Impact of logistics on Canada s industrial real estate market

Transcription

1 Impact of logistics on Canada s industrial real estate market

2 INTRODUCTION 1

3 WHAT IS THE SUPPLY CHAIN EVOLUTION? Vancouver Vancouver Calgary Montreal Toronto Toronto Montreal TORONTO-CENTRIC EAST-WEST 1. DISTRIBUTION CENTRE MODELS 2. GROWTH IN GLOBAL FREIGHT MOVEMENTS AND CONTAINERIZED CARGO 3. DEMOGRAPHICS AND POPULATION GROWTH 4. TECHNOLOGICAL CHANGE INDUSTRIAL REAL ESTATE IMPACT 2

4 MODERN DAY CANADIAN SUPPLY CHAIN AT A GLANCE Figure 1: Example of Typical Supply Chain Structure Shanghai Port Metro Vancouver Toronto distribution centres End user Returns Total time: days Shipping Terminal (40 ft. container) (Loading/Unloading) Rail days 2-3 days 6-7 days USD 1,800-1,900 CAD CAD 2,000-2,500 CAD (Drayage Cost) Transfer 2-3 days CAD Road 1 day* Retail Store Source: Chainalytics, Canadian National Railway, CBRE Research, May *Cost of trucking is dependent on diesel price, equipment, labour cost, and seasonality. TERMINAL PORTS *Defined in Appendix I (Glossary) on Page 12. 3

5 RAIL RETURNS LAST-MILE LOGISTICS SUPPLY CHAIN EVOLUTION AND THE IMPACT ON COMMERCIAL REAL ESTATE Figure 2: Logistics Costs Breakdown 10% 5% 15% 50% 20% Transportation Inventory Labour Other Real Estate Source: CBRE Supply Chain Services, November

6 Richmond, BC Burnaby, BC Delta, BC Surrey, BC Mississauga, ON Northeast, AB Brampton, ON Southside, AB Northwest, AB Southeast, AB St. Laurent, QC Milton, ON Cambridge, ON Dartmouth, NS *Cornwall, ON VIEWPOINT CANADA INDUSTRIAL CANADIAN DISTRIBUTION CENTRE CONFIGURATION Regional distribution hubs Sub-regional distribution hubs Vancouver Calgary Montreal Toronto Figure 3: Industrial development land prices for top industrial markets Prices per acre ($ 000s) 2,000 Industrial Inventory Land prices per acre 1,500 1, Inventory (million sq.ft.) Source: CBRE Research, Q *Cornwall Inventory not tracked, but estimated. 5

7 VIEWPOINT CANADA INDUSTRIAL CHANGING CHARACTERISTICS OF INDUSTRIAL PROPERTIES Figure 4: Manufacturing, Warehousing and Flex space Manufacturing Warehousing /Distribution Flex Type General General Warehouse Size (000s sq.ft.) Distribution, Overnight delivery, Air Cargo General Distribution Truck Terminal Fulfillment centres/mega fulfillment Bulk distribution Use Manufacturing Storage, Warehouse, Freezer Storage, highcube Transshipment E-Commerce/ Shipping General Purpose Flex 20-1, , , Clear Height Loading Door ratio Column Space (ft.) % of Office space Parking for employees Truck Turning Radius (ft.) Storage, Light manufacturing High-Tech, Call centres 1:10,000 SF 1:10,000 SF 1:7,500 SF 1:5,000 SF 1:1,000 SF 1:5,000 SF 1:15,000 SF N/A <20% <15% <20% <20% <10% <20% % Low Low Low Medium Low Medium-High High Access to rail Yes Yes No No Yes No No Access to highways (Priority) Trailer Parking (Priority) Source: NAIOP, CBRE Research, May Medium High High High High High Low Low Medium Medium High High High None 6

8 BUILDING A DISTRIBUTION NETWORK FOR OUR CHANGING NEEDS Figure 5: Industrial Market Lease Rate Comparison Market Average Lease Rates ($ per sq.ft.) Average Lease Rates Class A Logistics space ($ per sq.ft.) Total Availability (million sq.ft.) Availability Rate (%) Under Construction (million sq.ft.) VANCOUVER CALGARY EDMONTON WINNIPEG WEST LONDON WATERLOO REGION GTA West GTA East GTA North GTA Central OTTAWA MONTREAL HALIFAX EAST NATIONAL Source: CBRE Research, Q Figure 6: Large format distribution centre developments Status Market Submarket Tenant Address Size (sq.ft.) Completion date Under construction Toronto Caledon Canadian Tire Coleraine Dr. 1,494,137 Q Under construction Calgary Southeast Home Depot Dufferin North 1,065,000 Q Completed Toronto Brampton Unilever 7900 Airport Road 815,460 Q Under construction Montreal Southshore Jean Coutu Varennes 648,000 Q Completed Montreal Laval Sobeys Terrebonne 469,995 Q Under construction Vancouver Delta N/A 8181 Churchill St. 430,000 Q Under construction Calgary Balzac Walmart East of QEII Hwy 428,000 Q Completed Calgary Northeast Exel Logistics (Cabela s) th Street NE 416,473 Q Source: CBRE Research, Q

