The U.S. cold storage sector experienced negative net absorption in the first half of 2026, the first such period since 2007, as supply growth outpaced demand. However, this imbalance primarily reflects a shift toward modern, high-quality facilities, while legacy properties face sustained occupancy declines amid e-grocery expansion and retailer consolidation efforts.
- Negative absorption milestone: First half of 2026 marked the first 1H period with negative net absorption since 2007, with 56 million cubic feet of negative absorption against 41 million cubic feet of deliveries.
- Vacancy concentration: Overall vacancy reached 7.7%, but legacy properties account for 68% of vacant cubic feet despite representing only a portion of total inventory.
- Flight to quality: Occupiers are abandoning older operator-run facilities for modern buildings with superior temperature control and automation, while demand for high-quality cold storage remains resilient.
- E-grocery acceleration: Online grocery sales grew 21.5% year-over-year in July while in-store sales contracted 2.6%, driving retailers to scale cold chain capacity through existing stores, 3PLs, and dedicated fulfillment nodes.
- Size mismatch challenge: Average cold storage leases signed over 5.5 years are 125,000 square feet, while new construction averages 300,000 square feet, extending lease-up times for recent developments.
The U.S. cold storage sector’s inflection point remains elusive as the market contends with negative net absorption in the first half of 2026, marking the first 1H period to record negative net absorption since 2007, according to Newmark’s latest cold storage market report.
Conditions are expected to improve in the second half of the year, supported by several large scheduled move-ins and reported stabilization in inventories held in cold storage; however, vacancy will remain well above the long-term average.
Key takeaways:
· U.S. food price growth has moderated substantially from the 2020-2022 run-up, although food prices remain more than 30% above 2019 levels.
· Phoenix, Columbus, Kansas City, Nashville, Charleston and Tampa posted the strongest gains since 2018, supported by growth in consumption, logistics, food manufacturing, power and modern warehouse capacity. Northern New Jersey and the Inland Empire declined from elevated levels but remain above the index’s 100 benchmark.
· While major new facility announcements have continued in 2026, incremental investment is likely to skew toward retrofit expansions within existing footprint.
· U.S. cattle supply has fallen to the lowest level in 75 years.
· While brick-and-mortar grocery spending remains soft, online grocery sales are growing at robust double-digit rates. U.S. e-grocery sales increased 21.5% year over year in July, while in-store sales contracted 2.6%. As order mix continues to shift toward delivery and ship-to-home—both more cold chain intensive than pickup—retailers are scaling capacity by leveraging existing stores, partnering with third-party logistics (3PLs) providers and selectively developing dedicated fulfillment nodes to meet rising expectations for speed and flexibility.
· Spurred by recent new development, the national cold storage inventory reached 346 million square feet or approximately 9 billion cubic feet as of Q2 2026. Contextually, the national cold storage market represents only 1.9% of the overall industrial base.
· New cold storage development has slowed over the past two years, and the construction pipeline has fallen from its 2024 peak. The modest pipeline increase YTD has been driven primarily by user-led projects, including owner-occupied and build-to-suit facilities.
· The supply-demand imbalance widened further in the first half of 2026, as approximately 41 million cubic feet of deliveries coincided with 56 million cubic feet of negative net absorption, pushing vacancy to 7.7%. However, rising vacancy does not necessarily reflect a broad-based decline in demand. Much of the increase is attributable to a flight to quality, as occupiers leave aging operator-run legacy facilities and choose modern buildings with stronger temperature-control and automation capabilities. Consequently, vacancy is likely to remain concentrated in legacy properties, while demand for high-quality cold storage space remains comparatively resilient.
· Older inventory continues to lose occupancy. Legacy properties have recorded sustained negative absorption since 2022, while 2006–2019 facilities also weakened in 2025 and 2026 YTD.
· Cold storage vacancy remains sharply segmented by vintage. As of 2Q26, facilities delivered since 2020 recorded the highest vacancy rate at 10.9%, reflecting continued lease-up across recently completed supply. Legacy properties weakened, with vacancy rising to 8.2% amid sustained move-outs and space consolidations, while facilities delivered between 2006-2019 remained comparatively tight at 3.4%. However, vacancy rates alone understate the exposure within older inventory: legacy facilities account for 68% of all vacant cubic feet, compared with 24% for post-2020 product and just 8% for the 2006–2019 cohort.
· The average cold storage lease signed over the past 5.5 years is roughly 125,000 square feet, while the average size of properties currently under construction across the United States is nearly 300,000 square feet. This mismatch has led to longer lease-up times for some cold storage developments.
· Cold storage construction costs of approximately $130–$350 per square foot far exceed the approximately $85–$150 square feet of dry warehouse range, driven primarily by the insulated envelope, refrigeration, under-slab heating and electrical/mechanical scope, with a higher operating-cost premium once built.
· Cold storage sales volume remained elevated if slowing slightly from the previous year, although an uptick is likely in the second half of the year.
