Canada’s big-city industrial markets are out of balance. For too long, there’s been too much demand and too little space.
That’s an especially pressing issue when it comes to warehouse space in Vancouver, Toronto and Montreal, which all face industrial vacancies that are flirting with sub-one per cent.
Given the insatiable demand for space by owners and occupiers, why should developers, builders and owners of warehouses even care at all about future-proofing their spaces? Isn’t having four walls, a roof and some parking spaces sufficient?
The truth is it’s not enough. Our economy is changing and diversifying, and our industrial warehouses and logistics spaces need to evolve as well if our big-city markets and the country’s overall economy are going to keep inflation under control while ensuring essential products are moving into, out of and around the country in a coherent manner.
Demand for warehouse spaces remains strong
Canada’s overall industrial market continues to experience strong demand across the country, with distribution, logistics and warehouse space being quickly snapped up by e-commerce, warehousing, manufacturing and other users, according to Colliers’
While there is nearly 32 million square feet of industrial space currently being built across the country, developers are losing the war with demand.
This means vacancy rates will continue to sink, while leasing rates and land prices surge.
Canada’s overall industrial vacancy is at 1.5 per cent. That’s a recipe that threatens to drag down Canada’s economy while seeing inflation worsen for consumer products, building materials, mechanical items and everything else Canadians and their businesses need to function.
E-commerce fuels demand acceleration
When it comes to our big-city industrial markets in Toronto, Montreal and Vancouver, the source of demand is pretty clear: logistics, logistics, logistics!
Right across the United States and Canada we’re seeing shoppers increasingly shifting to online retail. The pandemic has accelerated e-commerce and we’re likely to see our online retail rate double in Canada in coming years.
Meanwhile, we’re seeing our urban population increasing. Canada is poised to welcome hundreds of thousands of new immigrants in the next few years and many of these newcomers will settle in our largest cities, adding more demand to consumerism while establishing new businesses that require workspace.
Canada’s biotech industry is another bright light that will continue to expand, while the film industry in Metro Vancouver continues to punch well above its weight, creating competition for sound stages and industrial buildings that can be relied on for show business.
The future is huge
The first step toward future-proofing our warehousing market is to start planning, designing, and building massive warehouse spaces.
Spaces larger than one million square feet will generate more interest than ever before as retailers and distributors and the Amazons of the world consolidate operations and try to keep pace with online buying power.
Not only should we build larger, but we also must build higher. The threshold today in terms of what would be considered the gold standard for large-bay ceiling heights is 40-feet clear.
Prologis is working on a project right now in Tracy, Calif., that’s being used as a test model that will include 50-feet clear ceiling heights.
It’s a 1.1-million-square-foot cross-loaded warehouse being built on spec that also includes 10-inch-thick reinforced concrete floors, a massive 8,000-amp power supply, a higher-than-typical number of trailer parking and auto stalls, and a 70-foot speed, or staging, bay. The building is also targeting LEED Silver certification.
Warehouse users of the future will increasingly demand features like these, as well as more spacious bays with fewer columns and larger staging areas of at least 60 feet across.
We need more tech-ready buildings
While we have yet to realize the potential of pure automation or robotics-driven distribution centres in Canada, it is coming.
There are companies spending significant capital on developing, building and installing automation and robotics systems that will require more flexible and tech-ready warehouse spaces.
The labour shortage challenges that have emerged during the COVID-19 pandemic have likely forced many logistics companies to speed up these plans to keep their operations moving forward, with or without people.
Robotics can work 24/7, so you’re getting a lot more output. The feedback has generally been “Yeah, we’re looking at robotics.”
Meantime, smart technologies that promote energy use reduction and touchless tech and improve security will also be must-haves in the coming years and decades.
Prioritize higher-density buildings in urban cores
Another key measure to future-proof our warehouses is to locate last-mile warehouse buildings near people, transit, amenities, and services. That means putting up new high-density buildings near, or in, urban cores instead of in far-flung areas that are hard to get to and disincentivize talent recruitment and retention.
This will require more permitting, design, and construction of stacked, or multilevel, industrial buildings that blend light industry, office space, food and beverage, and other creative- or service-oriented businesses.
The closer you are to people, the more simplified the distribution process becomes.
While our current industrial landscape in Canada suggests that simply adding space to the market will be sufficient to protect the future, it’s essential that we take measure of our economy and think about the businesses of tomorrow when planning our next generation of warehousing.