9 VIEWPOINT CANADA INDUSTRIAL CANADA S TRANSPORTATION NETWORK AND DISTRIBUTION CENTRE LOCATION AIR Figure 7: Top 10 Busiest Canadian Airports (All Cargo) (000 s of loaded/unloaded tonnes of cargo) 2013 Toronto Pearson Int l, ON (1.4) Vancouver Int l, BC Hamilton, ON Montreal Trudeau Int l, QC 77.3 (0.4) Calgary Int l, AB Montreal Mirabel, QC 70.2 (0.1) Winnipeg Richardson Int l, MB 54.5 (4.9) Halifax Robert L. Stanfield Int l 28.6 (0.8) Edmonton International, AB Moncton, Greater Moncton Int l, NB *Compounded annual growth rate Source: Transport Canada, CAGR ** (%) MARINE Figure 8: Canada s Port Traffic (000s TEUs) Metro Vancouver Montreal Halifax Prince Rupert 3,000 2,500 2,000 1,500 1, Source: Port Metro Vancouver, Port of Montreal, Port of Halifax, Port of Prince Rupert, Transport Canada,

10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 VIEWPOINT CANADA INDUSTRIAL RAIL Figure 9: Average Canada Monthly Rail Carloads (Intermodal Units 000s) ROAD Source: Association of American Railroads, Figure 10: 5 busiest border crossings for Trucks (millions of movements) Two-way Traffic Volume Windsor-Ambassador Bridge, ON Sarnia-Blue Water Bridge, ON Fort Erie-Peace Bridge, ON Pacific Highway-Douglas, BC Niagara falls-queenston Bridge, ON Lacolle, QC Source: Transport Canada, Figure 11: Projected Shortage of Truck Drivers by Province 2020 Manitoba Saskatchewan Atlantic Provinces British Columbia Quebec Ontario Alberta (7) (6) (5) (4) (3) (2) (1) 0 Source: Conference Board of Canada,

11 KEY HIGHWAY AND INFRASTRUCTURE PROJECTS (COMPLETED, UNDERWAY AND PLANNED) SOUTH FRASER PERIMETER ROAD VANCOUVER - COMPLETED SOUTHWEST CALGARY RING ROAD CALGARY - UNDERWAY South Fraser Perimeter Road is a new four-lane trucking express highway, which connects Deltaport to the TransCanada highway and Metro Vancouver. With a second terminal in the planning for the Deltaport (2018), the South Fraser Perimeter Road will allow a faster route for goods to travel from the port to the highways. The Delta industrial submarket accounted for 95.0% of Vancouver s net absorption last year and is expected to tighten further. Land prices as a result have risen % over the last year and average $1.2 million per acre. NORTH ANTHONY HENDAY DRIVE EDMONTON - UNDERWAY The 16.0 km long Ring Road will connect Glenmore Trail/Highway 8 South to Macleod Trail (Highway 2A). Drive times are expected to be shortened as completion of this ring road will provide direct access to major industrial centres and distribution facilities. QE II HIGHWAY 41 ST AVENUE SOUTHWEST INTERCHANGE EDMONTON UNDERWAY Completion of North Anthony Henday Drive in Edmonton includes 18 km of six-eight lane divided freeway, nine interchanges, and twin river bridge structures. It is expected to open up access to the North east corner of Edmonton and provide access to the Aurum Industrial Park. In Edmonton, 41 st Avenue Southwest is expected to provide immediate relief to the Nisku and Leduc business parks. There will be a spine road connecting South Edmonton to North Nisku. This interchange will provide easy access to all of Edmonton, Calgary, Fort McMurray and other major distribution nodes. 10

