E-commerce to fuel warehouse boom

Canada is on the verge of a warehouse building boom as soaring demand for online goods is expected to continue beyond the pandemic.

Forty million square feet of additional warehouse space will be needed in the next five years after e-commerce sales rose 32 per cent last year, according to brokerage CBRE Ltd.

That’s more than all the leasable warehouse space in the country’s three largest industrial real estate markets combined, meaning there will be little choice but to build new facilities.

After lagging some developed countries in embracing e-commerce, Canada is now posting some of the fastest growth as shoppers doubled the share of their online purchases to at least 40 per cent during the pandemic, according to a recent report from Jpmorgan. Retailers are rushing to build logistics hubs to fulfil orders, making Toronto, Vancouver, and Montreal the three tightest markets for industrial space in North America, CBRE said.

“I’ve certainly never seen anything like the logistics market in 2020 and 2021,” CBRE Canada vice chair Paul Morassutti said in a telephone interview. “Last year not everyone would have been an e-commerce consumer. Now everyone is. Every retailer knows they have to have a digital presence

NOW THEY’RE BUILDING OUT THEIR SUPPLY CHAIN.

to survive, and so now they’re building out their supply chain.”

The surge in online shopping is a “paradigm shift” that will last beyond the pandemic, according to Shopify Inc., the Canadian e-commerce firm that is the country’s largest company by market value. In the meantime, lingering COVID-19 restrictions mean office and retail properties will continue to face difficulties in 2021, according to CBRE.

The rental apartment building sector — the other big pandemic winner — is projected to get even hotter after attracting a record $11 billion in investment last year. Although national vacancy rates rose last year due to the pandemic, the cost of buying a home also skyrocketed. That, along with government plans to boost immigration, has led big institutional investors to pour money into rental buildings in a bet that demand will only grow, according to CBRE.

“The deal flow in multifamily was really strong last year, and we expect that to continue,” Morassutti said. “The only reason it hasn’t been even higher, and this is true for industrial as well, is there’s not enough product to buy.”