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Online shopping and “last mile” real estate

The Globe and Mail recently published an excellent article on “how e-commerce is driving a real estate revolution.” This is a topic that I’m very interested in: how online manifests itself offline.

Not surprisingly, the article talks a lot about Amazon, including their 4th warehouse in the Greater Toronto Area, which is an 850,000 square foot facility in Brampton equipped with 350-pound robots (8050 Heritage Road).

The first thing I did after reading the article was figure out the location of all of Amazon’s fulfillment centers in the GTA. Amazon doesn’t seem to publish this. But according to TaxJar, they are here (I mapped out the addresses):

There are two in Brampton at the precise location where Hwy 407 (toll route) and Hwy 401 meet. The other three are distributed along Hwy 401 in Milton and in Mississauga.

Now let’s get back to that Globe and Mail article:

– In 6 years, Amazon has leased over 2 million square feet of warehouse space in Canada.

– Toronto is the third largest warehouse market in North America. It represents 43% of Canada’s total inventory.

– Average net rents have increased 9.7% over the past year and vacancy rates have dropped to 2.7% (CBRE data). In Vancouver, those same numbers are 5.1% and 3%, respectively.

– Online shopping is thought to account for about 6.5% of all retail sales in Canada. But in Toronto, 23% of all industrial space is already e-commerce-related (CBRE data, again).

– CBRE believes that every $1 billion in new online sales per year requires an additional 1.25 million square feet of warehouse space. 

– Based on online sales projections, Canada needs another 27.5 million square feet of industrial space over the next 5 years. We don’t have that much space in the pipeline.

– Clear heights are increasing for stacking purposes. Amazon’s new Brampton facility is 45 feet tall / 4 floors. 10 years ago new warehouses were 26 feet tall.

– Average sale price of warehouses in the GTA has gone from $119.35 psf to $142.19 psf over the last year.

Perhaps the most interesting takeaway from the article is the discussion around “last mile” distribution hubs. These are fulfillment centers located closer to the city, which are used to offer shorter delivery times: 

“…instead of having inventory stored for days or months, these fulfilment centres will turn over their inventory in one day, sometimes twice a day.”

This is something that I addressed in my recent presentation about the “mall of the future” at B+H’s retail design charrette. Where do these physical distribution centers want to be as online sales continue to grow and delivery times continue to compress? Where’s the future growth?

According to this article, it’s going to be in “last mile” fulfillment real estate – relatively smaller spaces that are located very close or directly in the city center.

Photo by Samuel Zeller on Unsplash

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