So Much Demand, So Little Space

March 9, 2021 2 Minute Read

So Much Demand, So Little Space

With online spending by Canadians forecast to reach $92.7 billion by 2025, net-new warehouse requirements from ecommerce-related demand are expected to exceed 40.0 million sq. ft. over the next five years.

But as Bloomberg News reported, citing CBRE’s new Market Outlook report, Canada will not come anywhere close to being able to construct that much space.

Canada’s three hottest industrial markets, Toronto, Montreal and Vancouver, are expected to have availability rates around 2.0% throughout 2021; in Montreal’s case, a record-low 1.8% could be reached. This despite having a total of nearly 20 million square feet of new industrial space slated for delivery by the end of the year in those three markets, 12.5 million square feet in Toronto alone.

Annual online retail spending grew by a record 31.6% to $58.8 billion in 2020, forcing retailers, wholesalers, and third-party logistics companies to develop more complex logistics networks in order to reach consumers in increasingly shorter timeframes.

Rise of ecommerce to accelerate demand for logistics space

CBRE Research has found that for every $1 billion in ecommerce sales, 1.25 million sq. ft. of additional warehouse space is needed. This is greater than all of the available space for lease in Canada’s three largest industrial markets combined.

And with so little space suitable for logistics users, CBRE’s Outlook forecasts new construction and strong pre-leasing of speculative projects.

Canada’s ecommerce-related market has significant runway for growth. Retailers are exploring the role that small shipping hubs located in suburban neighbourhoods could play in bringing goods closer to customers. And Canadian grocers have all made significant investments in their online offerings due to the unprecedented shift in shopping habits.

With manufacturing, energy, and other services requiring industrial space, CBRE forecasts that the industrial sector will experience high rental rate growth and record low availability rates for the remainder of 2021.

Canadian industrial markets are North American leaders and we think this is just the beginning of an incredible period of growth and demand. - Werner Dietl

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