By Erika Siegert, Senior Analyst, National research insights | November 3, 2020

This is an excerpt from ‘The Altus Report’, as published Informa’s Canadian Real Estate Forum Magazine – Fall 2020 and includes insights from the 2020 Alberta Real Estate Forum and 2020 Ottawa Real Estate Forum.

 

With the COVID-19 pandemic hitting the Canadian economy this year, the commercial real estate industry continues to adjust to mass closures, physical distancing measures, and the evolution of remote work. While retail and office assets have been hit the hardest, the industrial sector has maintained a strong position with the immense rise in online consumer demand, prompting distribution and fulfillment centres to open across the country.  

The industrial sector continues to sustain strong momentum carried over from 2019, now with the added boost of physical distancing measures increasing demand for the delivery and distribution of goods. Even as in-person stores began reopening after pandemic shutdowns, Statistics Canada reported a nearly doubling of retail e-commerce sales. This increase has impacted leasing activity as companies re-configure storage and distribution strategies to meet new levels of demand. Some companies have already begun industrial expansions, including distribution giant Amazon announcing plans for the development of multiple new fulfillment centres this year across the country. As such, the fight to quality continues as companies, investors and developers lean into this spike in demand and consider neighbourhoods just outside of city centres to maximize efficiencies and minimize spend. 

As Ottawa’s industrial supply continues to remain tightmore space will be needed in order to sustain further increases in demand. With that, multiple new developments are on the horizon in Ottawa, including a potential new Amazon facility, which would be the second Amazon location in Ottawa. Amazon’s growing footprint is setting a precedent for additional industrial developments in the Ottawa area, with one example being Ottawa-based investment firm Avenue31 proposing a 100-acre industrial development on federal landLocated in Ottawa’s east end, the development would add immense value to the industrial park adjacent to the existing Amazon fulfillment centre in the Cumberland neighbourhood. Cumberland has seen high industrial availability rates recently compared to other sub-markets in the Ottawa area, leaving room for companies to expand warehousing or logistics operations here. 

Despite strong performance in 2019, the Calgary market area is seeing a slow decrease in industrial availability. Still, with the growth of e-commerce and with Calgary being a strategic location for delivering goods to western Canada, investors are responding to this rise in demand. In the second quarter of this year, Skyline REIT acquired a four-property industrial portfolio in Calgary, totalling over 385,000 square feet, as a strategic move to continue expanding their footprint in Western Canada. Located just north of the Calgary International Airport, the majority of tenants among this new portfolio are in distribution, and less than 1% are associated with the Oil and Gas industry. Pockets just outside Calgary also pose strong development potential, one of which being in East Balzac, with multiple developments recently set in motion to be competed in 2021. The area includes east access to the provincial highway leading North to Edmonton, as well as convenient proximity to the Calgary International Airport. 

With what many are dubbing “the Amazon effect,” the development of new warehousing, distribution and fulfillment centres with state-of-the-art technologies and capabilities will continue to rise. While this has bolstered the overall commercial real estate market, additional supply will still be required to meet demand.  

 

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