Retail distribution
This summer marks the 10th anniversary of the iPhone’s debut, an event that ushered in what the late William J. Mitchell described a decade earlier in City of Bits (1995) as the fragmentation of physical cities. Rather than gathering in the town square, the town square would come to us as we accessed information, goods and services via a screen. The home would be “a more intense delivery point” for all these things, Mitchell told a Vancouver audience as part of the 1999-2000 MacMillan Bloedel Lectures on Architecture.
Retailers continue to grapple with the implications, however, as a panel discussion at last month’s meeting of the commercial real estate association NAIOP underscored.
“Retailers have been slow to respond,” said moderator Rick Kohn, a partner with Deloitte LLP in Vancouver and head of its B.C. retail practice.
Perhaps most interesting is the polarization of bricks-and-mortar retail, with Kohn noting that top-end shops and volume retailers are both doing well. The middle, in turn, has been hit hard by the changes wrought by globalization, with the internet fuelling a surge in cross-border shopping. The difference today, apropos of Mitchell’s comments, is that consumers no longer have to cross borders: a few keystrokes will arrange the import of what they want.
David Gray, principal of DIG360, echoed Kohn’s comments, noting that many retailers now depend on volume sales because consumers have all the access to products they need. This has combined with lacklustre demand for those products to create deflationary conditions and, in effect, a buyer’s market.
“[Retailers] have to sell more items today to even keep pace with what you were doing last year,” Gray said. “As a consumer, we’ve probably never had it any better.”
The challenge for retailers, Gray said, is to rethink what their real estate can be. If it’s no longer a place to pick up goods, what will it be and how will it engage consumers? Online marketplaces operated by Amazon, Etsy and TMall that connect buyers with suppliers from Nike to the local fruit packer and neighbourhood crafter are on the rise, and landlords and retailers need to keep ahead of the curve.
“Get out of your own box about what you think retail real estate is,” Gray advised.
Point of delivery
Industrial space faces increasing pressure as retailers focus less on point of sale and more on point of delivery.
“Competition for the right location is increasing,” Colliers International reported in a recent study of Metro Vancouver industrial properties and their proximity to road networks. “Distributors are willing to pay higher rents in strategic locations to reduce transportation costs and improve responsiveness.”
The report noted that just 31% of Metro Vancouver industrial space is within a kilometre of a highway. Within these properties, space located within 800 metres of a highway has a vacancy rate of just 1.1%. Within Vancouver the rate is a minuscule 0.03%, despite efforts to retain and renew industrial space in Railtown, Mount Pleasant and on the False Creek Flats.
“The growth of e-commerce is further creating shifts in demand for industrial real estate and the necessity of efficient transportation networks to support fulfilment to end-users,” Colliers said, in a conclusion that’s as much a warning as it is a statement of fact.
Red Sun rising
Speaking of distribution, Kingsville, Ontario, greenhouse vegetable producer Red Sun Farms plans to open a 10,000-square-foot distribution centre in Metro Vancouver.
Red Sun typically owns rather than leases its premises, including production sites in Arizona, Michigan, Texas and Virginia as well as Mexico.
The location remains undisclosed while final details are being worked out, company staff said last week, but the new facility will serve retailers on the west coast of Canada and the U.S.
Rob Jackson, a veteran of both BC Hot House Foods Inc. and Village Farms Canada LP, will oversee the new facility. •
