Canadian Industrial Real Estate Blog

North Americans are a buzz about the robust consumer spending throughout our continent. The picture is quite rosy for the established large-scale retailers who are seemingly on fire with sales given new found consumer wealth created by robust stock markets, soaring home prices, low-interest rates, etc. For the outsider, it looks like a simple equation, retailers simply find new products to sell get them out to the stores, sell out the product in record time and record volumes, everybody is happy.

While this may be true on some levels, the competitive environment clearly does not simply lie in the pricing and/or positioning of givens products. The supply chain of getting the product from the manufacturer (more often overseas) to the shelves of the retail locations is proving more critical than ever to the overall success of a retailer. A large part of the eventual success or lack thereof for these retailers is based on the intelligence and innovation of the supply chain and real estate minds within these organizations. We spend many of our days in strategy sessions with these people, reviewing the new challenges being faced and how to overcome inefficiencies while engaging in proactive initiatives designed to keep a given company ahead of it’s competitor(s).

One of the recurring themes that we see is the size of the warehouses increasing. In the past, 300,000 – 400,000 square feet was considered large for the Canadian market while in the US the figure was doubled. In Canada we are now in discussions more frequently with retail end users that are investigating distribution hubs of 1,000,000 square feet and up. This sizing poses several challenges to be strategically dealt with including the following:

• Finding a piece of land that will allow for a single development of that size
• Ensuring proper zoning and services exist and/or can be acheived by the developer/end-user
• The size these buildings can get before they actually become more of a detriment to operate vs. advantageous
• Whether rail access is available in relatively close proximity

The next 4 posts will address these items and some of the findings that have resulted.

Vancouver – Water and mountains in seemingly every direction is cause for concern by anyone trying to locate land for industrial construction in and around Canada’s most populous Western city. Perplexity is a common result of efforts to secure medium to large parcels of land close to the masses and any such parcels that do exist are typically held by a select few developers who are only willing to part with their land under a design build sale arrangement - the developer gets the contract to construct the required building and then sells the end user the land and building as a total package, at a tidy profit. In order to secure large parcels to be developed individually, one must drive 60 – 70 kilometers outside of the CBD to Gloucester and/or Campbell Heights and pay between $800,000 - $1,000,000 per acre.