Brick and mortar retail isn’t dying—it’s evolving and, in the process, spurring demand for industrial space.
“We’re seeing how giant retailers like Amazon depend on a network of distribution centres to service their customers, and a lot of these companies are opening multi-tiered distribution centres and housing them in secondary areas outside urban cores,” said Ray Wong, vice president of data operations and data solutions at Altus Group. “Amazon and Wal-Mart are investing in these logistics facilities.”
In a recent market update, Altus noted that investors regard retail spaces as warehouses of sorts, as they buttress retailers’ online presences.
“As e-commerce logistics services continue to expand, the need for well-situated warehouse space and the construction of new distribution centres will likely produce significant economic growth in major markets like Toronto, Vancouver and Montreal, fuelling demand for available product as vacancy rates continue to remain tight,” read Altus’s Retail Market Update.
Grocery stores are among the retailers who have successfully figured out how to leverage e-commerce with brick and mortar. Customers have the option of having their groceries delivered from the nearest store or they can order them online and pick them up in-store.
That doesn’t mean there aren’t minor kinks that still need to be figured.
“Big-, small- and medium-format grocery stores are trying to figure out the right size,” continued Wong. “Sobeys partnered with Ocado Group and they’re building two large warehouses in Toronto and Montreal, and that’s going to be their online strategy. They’re going to stock these warehouses and service their online customers from there.”
Changed consumer behaviour is at the heart of retail’s evolution, according to Altus’s manager of national research insights and data solutions. She, furthermore, added that stores are starting to become de facto showrooms for retailers’ online stores.
“What’s happening with retail is consumer behaviours are changing, demands are changing and demographics are changing, and that’s driving how retail is changing,” said Kruti Desai. “Consumers are now looking more for experiential retail and want to be engaged. We’re seeing stores becoming more innovative, in terms of adopting additional designs and concepts. Store closures may be happening, particularly among larger format stores, but retail is still evolving with regards to how spaces are being used
“E-commerce is changing how people shop,” continued Desai. “Customers can still shop online, but they can also pick up in stores or vice versa, so I think that’s going to change how stores are used. In terms of inventory, retailers will check how much they need in-store. They can showcase products and then deliver them to customers, which means there will be demand for industrial space. These are trends to keep in mind.”