My Real Estate Blog - Market Trends, Tips & Updates
Intermodal facilities vital for GTA industrial growth
12/14/2018 | Posted in Commercial Real Estate by Paul DeAdder | Back to Main Blog Page
![Mortgage Rates - Interest Rates](http://crworks.com/partner/images/blog/105354/mortgage-rates---interest-rates-48.jpg)
Industrial real estate is in high demand in the Greater Toronto Area (GTA), and properties close to intermodal facilities are particularly desirable for retailers, manufacturers and distributors. These are among the findings of an Avison Young report on intermodal logistics in the GTA.
“Intermodal facilities serve as critical links not only for the Greater Toronto Area’s logistic supply-chain network, but for Canada’s supply-chain network overall,” said Bill Argeropoulos, AY principal and practice leader for Canadian research.
Intermodal transport involves moving freight in a standardized intermodal container or vehicle using multiple modes of transportation — including rail, trucks and ships — without handling the freight itself when changing modes. It reduces cargo handling, improves security, reduces damage and loss, and allows freight to be transported faster.
Organizations with logistics and distribution needs have the potential to increase efficiencies and reduce costs by locating their premises close to intermodal terminals so goods can be transported on local, national and international scales.
“These facilities support the quick transfer of goods, in most cases, from abroad to the next point in the supply chain,” Argeropoulos said. “The cost-effective delivery of goods is becoming critical for retailers and for the longevity and viability of the retail sector as retailers look to streamline delivery and shorten the last mile in the e-commerce age.
“Because of these e-commerce requirements, the industrial and retail real estate sectors have become increasingly linked and, in particular, industrial space has a more important function for retail businesses than in the past.”
Need for logistics, distribution and warehousing
The GTA is among the largest and most dynamic industrial markets in North America, fuelled in large part by the growing need for logistics, distribution and warehousing facilities.
“These facilities now need to be located closer to urban areas to allow for quicker delivery of goods,” said Argeropoulos. “Secondly, some companies are choosing to locate their distribution centres in close proximity to intermodal terminals to facilitate quicker movement of goods.
“Traditionally, these distribution centres would occupy large swaths of land. But, as they get closer to urban areas to meet last-mile delivery requirements, and given the shortage of available land and rising costs across the GTA, there is the possibility that we may see multi-storey facilities constructed in the future. This trend is getting started in the U.S., but remains on the sidelines here so far.”
While rail capacity is increasing, the GTA is in need of more intermodal terminals. Operators are looking to add extra capacity to load and unload container trains and improve access for trucks to match growing demand.
CN and CP’s GTA intermodal terminals
Canadian National (CN), which oversees 32,200 kilometres of railway tracks across Canada, has its GTA intermodal operations at the Brampton Intermodal Terminal. It can handle 160 trucks per hour and eight or nine trains a day while operating on a 24/7 basis. There are 192 industrial buildings, totalling 47 million square feet, which have at least 100,000 square feet of space within a five-kilometre radius.
Canadian Pacific (CP), which oversees 20,000 kilometres of track, has its operations at the Vaughan Intermodal Terminal. It can handle 1,800 containers a day while operating 24/7. There are 12 buildings which contain 100,000 square feet or more of space within five kilometres. In total, they comprise six million square feet.
Demand for logistics and distribution space, including trailer parking, in proximity to the CN and CP facilities continues to increase. Available buildings and developable land have become increasingly scarce and the existing facilities have exceeded their capacity. CN is leasing additional land near its Brampton facility to stage containers in order to reduce traffic congestion.
CN announced in July it will make $315 million in capital improvements in Ontario for intermodal rail-yard expansions to improve the efficiency of container movement in and out of the Greater Toronto and Hamilton Area. That includes a satellite intermodal facility near the existing Brampton site to provide temporary capacity and new intermodal equipment and infrastructure in Brampton to serve the growing cold goods supply chain.
CN’s proposed intermodal hub in Milton
CN has also proposed a new $250-million logistics hub on a 400-acre site in Milton which could handle 67 trucks per hour and four trains each day. Each train represents the equivalent of 280 long-distance trucks. There are currently two buildings (totalling 400,000 square feet) which contain 100,000 square feet or more of space within five kilometres.
“The proposed facility would help support existing distribution centres in Halton Region, create jobs and alleviate highway congestion while helping to meet the requirements of projected population growth in the GTA, which is expected to reach 10 million by 2041,” said Argeropoulos.
The report says the proposed development would spur further industrial construction and create up to $230 million in new tax revenues for the municipality and Halton Region over 20 years. The proposal has met with opposition due to concerns about increased traffic on local roads and its environmental impact. A decision relating to the review process is expected by early 2019.
GTA industrial real estate’s future
“Future demand patterns are likely to increase the value of industrial real estate close to intermodal hubs, and the functionality of the buildings themselves,” said Argeropoulos. “Some older assets near urban areas may be repurposed or redeveloped, given the high cost of developable land.”
Argeropoulos doesn’t believe the lack of available land for industrial use in the GTA will put its status as an industrial powerhouse at risk, given its dense population of consumers and workers.
However, he said decisions made by municipal and provincial governments — including those regarding the release of developable land — will determine the long-term viability of the GTA industrial real estate market.
“We will need to look at the built form of industrial assets in new ways, taking into account availability of land, tax rates, development charges and other factors contributing to the cost of doing business.”
Potential disruptors of intermodal logistics
The report identifies five potential future disruptors of intermodal logistics in the GTA: urbanization and the importance of the last mile; autonomous modes of transport; international trade agreements; reshoring of manufacturing; and 3D printing and on-site manufacturing.
“Autonomous trucks could offer continuous flow of goods while saving on labour costs and shortages and, perhaps, less reliance on fossil fuels, which could benefit the environment as well,” said Argeropoulos.
“In the case of 3D printing, it would eliminate the need for many goods to be shipped via the lengthy and costly overseas supply-chain system if they could be manufactured easily on-site at the time they are needed. Of course, the raw materials for this process would still need to be transported somehow, but this would likely be more efficient.”
Source: Renx