Cold storage's vacancy record is an obsolescence map

Newmark's first-half 2026 Cold Storage Market Overview counts 41 million cubic feet of deliveries against negative net absorption, a 7.7% vacancy rate that reads as oversupply until you see where the empty space sits: buildings that predate the pandemic. Facilities delivered since 2020 are generating demand, while legacy properties have posted negative absorption every year since 2022 and account for 68% of total vacancy, against 24% for post-2020 product.

The gap has the shape of a functional divide: the buildings that are filling were designed for today's distribution model, and the ones emptying were built for a pallet-load reality that e-grocery has already made obsolete. Newmark argues long-term demand remains intact — population growth, domestic food production, e-grocery, and the increasingly sophisticated pharmaceutical and biologics supply chain — but that demand is not distribution-neutral. Online grocery sales in July jumped 21.5% year over year while in-store sales fell 2.6%, as retailers route more volume through existing stores, third-party logistics providers, and dedicated fulfillment centers, none of which resembles the old pallet-in, pallet-out warehouse.

That sort of bifurcation is familiar to anyone who watched office trade through the recovery: the prime space clears quickly, the commodity lingers, and the mid-market waits. Cold storage is following the same pattern, except the difference between the vintages is operational, not aesthetic. The new facilities are built to the specifications of a distribution model that routes more volume through e-commerce and home fulfillment; the older stock was designed for a store-and-ship cycle that no longer sets the pace. That is why the conversion play is strongest in dry warehouse, where an older shell can be upgraded to cold service at a cost the operating statement can support.

The consumer wallet is tightening as food prices remain more than 30% above 2019 levels even after moderating from the 2020-2022 surge, and reduced SNAP benefits plus a gas-price spike since March 2026 are squeezing budgets, according to Newmark. The category data reflect that pressure: grocery unit sales fell 1.8% year over year, with fresh produce among the hardest hit, while frozen produce posted unit-sales growth above 5% and total frozen-food inventories rose modestly.

The bifurcation carries a construction-cost edge, because new cold-storage development runs $130 to $350 per square foot and Newmark expects higher costs and longer timelines to push projects toward build-to-suit, owner-user, or pre-leased formats. Fewer speculative deliveries follow, because no one builds a $350-per-foot box on spec when repositioning older dry warehouse stock into cold storage costs $100 to $150 per square foot, less than half the top end of new-build costs.

Temperature-sensitive biologics, including GLP-1 therapies, are projected to grow at an 8.3% compound annual rate through 2033, according to Newmark, making the long tail of pharma the sector's most durable driver. GLP-1 adoption could also support food-storage demand by nudging consumption toward protein and fresh produce, though fresh produce is the category currently getting hit hardest.

The whole report reads less like a supply-demand story and more like a technology depreciation curve: the market has plenty of demand, but it lacks modern, functional temperature-controlled space, and the old stock emptying out is a format shift at work. The record 7.7% vacancy rate — which this publication detailed in its coverage of the sector's vintage split — is a repricing event, not merely a vacancy statistic. Allocators underwriting cold storage as one bucket will misprice the next cycle; the trade is in the vintage spread, and the cheapest functional capacity is a dry warehouse with a refrigeration retrofit.

Cold storage has been sold to allocators as a structural-growth play, and the growth story is intact, but the 1H data says the growth is flowing to a specific format and a specific vintage. A fund buying a legacy cold box at a discount to replacement cost is not buying the same asset as a fund underwriting a modern build-to-suit on a pre-lease to a national grocer; the income stream, the tenant profile, and the capital expenditure horizon all differ. Watch the first comps from a repositioned dry box — the spread between what that space rents for and what the vintage cold box rents for will set the market's new pricing floor.