Article
Why Canadian Industrial Real Estate is Uniquely Positioned for Success Despite COVID-19
May 8, 2020 3 Minute Read
While Canadian industrial real estate is experiencing challenges from the COVID-19 pandemic, the sector could see increased demand from tenants and investors in the coming months.
The industrial market entered 2020 with record fundamentals. Now, with a possibly permanent shift towards online shopping taking place, the sector is poised to outperform despite challenging economic times.
Here’s what you need to know about what makes industrial properties so unique.
Strong Fundamentals
Well before the COVID-19 outbreak, the Canadian industrial market had some of the best fundamentals of any commercial property type.
Trends that have made many investors bullish on the sector, including strong demand and limited supply, continue in most of the country’s major markets, and have become even more pronounced in Toronto and Vancouver.
Demand for logistics and distribution space to support ecommerce, a multi-year trend, is only gaining momentum.
Unprecedented Ecommerce Demand
As CBRE Vice-Chairman Paul Morassutti said in our recent Virtual Market Outlook webinar, most of the economy is currently in our living rooms.
As a result, the penetration of ecommerce is growing at an unheard-of rate, especially in the online grocery sector.
As consumers are restricted from going to the store, more and more people are turning online for everything from toilet paper to home office supplies.
While some industry watchers may be tempted to write off a rise in online orders as a short-term effect of the COVID-19 pandemic, research has shown that online buying habits are surprisingly sticky.
To date, Amazon has seen an astonishing 50.0% year-over-year growth in new customers. While retail preferences may fluctuate, online customer growth is likely to continue.
Meanwhile, other national companies with a strong omnichannel presence are also seeing a boom in business.
Evolving Supply Chains
Existing supply chains currently support “just-in-time” delivery. In other words, in order to avoid high inventory carrying costs, distribution centres hold just enough goods for rapid delivery.As we have seen from empty store shelves in recent weeks, this model has flaws. The importance of more inventory and storage capabilities is suddenly abundantly clear.
This will lead to a rise in demand for industrial space, with larger distribution centres, modern racking and robotics essential for storing, sorting and delivering large amounts of goods in a short amount of time.
Looking Forward
As we move through this period of unprecedented ecommerce sales and changing consumer preferences, industrial real estate needs will also rapidly evolve.
CBRE is here to support you with research and analysis during the COVID-19 outbreak.
Click here to register for our upcoming Virtual Market Outlook webinar on May 12 with CBRE Canada Vice Chairman Paul Morassutti and special guest Benjamin Tal, Deputy Chief Economist at CIBC Capital Markets.
Recent Insights
-
The Canadian retail sector faces robust demand, low vacancy rates and limited construction activity, but CBRE’s Alistair Corbett says new developments are about to kick off in Alberta.
-
CBRE Group, Inc. earlier this year combined its project management business with Turner & Townsend, a majority-owned subsidiary that provides program management, cost consultancy and project management services globally.
-
Toronto's office market saw a 50 bps drop in vacancy to 18.5% in Q1 2025, while national industrial availability rose to 5.0% amid tariff concerns.
Stay In The Know
Subscribe today and join hundreds of professionals who get the latest blogs delivered straight to their inbox.