Unexpected factors influencing the future of industrial real estate

Unexpected factors influencing the future of industrial real estate

Industrial – Workplace December 2016

Looking into the future, commercial real estate will be driven by many things – including driverless vehicles. Then, when your products aren’t leaving your factory or warehouse via ghost truck, they will fly out via delivery drone. And the goods themselves? They’ll pop out of a 3D printer or be assembled by an AI bot. What does this have to do with the future of industrial real estate? Quite a lot, actually…

1. Driverless electric trucks

They’re here. Well in the Dutch Port of Rotterdam, anyway. In April 2016, a fleet of automated trucks drove themselves across Europe for a week, proving a) that they could, and b) it’s time to take this ‘futuristic phenomenon’ seriously. And why wouldn’t you? Given that labour is currently the number one land transport cost, followed by fuel, driverless electric trucks will allow you to freight further (no government-mandated rest stops required) at a fraction of the price.

What will driverless trucks mean for industrial real estate? You’ve always had to keep transport costs and travel times down by being positioned near motorway on-ramps and distribution centres, right? Well, scratch that. Now you can set up shop almost anywhere you like – even at the other end of the island. Just load up your driverless truck at 5pm and let ‘him’ tirelessly drive through the night, delivering your goods before start of business the next morning.

2. 3D printing

Warehouses and factories require a certain amount of space – to fit in all your products and machinery, and so your employees don’t start to resemble sardines with hair. This usually lands you in the isolated wastelands we call “industrial areas”, but 3D printing will change this. When your goods are printed, rather than built and assembled, there will be no need for space, parking or even daylight.

What will 3D printing mean for industrial real estate? There will be no reason why you can’t be based in a small, inner-city warehouse, where you can finally get a decent coffee while your printers do all the work. You’ll soon offset any added leasing costs by saving on staff, floor space, lighting, heating, transport and raw materials (this method doesn’t produce waste). You’ll also end up being more competitive, as 3D printing will make cheap labour costs in places such as China irrelevant, as the National Journal reported recently. Heck, with all these savings, you could even afford to take up industrial residence on Paritai Drive if the council and Gilda allowed it (they won’t).

3. Drone deliveries

Is it a bird, is it a plane, or is it a drone delivering model birds and planes to the relevant doorstep 30 minutes after they are ordered? Oh, look, it’s the latter. This is the scenario currently being promised by Amazon’s Prime Air service. Although currently only in the development stage, the fact that it’s got that far is a heads up to warehouse proprietors looking to bypass any costly middlemen and deliver goods straight to your customers.

What will drone deliveries mean for industrial real estate? TBH, not much if you’re in, say, the business of manufacturing cars. But if you mainly produce small, portable goods aimed at the consumer, it could mean a literal move closer to them; out of industrial areas and into urban and suburban ones. Amazon’s Prime Drones travel up to 24 kilometres on a round trip, so you’d need to be looking at being positioned within 12km of your customer base.

4. Robotics

In a recent CNBC interview, Elon Musk explained that the march of advanced AI robots is so loud that we need to really think about providing a Universal Basic Income for all the workers that they will replace. While that is an issue to be addressed in other forums, in this one the out-take is clear: robots are taking over. In China’s Changying Precision Technology Company factory, they already have. The mobile phone parts factory’s floor staff is now 90% AI, contributing to a 162.5% increase in productivity.

What will AI robots mean for industrial real estate? (Most) robots don’t drive and they’re yet to start breathing. Which means you can cross parking, windows and air conditioning off your list of factory must-haves. A versatile real estate search, indeed.

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