Opportunities in global listed property: US cold storage warehouses
BSc (Hons), MRICS Head of Global Listed Real Estate Sydney, Australia
It’s a fact of life that everyone needs to be fed and watered. As the economy grows and shifts, or trends alter, consumption habits will change. But people still need food.
They might eat out more, or start buying organic food, or tighten the purse strings and consume more at home, but in each scenario what doesn’t change is the demand for fresh food, whether it be purchased from restaurants, greengrocers or from supermarkets.
Fresh food needs to be stored in temperature-controlled warehouse facilities. These facilities form a property class that is very stable, very defensive, and historically has had solid rates of return. It is also relatively unknown to many investors.
Cold storage facilities generate both rent and storage income, and owners of the facilities are often involved in product placement, retrieval and transportation.
Revenues in the US for temperature-controlled warehouses have risen steadily since 2006 to reach an estimated US$5.3 billion in 20171. The number of refrigerated warehouse facilities in the US last year was 1,154, up by almost 11 per cent from two years earlier2.
Within the sector, there are different facilities focused on different commodities. Packaged foods comprise 17 per cent of warehouse usage, followed by potatoes and poultry (both 11 per cent), dairy (nine per cent) and fruit and vegetables (seven per cent)3.
The sector is worth considering for investors, who can gain access to stocks exposed to US cold storage warehousing through the AMP Capital Global Property Securities Fund, which is an active ETF trading on the Australian Stock Exchange.
Strong and stable food industry fundamentals drive demand, while diversification across geographies and commodities reduce volatility of returns.
And with the compound annual growth rate of retail groceries in the US at almost four per cent, it provides a stable investment option.
1 IBIS Report, Refrigerated storage industry in the US, February 2018
2 GCCA, December 2018
3 COLD, January 2019
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Important notes
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While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.
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