The cold-storage boom is a risk to the IE's aging freezers, not a windfall

Cold storage runs on a different economic logic than the dry warehouses that define the IE. Refrigeration systems, specialized construction, and heavy power draw make these buildings far costlier to build — and far harder to replace — than a standard distribution box. That replacement cost is exactly what's driving the current market.

Newmark's data shows national cold-storage vacancy hit a 20-year high to close 2025. The cause isn't collapsing demand — overall absorption stayed positive — but a flight to quality. New, purpose-built facilities are pulling tenants and capital, while older boxes sit with rising vacancy and what the firm calls functional obsolescence: buildings that no longer match how the cold chain operates.

That sorting is where the IE's exposure lives. The Los Angeles/Inland Empire market carries the oldest cold-storage inventory among the top 10 U.S. markets, with an average build year of 1975. California's roughly 20.5 million square feet of refrigerated space concentrates in LA and the IE. In a market rewarding modern specs, a half-century-old freezer is the wrong end of the trade.

The Walmart deal in May shows the other side of the same split. The retailer paid $233 million for a 507,000-square-foot temperature-controlled facility in Riverside it had leased since 2010 — the largest cold-storage building sale in Southern California history, by JLL's account. Buyers are paying up for mission-critical, well-located, modern cold space precisely because building new means years of entitlement and far higher cost. The capital is real. It's just flowing to the right buildings.

For an IE operator or landlord sitting on aging refrigerated space, the national headline reads like a tailwind and functions like a deadline. The boom raises the bar on what tenants expect and what capital will fund, and an obsolete box doesn't clear it. The question isn't whether cold storage is hot. It's which side of the quality line a given building sits on — and the IE's age profile puts more of its stock on the wrong side than most markets carry.