Americold: Quick Note On The Most Insane Occupancy Issue

I’ve got another article in the works — basically a book at this point. It wasn’t supposed to be a book, but when a research topic starts snowballing, it either becomes one or drags you down with it. That said, I wanted to share this piece with readers now, while it’s still under the legal limit for attention spans.

Occupancy

Success for Americold (COLD) hinges heavily on occupancy — you know, that old chestnut: supply and demand. But here’s the weird part. Their margins are improving… while occupancy is doing a slow-motion nosedive. Curious, right?

Now, you could just say, “Maybe they’re charging too much.” And frankly, you wouldn’t be wrong. But research isn’t about blurting out the first thing that pops into your head (even if it is the most likely scenario). No, it’s about taking those “maybes” and wrestling them to the ground.

So, is it in the transcripts? There’s been plenty of talk about occupancy — a greatest hits collection, really. But the juicier stuff, like the impact of pricing? That’s only started sneaking into the conversation recently. And because transcript quality is, shall we say, aspirational, you’ll often find yourself hunting down the original audio. At least, if you want to know what was actually said.

Naturally, I did what any reasonable person would do after an unreasonable number of hours with spreadsheets: I built charts. We compare economic occupancy (leased space) versus physical occupancy (someone actually shows up). But while those trends painted a clear picture (spoiler: not great), they didn’t solve the puzzle. What we had were three possible culprits:

1. Too much new supply. Cold storage warehouses popping up like mushrooms after rain.
2. Weak demand. Consumers won't buy food so producers cut back on space.
3. Maybe COLD jacked up prices. And now tenants are politely (or not so politely) ghosting them in search of a landlord who isn't pushing margins.

Is It New Supply?

This one’s a real treat. Painfully tedious to research and somehow even less satisfying to answer. The conclusion?

“Why the heck are sources so contradictory about new supply?”

Yes, that’s the answer. No, it’s not a good one. We’re just living in a world where industry data looks like it was assembled by committee during a blackout.

We don’t have a great answer yet. But we do have a growing pile of conflicting reports, so… progress?

Is Demand Weak?

Ah, management’s old standby. The story goes: grocery prices are sky-high, nobody buys food anymore, and now cold storage facilities are just big, sad refrigerators full of broken dreams. The rent isn't too high. Tenants just cut back on storing cold food because consumers won't eat.

Suspicious? A little. Because unless you’ve recently noticed your entire neighborhood spontaneously transforming into an army of shredded, kale-eating fitness models (scratch that, kale is refrigerated), the "people just stopped eating" narrative feels a bit… off.

Notably, management has not yet blamed it on Ozempic. Just an affordability crisis that drives tenants to reduce stocking levels.

Are Tenants Just Leaving Americold?

Now this one should have been tough to crack. How do you know who’s leaving unless you’ve got tenant rosters and a spy in every loading dock?

Lucky for us, Americold is no longer playing solo in the public REIT sandbox. Lineage (LINE) finally went public, meaning we now have data from the two giants of cold storage. COLD holds 17.8% of North America’s market (in cubic feet), and Lineage clocks in at 30.1% as of 2024.

That’s a combined footprint of nearly half the entire continent’s refrigerated square footage — basically, if you’ve frozen a pizza in the last year, there’s a decent chance it passed through one of their warehouses.

And now that both are public, we can compare occupancy stats side by side.

Here’s the chart:

The red (and pink) occupancy lines for Americold are getting wrecked.

Absolutely faceplanted. Not down as hard as the share price, but that's hard bar to beat.

Meanwhile, over in Lineage land, the blue lines? A modest dip. Perhaps a wobble? Yes, at least a wobble. You’d hardly notice unless you squinted though. Or if you have a passing interest in numbers.

So what can we take from this?

• Yes, tenants are probably trying to cut back on space a bit. There might also be some new supply, though sources are contradicting on the amount.
• But also yes, tenants seem especially eager to cut back on space rented from Americold — like they’re in a hurry to not be there anymore.

Conclusion

Could extra supply be creating some pressure? Sure. That’s the kind of generic macro-explanation that fits nicely in a conference call.

But that doesn't explain the widening gap. It looks like Americold raised prices. Tenants looked at the new price chart and thought:

"Looks about as good as that new Snow White movie."

Disclosure: No position in COLD or LINE presently.

• Missed our prior report? We recently sent subscribers a larger (but less snarky) report on Americold.