E-commerce explosion fuels Canada warehouse boom

Toronto

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 (sq ft) of additional warehouse space will be needed in the next five years after e-commerce sales rose 32 per cent last year, said a report from brokerage CBRE.

That is 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, said the report.

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, said a recent report from JP Morgan.

Retailers are rushing to build logistics hubs to fulfil orders, making the country's three largest cities - Toronto, Vancouver, and Montreal - the three tightest markets for industrial space in North America, CBRE said.

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"I've certainly never seen anything like the logistics market in 2020 and 2021," said CBRE Canada vice-chairman Paul Morassutti. "Last year, not everyone would have been an e-commerce consumer. Now everyone is. Every retailer knows they have to have a digital presence to survive, and so now they're building out their supply chain."

The surge in online shopping is a permanent "paradigm shift" that will last beyond the pandemic, said Shopify, 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, noted the CBRE report.

Canada's rental apartment building sector - the other big pandemic winner - is projected to get even hotter after attracting a record C$11 billion (S$11.6 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, said CBRE.

"The deal flow in multi-family was really strong last year, and we expect that to continue," said Mr Morassutti. "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." BLOOMBERG