One of the largest speculative cold storage projects planned in the Houston area is breaking ground as the city’s cold storage market heats up. 

The 315,101-square-foot project by Boomerang Interests comes on the heels of other substantial projects in the works by Blackline Cold Storage Inc. and Ti Cold Development. 

Houston ColdPort, a joint venture between Boomerang Interests and CenterSquare Investment Management, is planned for a 22.48-acre site at 7500 Uvalde Road at the northwest corner of Beltway 8 and U.S. Route 90. The project is expected to appeal to companies requiring space for freezer/cooler storage, food processing/manufacturing and food distribution. Boomerang Interests is marketing the project as the first truly speculative cold storage project in Houston, meaning construction is starting without a specific tenant in mind.

The site is located within the so-called heavy-haul corridor by major U.S. east-west and north-south thoroughfares such as Beltway 8, U.S. Route 90, Interstate 10 and Interstate 69. Houston ColdPort can accommodate a single tenant or two tenants, according to a statement from the joint venture developers.

Houston ColdPort fills a need for modern cold storage space in the city, developers said. The average age of cold storage facilities in Houston is more than 30 years old, said Andy Cyrus, managing partner of Boomerang Interests, in an email, citing CoStar data. Cyrus, who co-founded the firm with JLL's Beau Bellow, added that many of the existing buildings have limited vacancies at a time when the sector is expanding.

“The pandemic accelerated and highlighted the growing demand for online ordering of refrigerated and frozen foods,” said Jeff Reder, managing director of CenterSquare, in the statement. “Houston is a top target market for cold storage users given its large and growing population, central location, business friendly environment and of course being home to one of the largest ports in the world.”

Developers have started site work, which is expected to take two months prior to starting construction. Boomerang Interests expects to complete Houston ColdPort in the second quarter of 2022.

Elsewhere in Houston, Blackline Partners also is building its first cold storage facility in the city, a 298,000-square-foot project in Cedar Port Industrial Park near Port Houston. The project broke ground about two weeks ago with an undisclosed tenant taking up about 25% of the project and the remaining space available for lease, said John Prendergast, vice president of commercial at Blackline Partners, in an interview. 

Prendergast said many tenants are telling him the current cold storage facilities in the city can’t accommodate their space requirements. Traditionally, cold storage operators have large facilities on the East and West coasts, but demand for fresh foods and a growing population have created a bigger need for facilities closer to the central United States, he noted. Blackline Partners has teamed up with Artemis Real Estate Partners on the project located at 6330 Nita Way. 

Construction on the 1st phase is expected to be complete in the 1st quarter of 2022, Prendergast said. Blackline Partners has enough land at the 36-acre site to accommodate about 680,000 square feet of cold storage space, he added. Plans for future phases haven't been announced. 

Fresh Food Demand Drives Growth

Typically cold storage buildings are designed for specific users, so speculative space is rare, according to a 2020 report from CBRE. When fully leased, cold storage facilities can yield rents that are two to three times higher than that of a standard warehouse. But the bespoke nature of the facilities can raise concerns about leasing the properties once a tenant vacates, which has previously led to some hesitance among traditional investors to get into the cold storage business. 

However, as consumer demand for fresh foods flourishes, investors are increasingly showing interest in cold storage as a way to diversify their portfolios, the CBRE report found. 

The cold storage sector is set to grow at a compound annual growth rate of 4.5% by 2023 as demand for cold storage space expands, according to CBRE.

“Consumers are becoming healthier in their food choices and they are increasing shopping at the perimeter of the grocery store versus in the middle — another way of saying they are demanding more fresh foods than packaged and preserved ones. This has placed pressure on cold storage needs,” said Justin Boyar, CoStar’s director of market analytics, in an email.

In Houston, cold storage projects tend to be owned by the occupier itself, and the advent of speculative cold storage space is a relatively recent phenomenon, Boyar said.

Among the larger cold storage facilities in the Houston area are Seaboard Corp.’s 628,000-square-foot Jacinto Terminal in the East I-10 Outer Loop area and The Yucaipa Cos./Americold’s 315,000-square-foot facility in La Porte, according to CoStar data.

Meanwhile, Ti Cold Development has a proposed a 305,000-square-foot cold storage facility at East Hardy Commerce Park, situated close to Interstate 45 and Beltway 8 as well as George Bush Intercontinental Airport. It was not immediately clear whether that project had any tenants signed yet or whether construction had started. 

For the Record

ARCO Design/Build is designing and constructing Houston ColdPort. Boomerang Interests has hired Chris Cummings and Walker Barnett with Colliers International to lease Houston ColdPort. JLL's Trent Agnew, Dustin Volz, Will Mogk, Michael Johnson, and Wells Waller arranged financing for Houston ColdPort. BoyarMiller is providing legal counsel. For Blackline Partners' Houston project, CBRE’s Gordon Reynolds, Brian Myers, Jeff Stein, Brock Hudson, Art Rasmussen, and David Norrie arranged the joint venture equity and financing on behalf of the owner.