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A year into the pandemic and rolling lockdowns, Canadians have been forced to change their shopping patterns, pushing online sales growth to unexpected levels. Soaring e-commerce has already changed the real estate market and the makeup of shops and malls—and the trends are expected to transform these sectors forever. 

Online continues to soar: This past January, retail sales in Canada grew 3.3 per cent compared to the same month in 2020, according to Mastercard data. “The underlying trends … you have a business that’s very much driven by online,” said Steve Sadove, a senior advisor for Mastercard and former CEO and chair of Saks. Online sales more than doubled, up 107.7 per cent over the same timeframe. In December, retail e-commerce sales reached a record high, up 69.3 per cent to $4.7 billion, according to Statistics Canada’s most recent figures.

Share of e-commerce grows: The proportion of how much people buy online has grown amid the lockdowns. Mastercard’s data indicated about 30 per cent of sales happened online in January, said Sadove. In 2020, the share of retail e-commerce sales was 5.9 per cent, according to StatCan, up from 3.5 per cent the previous year. “The onset of COVID-19 prompted many Canadian retailers to open or expand their e-commerce presence, quickly changing the retail landscape,” the agency said.

Post-pandemic changes: There’s “no question” consumers will continue to shop online if the world returns to a pre-pandemic normal, said Sadove. Since the pandemic began, the equivalent of eight years of change has occurred in retail, he said. Customers across all age groups have become accustomed to shopping online and the convenience that affords. “I think they’re not going to go back to old behaviours.” 

Lessons from U.S. trends: Some of that anticipated permanent change can be gleaned from Mastercard’s American spending data. In February 2020, as restrictions eased south of the border, online sales in the U.S. grew 54.7 per cent compared to the same month the previous year. That’s a little less than 20 per cent of overall commerce, he said.

What it means for real estate: The growth in ecommerce is driving the need for warehouses, distribution centres and other industrial spaces for storing and sorting goods, according to the Business Development Bank of Canada. Chuck Scott, CEO Cushman & Wakefield Canada, said he expects growth in the industrial commercial real estate markets to “carry over into 2021 and the foreseeable future.” Vacancy rates are “extremely low,” he noted. In the fourth quarter of last year, it was 2.5 per cent, according to the company, and Scott said that “will drive new development and capital markets investment.”

The future for stores: That doesn’t mean physical stores will be gone. “That’s just not right,” said Sadove, in reference to predictions of the death of brick-and-mortar locations. “It’s going to be this merging of the two, and both will become important to the consumer.” But expect stores and malls to house alternatives to shops, said Scott, such as fitness centres, museums and indoor dog parks. Stores may also section off space to fulfill online orders, he said. We’re already seeing that trend in grocery, with microfulfillment centres at some Loblaw and Walmart locations in Canada, for example.