air lock function, ground heating systems.
- Power supply and metering. Capacity, redundancy, current consumption pattern, solar integration if any.
- Environmental and refrigerant. Ammonia plant compliance, leak history, refrigerant phase-out timeline (HFC, particularly R404A, is being phased down under the Kigali Amendment).
- Catchment. Location relative to ports, retail distribution networks, and food processing clusters.
- Comparable sales. Recent cold storage transactions by covenant tier and submarket.
6 Yields and Pricing
Modern long-WALE cold storage with strong-covenant tenants prices at the tighter end of the industrial specialist spectrum. Older or short-WALE cold storage trades meaningfully wider, reflecting refrigeration plant replacement risk and operator covenant.
Frequently Asked Questions
How long does a cold store refrigeration plant last?
Major refrigeration components (compressors, condensers, evaporators) have economic lives of 15 to 25 years with proper maintenance. The full system has working life of 25 to 35 years before major rebuild becomes necessary.
What is the refrigerant phase-out risk?
Hydrofluorocarbon refrigerants are being phased down under the Kigali Amendment to the Montreal Protocol. Older R404A systems will require refrigerant replacement or plant rebuild over the next 10 to 15 years. Buyer-side review should price this.
Is cold storage suitable for an SMSF?
Generally yes, subject to the standard SMSF and LRBA rules. The refrigeration plant replacement risk is material and should be modelled into the SMSF's cash flow.
How does cold storage compare to ambient industrial on yields?
Modern long-WALE cold storage with strong covenant trades close to or slightly tighter than ambient industrial of comparable scale; the specialist demand has driven yield compression. Older cold storage trades wider, reflecting capex risk.