Online shopping is starting to change the kinds of warehouses that retailers lease or build while simultaneously altering how people view industrial real estate.
A GWL Realty Advisors report last month noted trends such as heightened demand for larger and more specialized warehouses.
It added that retailers are diverting capital investments from retail stores toward their back-end operations, or supply chains.
The result is that, more and more, the best way to gauge a retailer's health is by looking at how much industrial real estate it is leasing and not how many new stores it is opening.
Online purchases are also set to change the way people view industrial real estate, said CBRE vice-president Chris MacCauley, who contributed to GWL's report.
He believes warehouses are starting to be seen as job centres because retailers require substantially more staff to fill a lot of small orders than they did when workers in their industrial buildings simply moved large pallets of product into the backs of trucks.
“The industry has had pushback whenever there are proposals to build warehouses because people don't think that those buildings provide jobs,” MacCauley said. “With e-commerce, warehouses are providing jobs.”
Already, e-commerce-oriented tenants have been leasing bigger warehouses – and more of them – in Metro Vancouver.
Back in 2010, no new warehouses were built in Metro Vancouver. In the last half of 2013, developers built about 1.4 million square feet of warehouse space. Earlier this year, there was about 1.8 million square feet of warehouse space under construction.
Dayhu Group's Boundary Bay Industrial Park, for example, has one newly complete 450,000-square-foot warehouse, built on a speculative basis, and a second speculative 450,000-square-foot warehouse is nearing completion. Farrow and Apps Cargo Terminals have leased space.
Amazon.com Inc.'s (Nasdaq: AMZN) Amazon Canada Fulfilment Services leased an existing 200,000-square-foot fulfilment centre in Delta in 2012. MacCauley has since heard that the Seattle e-commerce giant seeks to build a specially designed facility “upwards of 900,000 square feet for a new fulfilment centre.”
Large B.C. retailers, however, prefer to first invest in new software and improved processes to make supply chains more efficient.
“Most companies in retail can't afford to just drop everything and build a new facility,” London Drugs chief operating officer Clint Mahlman told Business in Vancouver.
Though he declined to give exact figures, Mahlman said e-commerce sales at London Drugs far surpass the 16% year-over-year growth that Statistics Canada identified for the sector earlier this month.
Instead of investing in large new fulfilment warehouses, however, most of London Drugs' e-commerce order-filling is done at its stores.
“In the stores you have cases broken down into single units, or ‘eaches,'” he said. “Shipping out of that store means we can be faster and we're often able to reduce shipping costs because we can get fulfilment closer to the customer address.”
Some e-commerce shipments are sent from the company's Metro Vancouver warehouses because not all items are stocked in all stores.
Other direct-to-customer shipments are sent direct from suppliers.
“This has had a huge impact at a lot of our supplier warehouses where they've really had to configure,” Mahlman said. “They've been used to shipping things by the skid; now they're having to radically change and send single orders for products.”
