Warehouses are emerging as Toronto’s hottest property type as shopping habits continue to shift online, sparking demand for warehouse and distribution facilities close to the population centre and transportation routes.   The result is historically low warehouse availability rates in Toronto (just 1.5%) and rising rental rate pressure, according to a recent PWC report.

Canadian gateway markets such as Vancouver, Toronto, and Montreal have seen record upward pressure in recent years, with average asking rental rates surpassing $8.00 per square foot (psf) for the first time in history.   Canada-wide average rates increased by 10.1% in 2018, the largest single-year increase in history according to Cushman & Wakefield’s report on Canadian Industrial Real Estate.   The report goes on to highlight that Toronto experienced record rent highs in 2018/2019 averaging 17%.

E-commerce is causing disruption in the real-estate space.

Consumers worldwide spent nearly $3.46 trillion online in 2019, up from $2.93 trillion in 2018, or 16.4 per cent of overall retail spend, according to the forecast from Internet Retailer, a Digital Commerce 360 brand.   ‘The Amazon Effect’, has completely changed consumer buying behaviour and expectations as consumers now expect fast, seamless and competitive service.  This demanding online world challenges traditional logistics and supply chain models and companies are now forced to adjust their strategies to remain competitive and relevant.

Within Canada, e-commerce represents a growing share of the retail market at just under 10 per cent.  The Canadian B2C eCommerce market accounted for US$24 billion in 2018.  Prominent players on the Canadian market include amazon.com, costco.ca, walmart.ca and apple.com, who between them account for 30% of online revenue in Canada (source: statista)

“E-commerce is causing significant disruption in Canadian warehouse space, especially as it relates to the ‘last-mile’ of fulfilment”, says Anne Waldes, CEO at Trade Link.   The ‘last-mile’ is a term referring to the last stages of delivering goods right to a customer’s door and a vital part of most online retailers’ distribution network.    “We see demand for smaller warehouses sites, between 20,000 and 200,000 square feet, is soaring as e-commerce accelerates competition for warehouse space close to the end-customer.  The reason is simple: having a warehouse closest to the customer allows for shipping costs to be reduced by as much as 10-40%”, Ms Waldes explains.

What does it mean for Logistics Providers, Retailers and other Operators?

Market expansion in Canada of online sales is expected to continue over the next few years and a trend that has long-term potential, given that e-commerce penetration today represents under 10 per cent of total retail sales in Canada.   With the advent of new technologies, most notably the smartphone, growth in online sales is only going to accelerate, impacting demand for last-mile fulfilment solutions.  That puts pressure on logistics providers, retailers and other operators looking to secure space near key markets and population centres.

Against this backdrop, warehouse availability is expected to remain limited in Canadian markets in 2020 and beyond, making it is even more imperative for logistics providers and users to plan well in advance to secure space.

Retailers of all sizes and categories are recognising the importance of warehouse and distribution strategies in serving online business models and providing end-customers with a seamless shopping & delivery experience.  This requires:

• E-commerce facilities that are strategically located to deliver an order to the customer’s front door as quickly as possible.
• Operations that can support 24/7 orders, to manage order flow and inventory.
• Sufficient manpower within e-commerce fulfilment centres to manage the tasks of pick, pack and despatch against online order demand.

The growing need for a seamless, competitive and more immediate delivery experience is challenging the traditional logistics and freight forwarding model.  Providing a differentiated delivery experience while remaining profitable is a significant challenge for retailers and international transport carriers.

As a result, retailers are becoming increasingly frustrated with the standard of service provided by traditional freight forwarder and carrier services and are more open to disruptive new entrants that can meet their expectations.  “Increasingly we see retailers looking to their logistics partners to provide turnkey e-logistics solutions, encompassing upstream vendor management, multi-modal transport warehouse & distribution solutions” comments Edna Carr, Trade Link’s VP of Global Sales.

Within this scenario the logistics partner operates from a network of warehouse and distribution centres and in many cases will manage upstream (sourcing) and downstream (supply) supply chain operations.   The logistics partner has control and visibility of inventory availability and demand, leveraging advanced analytics, dynamic route optimisation and artificial intelligence to provide a fluid delivery environment.

How Trade Link is responding.

The concept of regional fulfilment centres to hold inventory closer to the end customer and so be able to respond to real-time demand with faster delivery and reduced transportation costs, has long-been the business model of the automotive industry.

Trade Link has a long history of managing supply chains on behalf of leading automotive manufacturers and suppliers, with proven experience in providing JIT (Just in Time) and last-mile logistics solutions.

As a result, Trade Link are evolving our experience, network and systems to support a growing demand for turnkey e-commerce logistics solutions.   We are working with retailers to transform their supply chains from single-hub to multi-hub networks with the aim of getting product closer to the end-customer.  We are helping retailers to succeed by striking the right balance between speed, cost and control – by providing:

• Upstream consolidation of orders in global markets – including vendor management, order modification, pick and packing solutions;
• Supply chain visibility and ability to organize and track shipment no matter what mode;
• Online order status and documentation;
• A network of warehouses and distribution centres with value-added services of e-fulfilment capabilities;
• Cross-border & international e-commerce logistics – proactively dealing with regulatory requirements, payment methods and customs formalities across global markets.

Trade Link’s global network is made up of multi-user logistics centres around the world, enabling us to consolidate shipments, hold inventory and fulfil orders in each local market.  We can provide shared warehouse solutions in over 60 countries worldwide, including Canada & USA, allowing our customers to benefit from the economies of scale of our multi-user logistics centres.

Our partnered logistics centres specialise in warehousing, stock management, order processing, pick and pack, kitting, and distribution solutions.  We cater to start-up and established retailers, manufacturers and distributors.  Trade Link manage as much or as little of your supply chain as necessary and take the complexity out of the order-to-delivery process.

To keep up with increasing demand from e-commerce channels in the Canadian eCommerce marketplace, it’s imperative to partner with an experienced logistics provider.  Today, Trade Link are helping companies large and small to succeed with the development and implementation of advanced supply chain and logistics processes.

Want to learn more about our turnkey logistics solutions?  Get in touch and discover how we can assist you.  Contact us.