12 HIGHWAY 407 EXPANSION TORONTO - UNDERWAY HIGHWAY 427 NORTH EXPANSION TORONTO - PLANNED The Highway 407 extension in the GTA provides an additional 43.4 km of highway from Brock Road in Pickering to Highway 35/115 in Clarington. Highways 412 and 418 with be north-south highways (10 km each), which will connect Highway 407 to Highway 401. Phase one is expected to be completed in 2015, with the entire project to be completed in This project will spur activity in the industrial market in Durham Region, which is known for its low development charges and favourable zoning bylaws. Expansion of Highway 427 will extend the highway (6.6 km) north from highway 7 to Major Mackenzie Drive and will connect Queen Elizabeth Way (QEW) and Gardiner Expressway to Highway 401 and 407. Proposed project includes six lanes which will increase traffic from 128,600 cars to 321,400 that will travel on the 427 north of Highway 401. It will also provide direct access to the CP Intermodal facility in Vaughan (770 acres), which generates more than 700,000 TEUs of traffic annually. HIGHWAY 404- NORTH EXPANSION TORONTO COMPLETED DETROIT-WINDSOR BRIDGE SOUTHWESTERN ONTARIO - UNDERWAY The 404 extension is a 13 km north-south extension, with phases one and two entailing bridges and overpasses which were completed in 2009; and phases three and four involving mainline road construction which commenced in July The $99.0 million extension finally opened on September 17, Highway 404 is a route running parallel to Highway 400 approximately 15 kilometers to the east, it extends 49 km on a north south orientation between Highway 401 and Ravenshoe Road near Keswick. The New International Trade Crossing (NITC) is building a secondary bridge between Windsor, Ontario and Detroit, Michigan to accommodate 14,000 vehicles that cross daily on the Ambassador bridge. Construction is expected to be complete in 2020, which will link interstate 75 and interstate 93 in Michigan with Windsor s currently under construction Rt. Hon. Herb Gray Expressway and connect to Highway 401 in Ontario. This bridge is expected to alleviate traffic on the Ambassador bridge and facilitate the flow of goods across the border. 11

13 CHAMPLAIGN BRIDGE MONTREAL PLANNED Renovation of the five-decade old bridge in Montreal will allow the bridge to handle over 150,000 cars per day, making it the busiest bridge in Canada, along with increasing transport to the U.S. border. A key component of the Champlain bridge will be the insertion of a light rail transit (LRT) connecting the Brossard market to downtown Montreal via Griffintown. This link has already increased land prices and spurred residential and retail development on Nuns Island and in the Griffintown area and will solidify several existing nodes (Quartier 10/30, Panama Station) along this line as periphery suburban office hubs on the South Shore. TURCOT INTERCHANGE MONTREAL UNDERWAY Turcot exchange in Montreal connects Autoroutes 15, 20, and 720. It is an important link between the CBD and Pierre Elliott Trudeau airport and improves access to the Champlain Bridge. The Turcot interchange (with significant urban planning enhancements) will dislocate heavy industrial user adjacent to the Lachine Canal in favour of low-to-medium density residential development over the medium-to-long term. The reduction in physical scale of the interchange and feeding arteries will also improve adjacent property values, which have historically been predominantly low-income housing due to excessive noise/dust. A30 HIGHWAY MONTREAL- COMPLETED Source: CBRE Research, The A30 Highway was a public-private partnership completed two years ago to connect the southern and western suburbs of Montreal to the St. Lawrence River. It also creates a Southern ring network connecting A30 Highway to other major highways in Montreal (10,15,20,40,and 540). As a result, trucks can bypass the busy traffic in Central Montreal and travel along the Eastern Corridor of both Canada (Southern Quebec and Ontario) and the U.S. The highway also provides access to the brand new 83-acre CSX Intermodal facility in Salaberry-de-Valleyfield, which will receive heavy traffic from heightened cross-border trade. While it s fair to assume that this will spur industrial activity between Chateauguay and Saint-Timothée, the impact has not yet materialized since there is a fair amount of agricultural land near Beauharnois and it is not clear how much is zoned for industrial use. Another pushback has been the toll bridge introduced between Vaudreuil-Dorion and Saint-Timothée, which trucking companies are reluctant to pay fees for. 12

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16 VIEWPOINT CANADA INDUSTRIAL APPENDIX II - SHIPPING/LOGISTICS TERMINOLOGY TWENTY-FOOT-EQUIVALENT (TEUs): DRAYAGE TRANSLOAD CROSS-DOCK INTERMODAL PANAMAX SIZE POST PANAMAX SIZE SUPER POST PANAMAX SIZE SHIPS 15

17 Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE Limited clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE Limited.