Australia’s cold storage sector is facing a looming capacity shortfall, with growing demand for temperature-controlled facilities placing additional pressure on food and beverage supply chains, according to new research from JLL.
The research found Australia will need an extra 1.1 million square metres of cold storage over the next 10 years – driven by population growth, ageing facilities, and rising demand from the pharmaceutical and e-commerce sectors.
With prime vacancy at just 1.05 per cent nationally, and no available space in Sydney and Melbourne, the supply shortage is found to be already pushing up rents and attracting investor interest.
For food and beverage manufacturers, the report found that the shortage is changing the way businesses approach storage, logistics and inventory management.
“The shortage of readily available cold storage space will result in the continued growth of specialist third-party logistics (3PL) in the sector who have shown the foresight to invest in capacity and have the expertise to manage these complex supply chains,” Nathan Bingham, head of occupier services, logistics and industrial at JLL, tells Food & Drink Business.
“The seasonal nature of many food industries also places 3PLs in a strong position, as the high fixed cost of cold storage for short-term peaks can be prohibitive for many groups.”
The seasonal nature of many food industries is also strengthening the role of 3PLs – for manufacturers facing short-term peaks in demand, owning or expanding dedicated cold storage can be difficult to justify because of the high fixed costs involved.
Specialist operators can instead provide greater flexibility, allowing businesses to access capacity when it is needed without carrying the full cost of additional infrastructure.
However, increasing competition for available space could create another cost challenge for manufacturers already operating under financial pressure.
“Occupiers of cold storage space need to plan well in advance and have a clear understanding of their future requirements to ensure they aren't exposed to significant cost increases,” Bingham explained.
“Despite rising property costs, total operating expenditure exposure can be reduced by considering automation and other operating solutions that more efficiently manage stock holdings.”
Automation is likely to become increasingly important as manufacturers and logistics providers look for ways to manage costs and maximise existing capacity.
Bingham says more efficient operating solutions can help businesses manage stock holdings while reducing their overall operating expenditure exposure.
“Co-location of cold storage onsite with manufacturing and production is a key strategy that can deliver significant benefits to F&B companies,” he continued.
“Long-term partnerships with suitably qualified 3PLs can also be a winning strategy if they enable the 3PL to invest in automation and technology that can deliver a lower long-term cost.”
The report also found that the implications extend beyond individual manufacturers.
“A prolonged shortage of cold storage capacity could put pressure on food supply chains, making it more difficult and costly to store and distribute temperature-sensitive products,” Annabel McFarlane, head of strategic research at JLL, tells Food & Drink Business.
“However, initially these challenges are likely to be mitigated through greater efficiency across existing facilities. Increased automation, improved racking systems and better utilisation of available space can help increase capacity in the short-term.
“Longer term, additional investment in cold storage infrastructure will be needed to meet growing demand and support a resilient food supply chain.”
For manufacturers, the message is increasingly clear – cold storage can no longer be treated simply as a downstream logistics requirement.
Capacity planning, automation, co-location and strategic 3PL partnerships are becoming important considerations in protecting supply, controlling costs and ensuring temperature-sensitive products can continue moving efficiently from production to market.
