Logistics, warehousing, and fulfillment are the clear winners this year. This segment of industrial real estate has remained resilient throughout the pandemic—in large part because of a surge in demand from e-commerce, food delivery services, home improvement retailers and, to a lesser degree, medical supply companies.
Much of the country continue to see tight market conditions, according to CBRE’s report on the Canadian industrial real estate market for the second quarter of 2020. The availability rate has edged up since the start of the pandemic, but at 3.5% nationally, it’s still well below the 10-year average of 5.1%. Many interviewees are seeing rents go up significantly. Six of 10 markets saw an increase in rental rates over the prior quarter, and the national average net asking rent was up by almost 10% from the same period last year, according to CBRE.
The biggest challenge, according to interviewees, is getting their hands on high-quality distribution space to facilitate e-commerce. Redundant retail space might be repurposed into industrial uses to help with last-mile delivery and overall fulfillment and distribution. In Atlantic Canada, ports in Halifax and St. John have both undergone upgrades and modernization, so there are expectations the industrial and storage segments will benefit. We’re also starting to see multi-level industrial properties in certain areas, like Vancouver, although this has yet to take root across Canada.