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This article was published 15/2/2018 (611 days ago), so information in it may no longer be current.
Considering just how thoroughly e-commerce is shaking up the bricks and mortar retail business, it should not come as a surprise that it is also disrupting the warehouse and distribution business.
Paul Derksen, senior vice-president for QuadReal Property Group, the real estate arm of the B.C. pension fund BCICM, said the way people are now shopping is changing the way warehouse buildings need to work.
At a Building Owners and Managers Association (BOMA) event in Winnipeg on Wednesday, Derksen said, "At the end of the day it’s about how everything gets made in China and comes into North America."
Since the U.S. has about a US$375-billion trade deficit with China, it is understandable there is a lot of effort being applied to the efficient movement of all that stuff around North America.
Amazon is building a 600,000-sq.-ft. distribution centre in Calgary, its seventh in the country.
It is one of millions of square feet of distribution space in the Calgary region that increasingly functions as an inland port of sorts for the busy West Coast ports of Vancouver and Prince Rupert.
With so much more product coming from offshore and so many more consumer purchases that bypass the retail store, the way warehouses function is changing.
For one thing, Derksen said rather than shipping pallets in from the manufacturer to the warehouse and then shipping them out — still in the pallets — to the stores, product is now increasingly unbundled at the warehouse.
"The retailers now want to get product from the warehouse to the customer," Derksen said.
"That requires a shift in how you build warehouses."
It means that distribution centres need to be configured on land that has room for trucks to access the building from two sides — entering with palletted product at one side of the building and leaving on the other side with the unbundled orders ready to be delivered to customers’ doors.
Derksen showed examples of some of the most modern versions of the souped-up warehouse, including multi-level facilities in very dense Asian cities and fully automated, robotic warehouses with artificial intelligence features so the most popular items at that time are most easily accessible to the robots.
He said that in some of the busiest cities in the world like Chicago and New York there have been instances where old warehouses in the inner cities that have been converted to lofts have been converted back to warehouses as retailers try to figure out ways to tighten up the delivery process.
But while there are sophisticated technologies now commercially available — like full automated turnkey warehouse systems that use robots to pick orders — Derksen said modern warehouse transformations are currently still limited to the speciality and "very, very large scale" operators.
As for Winnipeg, Derksen said QuadReal, which owns about 2.2 million sq. ft. of space here, "loves" the market.
"We call it our bond," he said.
"It is a very steady market. We know what happened last year. We know what to expect next year."
He did say that Winnipeg may not be ideally suited for the mega distribution centres like the one Amazon is currently building in Calgary because it is just too far from any port.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.
Updated on Thursday, February 15, 2018 at 8:43 AM CST: Photo added