• 20 apr 2023
  • Blog
  • Assetmanagement
Cold Storage Photo 3

Cold storage: return and impact

In our collaboration with UBS Asset Management we invest in large, modern, efficient and sustainable cold storage facilities across the United States. This fits perfectly with PGGM’s focus on sustainable investment initiatives, according to Investment Manager Sebastiaan Blom from PGGM’s Private Real Estate department.

Demand drivers

'Our dietary habits have changed in recent years, with more variation in what we eat and increasing demand for organic and plant-based food (such as cauliflower rice, broccoli pizza crusts and veggie burgers). These are often perishable products which all require temperature-controlled storage. In addition, the way we shop for groceries is changing rapidly, with the share of e-commerce in groceries rising steadily. This means the logistics systems behind it are changing too, with orders being transported directly from the distribution center to our homes. This contrasts with the process of products being hand-picked from the grocery shelves, put in a box and delivered to our home, as is often still the case today. These developments will only increase the demand for large, modern, and efficient cold storage facilities, where food manufacturers and distributors can store their food.'

‘Perishable products require temperature-controlled storage. The better these products are and remain refrigerated, less food is lost in the distribution chain. That is why together with UBS Asset Management we focus on developing modern cold storage buildings that can store food in the best possible way and thus extend freshness and shelf life. In addition, these buildings are typically located in key distribution hubs. Together with UBS Asset Management, we are truly committed to this strategy; focused on what we develop/own and where. This way we can really make an impact through private real estate investment and its potential impact on developing more efficient food infrastructure.'

Less food waste and up to 50% more energy efficient
'Food waste is a major problem in the current food chain. Worldwide, 30% of food is lost across the supply chain, leading to unnecessary additional greenhouse gas emissions. A major cause of food loss is poor refrigeration during storage and transportation. Better, more stable, and more targeted cooling of products, can therefore significantly reduce food loss. This is important in itself, but also has positive climate effects. Less food waste means less greenhouse gas emissions. In addition, food loss accounts for 21% of all fresh water used in the United States. Furthermore, new cold storage facilities are significantly more energy efficient than existing stock. They do still use a lot of energy, that is a fact, but a new state-of-the-art cold storage facility can be up to 50% more energy and cost efficient than older, antiquated facilities. But how do you demonstrate all of this? We are currently thinking about how we can accurately measure these improvements.'

Socio-economic benefits
'Another ESG aspect to which we can contribute is the socio-economic element. For example, better cold storage and longer shelf lives contribute to countries in South America being able to increase their target markets, produce more food and subsequently export food to countries like the United States. This increases the livelihood of both the exporting and importing countries and helps reduce the cost of food. Again, cold storage plays a crucial role in this supply chain. But how does one empirically prove this socio-economic impact? That is very difficult.’ 

Attractive investment
'This investment is financially attractive and that is still an essential guideline for us. Demand for cold storage is healthy, which means rental forecasts are positive. Moreover, due to our changing dietary habits, we expect that this demand will continue to increase, and we will be able to sell these buildings at an attractive price point in the future. We only started this program recently, but if the strategy is successful – and I think it will be – then I do believe that we will expand our current mandate in the future. Developing new cold storage buildings or refurbishing old ones to the newest and most sustainable standards, so that we can continue to make even more impact.'

Cold Storage Photo 2
Cold Storage Photo 1

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