Amazon is Fuelling North America’s Worst Warehouse Shortage

Finding warehouse space around Toronto has never been harder, and the e-commerce fuelled shortage is disrupting businesses and threatening the broader economy. With the pandemic driving a belated embrace of online shopping in Canada, Amazon has been gobbling up warehouses. That’s pushed the vacancy rate in the Toronto area down to just 0.5%, making it the tightest market in North America, if not the world.

Logistics consultant Richard Kunst is seeing the fallout first hand, as companies try to fill orders and move merchandise. One client, a food manufacturer, has been forced to pack roughly a third of its orders in a parking lot. Others are so desperate for warehouse space Kunst has advised they ask local farmers if they can keep goods in their fields.

While the warehouse shortage is most acute in Toronto, other major cities in Canada aren’t far behind, with Victoria, Vancouver and Montreal rounding out North America’s top four tightest warehouse markets, according to real estate brokerage Colliers International Group Inc.

The single biggest driver of this squeeze has been Amazon. The pandemic has seen the e-commerce giant increase its logistics footprint by nearly 12 million square feet across nine major Canadian markets since the end of 2019, according to Colliers. That includes taking a quarter of all the space that came up for lease in Toronto last year, while boosting its footprint 10 times in Montreal and quadrupling in Ottawa.

With new warehouse supply lagging the soaring demand, the brokerage CBRE has predicted Canada could run out of space entirely by the end of the year. That’s starting to raise alarms that Canada’s overall economy could be dragged down, just as it starts to recover from the pandemic.

“We become cost uncompetitive when we don’t have a good availability of warehousing,” said Jan De Silva, chief executive officer of the Toronto Region Board of Trade. “There are fewer jobs, fewer permanent jobs that can be created, because companies aren’t able to fulfill demand.” Amazon didn’t respond to a request for comment.

While the outlook for other types of commercial property, including offices and hotels, has been clouded by the coronavirus, investors have plowed money into industrial buildings over the last year, betting on the further rise of e-commerce with shoppers stuck at home.

Canada had lagged other developed economies in online shopping. But since the start of the pandemic, e-commerce nearly tripled its share of total Canadian retail sales to 10.4%, government data show.

That’s increased the need for warehouses and fulfillment centre and has pushed prices higher. Colliers estimates the cost of leasing industrial space in the Toronto area went up 25% in 2020.

Key exports

Because much of what is made in Canada — from car parts, to packaged food, to lumber products — is for export, particularly to the U.S., the increased costs could make Canadian firms less competitive compared to international peers. And for the domestic market, those higher costs could end up being passed on to consumers, quickening inflation.

To deal with these pressures, developers are starting to explore converting office towers and shopping malls into logistics space. Amazon’s Canadian distribution unit recently purchased a defunct flea market in a suburb of Toronto. Still, the problem may ultimately come down to land.

Housing push

Canada’s warehouse crunch is, in some ways, an extension of another part of the economy currently experiencing short supply and soaring price inflation: Residential real estate. Though the pandemic has shifted it into high gear, Canada’s housing market has been surging for years, driven by immigration and low interest rates.

With most of these immigrants landing in and around Toronto, Vancouver, and Montreal, local authorities in those cities and their suburbs have steadily converted areas zoned for industrial uses into land for housing to deal with the pressure. Now, with home prices surging more than 30% around the country, there’s also an acute shortage of warehouse space.

“Really well intentioned levels of government have been saying, ‘OK we have a housing problem, how do we solve that?’ And in solving that, whoops, now we have a warehouse problem, how do we solve that?” De Silva said. “We’ve got this whole chicken and egg situation that we’re trying to unravel.”

Source: Financial Post


Amazon to hire 75,000 logistics workers in latest hiring binge

Amazon announced on May 13 that it’s hiring 75,000 workers for its sprawling North American logistics operation, a sign that the company expects increased demand to outlast the pandemic. The world’s largest online retailer hired some 500,000 workers in 2020 as it sought to meet a surge in online demand when millions of consumers hunkered down at home amid the outbreak. With the U.S. economy starting to recover, companies are struggling to find enough workers.

The new hires in the U.S. and Canada will receive US$100 if they’re already vaccinated for COVID-19, Amazon said in a blog post on May 13 announcing the plans. Their average starting pay will be more than US$17 an hour, and the company is offering signing bonuses of as much as US$1,000.

Amazon employed 1.3 million people at the end of March. Most of those jobs are in the company’s operations group, which stores packages, sorts them and hands them off to delivery contractors.

Source: Financial Post


Amazon Pauses Prime Day Event in Canada Amid COVID-19 Outbreaks at Warehouses

Amazon is pausing plans for its annual sale Prime Day in Canada and India due to concerns about COVID-19, the company confirmed on May 6. The pause won’t affect Prime Day in the U.S., which is scheduled for an undisclosed day in June, according to an email reviewed by Bloomberg.

“Based on the increasing impact of COVID-19 in Canada, and the importance we place on protecting the health and safety of our employees and customers, we will pause plans for Prime Day 2021 in Canada,” said the email, sent to Amazon sellers. The Seattle-based company, in an email, confirmed Prime Day would also be postponed in India, which was reported earlier by CNBC.

Just west of Toronto, Peel Region, which has one of the highest community COVID-19 positivity rates in Canada, is home to a number of Amazon’s major fulfilment centres. Peel’s public health unit has partially closed three Amazon fulfilment centres – two in Brampton, Ont., and one in Caledon, Ont., – under its order to shut workplaces with five or more cases of COVID-19. Amazon declined to comment on the postponement, and did not respond to questions about how many of its workers are currently infected or isolating due to COVID-19.

Amazon had to postpone its annual sale worldwide last year due to the pandemic. The event is a way to drum up sales during the summer and attract and retain new Prime subscribers, who pay monthly or annual fees for delivery discounts and other services like video streaming.

Source: Toronto Star
Source: Financial Post