What’s Changed in the Commercial Real Estate Market in the Past 100 Years?

It wasn’t too long ago that one of the world’s largest retailers announced free shipping on any order over $25, only to one-up themselves a few years later when they lowered the threshold to $10.

It was a revolutionary development, as shoppers could sift through a large assortment of goods, order whatever they liked, then have it conveniently shipped right to their front doors.

Only this goes back further than you may think.

1906 to be exact.  That was the year Eaton’s (at the time the largest retailer in Canada by a wide margin) decided it wanted to grow its catalogue business.  By that point, Canada’s rail network went coast to coast, allowing for progressive retailers to complement their department store sales with home deliveries.

So how much has changed in a century?

Two things, mainly: the number of items available and the speed of delivery.

Instead of searching through physical catalogs – and the obvious limitations accompanying a finite number of pages, consumers can now search through a seemingly infinite amount of items.  If you can imagine it, you can probably buy it online.

Technology has advanced considerably to move the availability of items from a physical catalog to an online mega-database, but the supply chain network and logistics infrastructure that facilitates this shipping expediency is often overlooked.  Instead of shipping taking 6 – 8 weeks, some items can be delivered same day, if not within hours of ordering.

This leads to a critical component of the process, which is also a buzz word percolating in the industry: Last Mile Delivery.  In essence, the last mile of delivery refers to the final stretch an item / consumer good travels as it gets to your door.  To illustrate why that leg of the journey is so crucial, we first need to look at how far it travelled, and by what means.  As author Rose George suggests, 90% of everything comes from overseas.  Here is a simplified example of how an item travels from the factory where it’s made all the way to your front door:

Most of the infrastructure in the above illustration has been built out over the past century.  This includes the rail network across Canada to the invention and mass adoption of the shipping container itself.  Often referred to as a TEU (for twenty foot equivalent), the shipping container is responsible for the proliferation of goods coming and going overseas.  A TEU can be transported by ship, rail and truck, all without having to be unloaded in between.  This stream of the supply chain network is very efficient, and modern advances in technology have allowed for expedient transportation straight from China to mainland Canada.

While it’s quick to get a product into the country, it’s customer demands – specifically the desire to have a product delivered almost immediately – that have put pressure on companies to develop more infrastructure between the final warehouse and the customer’s door.

So it makes sense why Amazon is building a 1 million square foot distribution facility in Leduc (which adds to an elaborate network of distribution centres already built across Canada).  Companies simply wouldn’t be able to expedite shipping nearly as quickly if they didn’t have a built out network of warehouse facilities.

An while we believe that logistics hubs and distribution facilities will continue gaining traction in the Edmonton region, it’s also worth highlighting a fascinating article by Bloomberg that suggests the next generation (Gen Z) are flocking to physical malls.

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Note on our illustration:

Yes, we know that nobody would (or should?) order a kitten by delivery, but who doesn’t like a cute kitten picture?  Our illustration also doesn’t take into account how some items may go other measures (ie/ air, bicycle) while others may not have to travel overseas whatsoever.  It also doesn’t account for all myriad of additional transportation requirements that go into getting all the raw assembled into the final product.  An iphone, for example, has certain components coming from Germany, Japan, Switzerland and the US, all before assembled and shipped back to consumers all over the world.  It’s a staggering thought to consider all the different raw products, semi finished and finished goods circumnavigating the world in astonishing numbers.

 

 

Sources:

Retail Nation: Department Stores and the Making of Modern Canada

Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate

Our Team

Chad Griffiths

Chad Griffiths

Partner, SIOR, CCIM

Chad is a partner with NAI Commercial Real Estate and focuses on the Greater Edmonton area. Chad entered the industry in 2004 and has completed over 400 commercial transactions with clients ranging from small, local companies to large institutional owners. Chad has been a top 15 producer with NAI Canada-wide since 2013.

Ryan Brown

Ryan Brown

Partner, BCom, SIOR

Ryan is a partner with NAI Commercial Real Estate in Edmonton and is currently ranked nationally as one of NAI's top advisors. Having executed in excess of $100 Million worth of sales transactions and over 2 Million square feet of lease transactions, Ryan has developed a firm understanding of asset evaluation and an aptitude for building design, functionality, and long-term practicality.

Darcie Bouteiller

Darcie Bouteiller

Associate

Darcie is a licensed Commercial Real Estate Agent in the Province of Alberta with a focus on the Edmonton market and its surrounding areas. Darcie accomplishes custom solutions for her clients through her personable nature and results driven attitude. Darcie can help if you are looking to invest in commercial real estate or are looking for representation for a sale or lease transactions.

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