PRW construction lowing in Europe, but booming in Middle East and Asia: overcapacity in the Netherlands and other EU countries, as well as ongoing pressure on rates, will have to be sorted out before the next surge in expansion takes place in Europe.

Even though the public coldstores in most West European countries, except for Ireland, have good occupancy rates, large-scale new construction or substantial expansion is not to be expected in the near term, because returns are simply not attractive enough at the moment. That's the opinion of Theo van Sambeeck, a principal of ColdStoreDesign.com, based in Zwolle, the Netherlands.

Operators have only been able to realize modest price increases lately, but these don't even begin to compensate for rate cuts made in the past years. Furthermore, refrigerated warehouse executives indicate there is structural overcapacity. According to what they tell Van Sambeeck, in the Netherlands alone, about 30% of the public coldstores would have to be reorganized in order to bring the industry back into balance in terms of supply and demand.

Central Europe will see some construction of new public refrigerated warehouses. In countries such as Romania and Bulgaria there are several projects in the pipeline, reported Van Sambeeck. In Poland large public coldstores (partly dedicated) are under construction, also as a result of Unilever's policy to reduce its number of warehouses from 600 to 250 by 2010 (See related story, page 111.).

In Moscow and Saint Petersburg there are also several projects in progress which will begin to address the cold storage shortage in the region.

A real boom in construction is visible in the Middle East, where ColdStoreDesign.com is involved in several projects, Van Sambeeck said. Dubai is the absolute hot spot at the moment, but there are also projects on the drawing board for Oman, Kuwait and Saudi Arabia. In general, investors think big, which means that a capacity of 50,000 pallet positions is considered more or less normal. The issue of profitability does not seem to be a very pressing matter among the petrodollar-rich players in the Gulf states.

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"We know from experience that India and China are two other regions where much construction is scheduled. Entrepreneurs in these countries hope to profit from the presence of international food retailers, which is expected to increase enormously in the coming years, provided that restrictions are lifted and these economies can maintain their current growth figures," said Van Sambeeck.

The Chinese Commission for Refrigerated Warehouses recently released the latest statistics for the total capacity of refrigerated space in the PRC. Longchang Liu with the Shanghai Association of Refrigerated Warehouses, a Global Cold Chain Alliance affiliate partner and a member of the Commission, reported that the total capacity of refrigerated warehouse space in China is around nine million tons (over 30 million cubic meters). Of that, about 50% is estimated to be for public refrigerated warehouses.

According to Koenraad Van Simaey, a Southeast Asia-based partner of ColdStoreDesign.com, Vietnam is the absolute front runner when it comes to expansion of cold storage capacity, with an expected growth front 90,000 to 250,000 pallet positions in the next 12 to 15 months. He believes that this will create much pressure on the country's existing public coldstores, which currently are able to operate at relatively positive price levels.

For the time being, Van Simaey said, the Vietnamese market will predominantly focus on the export of shrimp and other frozen seafood and fish products. Several international logistics service providers are now entering into this market, competing primarily with local operators.

In the European private sector, Van Sambeeck reported, the most significant development is the construction of large facilities for dedicated storage of products made by single manufacturers or processors.

Instead of storing products in smaller quantities in several coldstores or 3PLs, they opt for centralization of stocks and eliminating intermediate storage and extra handling activities front the process, thus creating larger product flows closer to the retail distribution or consolidation centers.

These types of construction projects are about to be launched in nearly all countries in Western Europe. Rather extraordinary are the projects where entrepreneurs from different sectors enter into a joint venture and cooperatively run a refrigerated warehouse, such as the initiative in Ieper, Belgium, where vegetable and ice cream manufacturers are setting up a 100,000 pallet position facility. By taking these amounts out of the PRW marketplace, the pressure on rates increases again.

"Cooperation is sometimes necessary in order to establish an operation that has sufficient scale to realize a good return on investment, because operations this size nowadays have to be highly sophisticated and require a high level of mechanization and automation," Van Sambeeck noted.

"With increasing costs of energy and labor, the two most important expenses in the coldstore, the break-even point for these types of investments is moving more and more towards a smaller number of pallet positions," he said. "This is partly due to the fact that energy savings in an automated refrigerated warehouse can amount to 50% in some cases."

Service and Equipment Trends

Indeed, he added, "Looking at the interest in our Energy Cost Saving Quick Scan service, we notice that entrepreneurs are really focused on energy saving at the moment. For that matter, nowadays there are very interesting logistics solutions in this area, with reliable air curtains, a modern dock layout and advanced equipment."

"Debate concerning the use of CFCs and HCFCs will never end in this industry," Van Sambeeck opined. "It will keep us occupied, just like the debate on whether refrigeration plants with ammonia or plants with ammonia in combination with C[O.sub.2] are the best."

The choice in favor or against one or the other is mostly determined by location and the policy of the entrepreneurs, he said. "It is clear, however, that 3PLs (third party logistics providers) that claim to be "Green" have an extra marketing argument with large prospective clients in the food retail and manufacturing industry."

These companies are competing for the favors of consumers that are becoming more critical and environmentally aware (as is proven by the discussion surrounding food miles and carbon footprints). To satisfy their customers, retailers and manufacturers will therefore be more inclined to work with "green" partners; a trend that equipment suppliers have certainly acknowledged already.

"Finally, it is obvious that with increasing labor costs and the shortage of qualified staff, coldstore operatom are also very interested in the market for material handling equipment," concluded Van Sambeeck.

Preferred Freezer Services Building in Vietnam, China

Preferred Freezer Services, Newark, New Jersey, USA, has gone global by breaking ground for a new refrigerated warehouse in Ho Chi Minh City, Vietnam. The company will begin construction of another project in Shanghai, China, this September.

The Ho Chi Minh City facility will add eight million cubic feet to the nearly 170 million cubic feet of space that Preferred operates. It is anticipated that this is just the first of five to seven facilities to be developed by Preferred Freezer Services through its Vietnam holding company, Antara.

Preferred's site in Shanghai is in the Lingang Industrial Area, near the Yangshan Deep-Water Port and the 17-mile long East Sea Bridge. The facility's capacity will total 14 million cubic feet.

The company is also opening new or expanded PRWs this year in Everett, Massachusetts; Elizabeth, New Jersey; Jacksonville, Florida; Atlanta, Georgia; Houston, Texas; Chicago, Illinois; and Los Angeles and Oakland, California.

In what is an interesting promotional idea, Preferred is offering live webcams of sites under construction at its website: www.preferredfreezer.com.