Pre-delivery storage and same-day delivery are the main factors shaping the sector
E-commerce-fuelled warehouses are booming in Canada, amid the slow but sure decline of the brick-and-mortar retail store.
“Fulfillment warehousing space is definitely at the top of investors’ minds,” PwC Canada national real estate leader Frank Magliocco told the Financial Post.
“It’s a direct result of the increasing penetration of e-commerce sales. Because of that ride, there’s a massive demand for fulfillment space that will grow even more in the near future. It’s as simple as that.”
Much of the impetus is stemming from the unique requirements of the industry – specifically, in the emerging expectation for same-day delivery among consumers, which in turn is impelling hunger for spaces located no more than one mile away from major habitation and transportation hubs.
Industrial properties dedicated solely to pre-delivery storage are becoming even more important. Cold storage for food items is a particularly valuable commodity.
And even though e-commerce represents only 9% of retail sales in Canada at present, the true value of any investment in the sector is in its long-term potential, Magliocco stated.
Indeed, the development of ever-larger industrial spaces has accelerated in recent quarters. This was especially apparent in the Greater Toronto Area.
“The sheer size and scale of these projects is huge,” according to Kyle Hanna, executive VP at CBRE in Toronto. “Most are talking one million square feet or more.”
Cushman & Wakefield senior VP Gil Gordon added that the resulting market “disruption” is very real.
“The GTA is the third-largest industrial market in North America with the lowest vacancy rate of 1.3 per cent,” he said. “That’s staggering, but gives you an idea of what is happening in the sector.”
However, Magliocco also assured earlier this year that “the rise of e-commerce doesn’t necessarily mean the end of the brick-and-mortar presence, and in fact retail remains an important solution to last-mile delivery.”
