How modern operations are rewriting industrial’s rulebook
Twenty years ago, the rules for Canadian industrial real estate were simple: find or develop a well-located building at a good price, move in, and start your operations. Industrial facilities were often referred to as “boxes on dirt,” with little variation beyond square footage, clear height, and dock count. Needless to say, it was a low-tech environment.
That’s certainly changed.
Today, the manufacturing sector in Canada is increasingly high-tech. The rise of e-commerce has transformed logistics facilities into modern hubs, with buildings that rely on automation, requiring critical assets like complex infrastructure and a skilled labour force. These facilities demand much more planning and higher capital commitments, which leads to longer decision-making cycles.
Also top of mind for today’s tenants? Energy consumption needs and navigating land scarcity issues and site selection processes that have become increasingly complicated.
What should owners prioritize most right now as they work to modernize industrial operations?
Some ideas, fresh off the assembly line:
Deeply understand new era complexities and resource needs
Today’s industrial buildings have a variety of competing needs. Many are now designed to support high-energy, highly-skilled-labour operations needed by large transportation hubs, cold storage facilities, data centres, and advanced, high-tech manufacturing sites.
These buildings require high-capacity power systems and robust digital infrastructure to handle robotics and sophisticated equipment. Space is optimized for flexible production lines, rapid material handling, and vertical storage, requiring increasingly specialized infrastructure.
All the while, data centres keep scaling up in size alongside complexities, requiring far more power than anything we could have imagined 20 years ago. They process not just more data, but also the backups for that data. The pressure on the existing grid is unprecedented, and new sources of power are needed to fulfill our insatiable appetite for digital goods and services.
Did you know?
40-, 80-, and 90-foot cold storage facilities need high-spec sprinkler systems and retention tanks.
What’s a tenant to do? Know that the requirements of yesterday could be outdated. Your operations and infrastructure need a detailed, up-to-date plan and systems of support in place to make sure all will run just-in-time.
Always be ready to adapt and align to shifting expectations
Modern times are full of ever-evolving technology, changing landscapes, and market fluctuations that are, at times, impossible to predict very far in advance.
As operations and tenant needs become more sophisticated, high-performance assets, owners and operators should prioritize resilience, seeking adaptable, scalable space that supports efficiency and “just-in-case” strategies. This could include everything from responding to future-proofing needs around energy efficiency and ESG compliance to keeping design-build projects active even in a slower speculative market.
And as land near urban and transportation hubs becomes scarcer, occupiers who can’t find suitable space to lease should be aware and plan for what they might need should they get pushed outside the core to develop buildings that fit their needs.
Make sure your industrial workforce is skilled, trained and ready for what’s next
Finding the right site is just one part of the equation. Access to qualified workers can make all the difference. When tenants choose their location, they must take into account proximity to residential areas and talent nodes that have the unique workforce they will need to succeed.
In Canada, where newer industrial trends like vertical facilities have only recently started gaining traction, a noticeable skills gap has emerged, particularly when compared to places like Europe, where such facilities have been around for over a decade and the workforce is familiar with navigating them.
It’s important to understand how this will create knowledge gaps. Then, work through the best plan to have a strong pipeline of critical talent on tap to fill every hard hat and soft skill.
Did you know?
To run a 90-foot-high cold storage building – or any modern industrial facility with specialized equipment – you need equally specialized labour. Automation hasn’t eliminated labour; instead, it has just made it more technical and harder to source in some places.
The good news? The talent pool and access to data to make the best site selection decisions for your unique needs today is wider than ever. It just might take a bit more strategic thinking, planning and research to make sure the site for you hits all of the marks for your workforce needs.
Consider this:
Avison Young recently facilitated a 750,000-square-foot warehouse lease on behalf of a fashion retailer seeking to align its workforce with its core customer demographic in terms of age and gender. Their staff is 75% female and primarily under the age of 30. (A different industrial workforce profile from what you may have seen 20 years ago!)
Employee demographics were a key driver in this occupier’s site selection strategy. When choosing their location, they factored in proximity to universities to access seasonal labour during back-to-school and holiday peaks. Public transit access, green spaces and amenities for employees like cafeterias are also part of today’s site criteria, which was not the case 20 years ago.
The result? A tailored operation, built to support the real engine behind the fashion retailer’s operations: the people on the floor.
Build longer decision-making cycles into your development plans
With modern operations rewriting the industrial consideration set, the capital investment into these buildings has also evolved. The result? Longer and more complex decision-making cycles.
As the financial stakes have become higher for tenants, the role of the service provider has also shifted from simply presenting a list of available buildings to acting as a strategic advisor.
Today, tenant representatives must focus on helping tenants identify the factors that are key to strategic decision-making, including access to labour or transportation. The right facility isn’t just about the space, it’s about positioning tenants to compete and grow.
Did you know?
Consider a 90-foot-high cold storage warehouse, with specialized material handling equipment and skilled people to operate it. That’s a huge capital project, likely costing $200 to $300 per square foot.
“As a service provider, guiding this decision-making process is key. In my tenant rep work, the real estate part is easy. The hard part is defining needs, aligning everyone, and then going out to find the right space.”
Ben Sykes
Principal, Industrial Investment
But the goal, after all, isn’t to just find any fit for space, but the most ideal space that fits the goals and aims of your next industrial project.
We promise, in today’s markets, the extra time to revisit needs and requirements, align top talent and align resiliency strategies will be what makes every difference in the long-term, a pallet full of possibilities.
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Article contributors
Shlomo Benarroch
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- Principal, Senior Vice President, Real Estate Broker
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- Industrial
- Logistics
- Investment Sales
- Industrial Leasing
Marie-France Benoit, MBA
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- Principal, Director Market Intelligence, Canada
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- Research
- Market Intelligence
