E-Commerce and Land Use

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Most people don’t equate e-commerce with land use planning, but as more people shop online it is going to have a huge impact on our cities. For example, North America is undergoing a massive boom in warehouses and “fulfilment centres.” As the Economist writes:

Such modern structures usually lie within 100km (60 miles) of a big city and are near sea- and airports, highways and sorting hubs for couriers like FedEx and UPS. They are much bigger than older types of warehouse: often more than 100,000 square metres (1.1m square feet, or 14 football pitches); and they have high ceilings to further increase their volume. At Dotcom Distribution’s cavernous New Jersey warehouse, pickers ride “reach trucks” up to three storeys above ground to fetch 50,000 different products for 15 e-commerce clients. Such fulfilment centres also employ far more people than older warehouses: around Christmas each may have up to 3,000 staff working on shifts.

We can already see how the rising demand for fulfillment centres is playing out at the local level in British Columbia where there is a brewing battle between conservationist and developers for land.

The Globe and Mail reports that the demand for new industrial land required in British Columbia’s Lower Mainland is already far more than what is available. Paul Tilbury, the Chief Operating Officer of an industrial developer in the Lower Mainland argues that demand for industrial land can’t be served “by intensification or telling distributors to go to Kamloops or Calgary, as local politicians have suggested. A lot of the new demand comes from the e-commerce section. “They measure their success in delivery time,” Mr. Tilbury says. That means they want to be as close as possible to the big population centres.

E-commerce is going to significantly affect land use policy as we grapple with preserving agricultural land and reducing sprawl. It is also likely to create a mismatch between retail space and industrial space. We’ll need fewer stores and more storage. Will this mean that eventually big box centres will be converted to warehouses? It’s hard to say, but what is clear is that fulfilment centres are becoming an integral part of the economy and will shape the future geography and economy of cities and regions.

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What will happen to cities as retail moves online?

Yuri Milner, a Russian Internet investor is predicting that the percentage of retail sales done online will be 20 per cent within a decade, and 50 per cent within two decades. This is up from just 6 percent today. What are some of the potential consequences for urban places of shifting to a society that does half it’s shopping online? Here are some of my thoughts:

We will drive less

If retail shifts online people will need to take fewer shopping trips. This will have a huge impact on how we use roads. In the US, 45 percent of trips are taken for shopping and errands, while only 27 percent are social and recreational, and 15 percent for commuting. The amount we drive is already hitting a plateau, so if we start buying more online expect to see it to start dropping.

Place will matter more

Cities, developers, retailers will need to focus on creating vibrant walkable places. When shopping online becomes easier, expect to see a surge in retail projects that are focused on “place making.” As it gets easier to shop online retailers will have to look for innovative ways to draw people to stores.

Niches will drive brick and mortar retail

Photo Credit: Jason Bragg, Toronto Neighbourhood Walks Project

In areas where developers and retailers are not investing, niche and ethnic retailers will continue to be the main tenants for suburban shopping malls and older main street. Niche Markets where demand won’t or can’t be met by online retailers will still leverage the bricks and mortar buildings drawing on a loyal customer base.

Offices will remake Retail Strips

I also believe that we will see more of what I call the office strip. Streets where the retail is rented mostly by medical offices and other services such as health and education providers, drug stores, massage therapy businesses, lawyer, and real estate offices As the population ages, demand for these services will increase. This is already happening in Toronto where many of the condominiums meet ground floor retail requirements by renting out space as offices and clinics.

The Rise of the Exurban distribution centre

We are also going to see the rise of massive warehouse distribution centres that employ thousands of low paid, often temporary, workers on the outskirts of cities who are going to be sorting and delivering all these products sold online to your door. For a view into what that potentially means I highly recommend reading Mac McClellands article about working in an Ohio warehouse during the Christmas season rush.

These are just some of my best guesses. What do you think the rise of online retailing will mean for cities?