Japan is on the brink of a potential food supply crisis, with aging refrigerated warehouses presenting a significant hurdle to maintaining the distribution of fresh and frozen foods. The country faces obstacles such as high construction costs and limited available land, hindering the replacement and expansion of crucial temperature-controlled storage units.
Logistics operators in Japan express growing concerns over the imminent shortage of refrigerated warehouses dedicated to storing frozen foods, agricultural products, and livestock items.
While over 30% of domestic warehouses exceed 40 years in age, there is a notable absence of efforts to replace them. Projections indicate that most regions in Japan could exhaust their refrigerated warehouse capacities within the next decade, potentially disrupting the distribution of essential goods and creating bottlenecks for securing a stable supply of imported food.
The refrigerated warehouse industry is grappling with the need to enhance revenues and secure funds. Some small and medium-sized businesses, facing potential closure due to outdated facilities, are urging collaboration between the government and the industry.
An executive at a major refrigerated warehousing company voiced concern: “The role of refrigerated warehouses is expanding, but the industry as a whole is not investing in facilities for them.”
According to the Japan Association of Refrigerated Warehouses, as of June 2022, 34% of warehouses in Japan were over 40 years old, the benchmark age for replacement. In Tokyo, where land availability for replacement is scarce, this figure rises to 46%.
Yuri Nagashima, a senior consultant at the Nomura Research Institute, estimates that by 2032, the demand for refrigerated warehouses may exceed the supply in 36 out of Japan’s 47 prefectures if 30% of small and medium-sized businesses’ aging warehouses close down.
Refrigerated warehouses are vital components of the logistics chain for agriculture and livestock products, marine goods, dairy items, and frozen foods. The recent surge in domestic distribution of fresh foods, driven by e-commerce, has further underscored their significance.
There is also an increasing demand for storage of semiconductors, pharmaceuticals, and other products. A shortage of refrigerated warehouses could potentially impede the flow of these goods.
Japan’s heavy dependence on imported food adds another layer of complexity. A shortage of storage space could force the country to reduce its imports, jeopardizing the stable supply of food.
Major refrigerated warehousing companies, recognizing the urgency of the situation, have been expanding their capacities through renovations and new constructions. Yokorei, a Japanese frozen food seller and warehouse operator, aims to increase its refrigerated warehouse storage capacity by 25%, from 1.04 million metric tonnes in 2022 to 1.3 million tonnes by 2030.
However, the financial burden associated with such investments poses a significant challenge for small and medium-sized warehouse companies. Rising operating costs, soaring electricity prices, and increased construction costs due to the global impact of events such as the COVID-19 pandemic and Russia’s invasion of Ukraine make it difficult to replace or build new warehouses.
Warehouse companies are exploring approaches like automation and labor-saving measures to counter the labor-intensive nature of cold storage facilities. Switching to alternative refrigerants that do not harm the ozone layer is also on the agenda.
As companies seek to improve revenues, some may resort to raising storage fees or passing on higher electricity costs. Those unable to navigate these challenges may exit the market, contributing to the impending crunch in refrigerated warehousing.
The industry is likely to witness collaboration and consolidation as companies grapple with the financial burdens of investment. Flexible approaches, including collaboration with other companies and the utilization of warehouses with multiple tenants, are being considered.
Kazuko Takahashi, senior director at CBRE, a real estate service giant in Tokyo’s Chiyoda Ward, noted, “Owning your own warehouse can reduce long-term costs, but due to the rise in initial costs and the shortage of land, the use of rental-type warehouses will also expand down the line.”