Soaring Canadian warehouse rent is putting extra financial pressure on small and medium-sized logistics businesses already battling workforce shortages and rising demand.
A perfect storm created by booming demand, high rental rates, and low warehouse vacancies is causing concern for Vancouver 3PL and Public Warehouses operators.
In Vancouver, the rental vacancy for warehousing has fallen well below the national average, to below 1%, while rental prices continue to increase.
Data from real estate advisory firm Altus Group reveals overall leasing costs for industrial real estate increased 40% in three years in Vancouver and Toronto. On average, the leasing costs for Vancouver industrial real estate are about C$17.40 per square foot.
Increases in rent have hit companies alongside record-high fuel prices, upward pressure on wages, and other rising operating costs in the logistics industry.
Chief Operating Officer of logistics software provider CartonCloud Shaun Hagen said the rising cost for warehouse space was impacting public warehousers in two ways; by driving demand for outsourced logistics services, while also incentivizing current logistics operators to reconsider their set-up and generate new revenue streams.
“With the rising costs of warehouse space, we are seeing more and more demand for 3PL warehousing services being sought after by those who want to outsource their logistics in order to avoid the hassle and expense associated with managing their own storage, handling, and distribution.
“This increased demand for outsourced services means increased potential business for existing operators — even those who own and run their own warehouse, rather than public warehousing.
They now have the opportunity to monetize their existing footprints more effectively by offering additional services like 3PL warehousing or cross-docking where they may not have offered this before.
Hagen said while the low vacancy and high rental prices were especially stifling for small and medium-sized businesses — but those thinking outside the box could still capitalize on booming demand by reducing day-to-day operational costs and seeking revenue through other services.
“Now more than ever, small and medium-sized logistics businesses should be analyzing their operation to find ways to reduce overheads and operating costs, and to seeking additional revenue that doesn’t rely purely on available storage space,” Hagen said.
“The cost of physical warehouse space is on the rise, and often out of the control of logistics businesses — but there are other areas of business that are very much in their control, where they can get some easy wins on the board.
“One important operational aspect SMBs can control is the technology they use to run their business.
Hagen is leading CartonCloud’s expansion in Canada, where the company believes SMB logistics companies can make gains by turning from paper-based processes to automated transport and warehouse management systems.
CartonCloud has grown rapidly in Australia in response to its unique capability to provide SMB logistics companies with automation of data entry and admin, software integrations, flexible and efficient workflows, and enhanced recipient experience for last-mile providers.
“Small and medium logistics companies play a vital role in keeping our supply chains moving in Canada, and we need to make sure these companies can continue to operate under these challenging conditions,” Mr Hagen said.
“Reducing overheads is critical in today’s logistics industry. Cloud-based warehouse and transport management systems can support businesses to improve revenue by automating data entry and increasing productivity, which improves the bottom line.
“Automating data entry with CartonCloud’s transport and warehouse management software has allowed SMB logistics companies to reduce administration overheads by 80 percent, while continuing to increase output and take on new business.
“As costs continue to rise, technology can step in and be the difference between a company leaking money and working overtime or a company that runs smoothly, makes profits, and gets the job done on time.
“We are still seeing a huge surge in demand, off the back of the e-commerce rise brought on by the pandemic, and companies that can streamline their operations to increase their capacity — even when additional storage space is not easily available — will be able to capitalize on this demand.
“With CartonCloud, the software does the heavy lifting in terms of data management and also provides optimized workflows to capitalize on ways they can build efficiencies into their operations.
“Businesses can use their software to add new revenue streams that aren’t dependent on storage availability, which means they aren’t as susceptible to the stratospheric rental rates.
“This might be adding additional services like custom packaging, enabling returns, providing stock report insights, or other services they can capture as chargeable rates to boost income.
“Last mile operators in Canada and across Northern America are contending with higher demand, faster turnaround expectations, and overcoming rising operating costs and rent — you have to be ready to look at new ways of operating that are more efficient than the paper and spreadsheet models that may have worked a few years ago.
“Investing in tech gives logistics firms newfound capabilities to overcome day-to-day issues, improve efficiency, and support growth by adding new revenue streams.”
“For us, it’s all about giving our customers that control, letting them operate their business the way they want to — with the most efficient processes. That way they can continue to grow, without the headache.”