While industrial real estate has lagged in the adoption of technology compared with other CRE sectors that trend is about to change.
The demand for industrial real estate has been driven by double-digit growth in e-commerce sales and is expected to increase by 850 million square feet and reach 15 billion square feet by 2023, according to a recent report by Deloitte.
Despite the increase in e-commerce demand, overall growth in the market is expected to slow as more newly constructed industrial spaces enter the marketplace and costs of capital continue to rise.
In the next five years industrial real estate owners are likely to face a scenario of slower growth, rising competition, and higher cost of capital and will need to make significant technological improvements to mitigate these risks.
Here are five areas of technological innovation that can help industrial properties owners to improve return on investments, mitigate risks and remain competitive.
1. Must-Have Property Features
Once considered premium improvements, 40-foot clear height ceilings, dedicated on-site trailer storage areas, 60-foot speed bays, LED lighting and oversized employee parking lots have become popular demands from industrial tenants. While not all industrial properties must be equipped with these features, they generally make the list of top requirements from most tenants.
2. Energy Efficiency
Lower energy costs can be a big draw for tenants- as most industrial tenants require massive amounts of power and energy usage. Incorporating solar power, LED or natural lighting, cool roofing materials, and even sustainable packaging can affect building efficiencies.
Prologis, the world’s largest owner of warehouses, has been able to meet the high sustainability goals through the use of a rooftop solar program. Developers are also using water-saving technology, irrigation and landscaping to reduce energy costs and meet global sustainability goals.
Artificial intelligence and predictive analytics are helping to reduce energy costs in industrial buildings by dynamically adjusting power usage and cooling and heating costs based on data collected over time. Giant portfolio owners are also harvesting energy and other occupant data collected via IoT sensors in industrial facilities to better design and develop sustainable industrial facilities in the future.
3. Optical Fiber & Cellular IoT
Access to a digital infrastructure which enables the use of smart building IoT devices and sensors can allow tenants to increase efficiencies across the industrial supply chain from first-mile or transloading containers to last mile delivery to customers. A digital infrastructure consisting of optical fiber throughout the facility and cellular IoT connectivity can enable tenants to track the exact location of a product or pallet.
As demand from consumers for same-day delivery increases, knowing the precise location of a product from its inception to last-touch can drive significant supply-chain efficiencies and add massive value to a potential tenant.
In addition to equipping properties with fiber to the edge, industrial owners and developers should familiarize themselves with the benefits of cellular connectivity solutions such as NB-IoT, LTE-M and other Low Power Wide Area (LPWA) IoT connectivity options which enable the transmission of data collected from devices and sensors across properties and locations.
Private LTE technology and the new frequency band called CBRS will certainly emerge as one of the hottest technologies that will enable far greater communications advances. Both Prologis and Ford are testing Private LTE in the CBRS band.
While 5G the next generation of cellular technology will enable greater manufacturing efficiencies, there are many solutions in the marketplace today which are well designed to meet the needs of warehouse facilities far into the future.
4. Improving Employee Retention & Workplace Productivity
Attracting and retaining skilled labor is a massive challenge for the industrial real estate sector. As the shortage of warehouse workers continues to persist, more industrial tenants are opting for spaces with better amenities to retain workers. Amenities such as on-site eating cafeterias, fitness facilities, and workplace training programs in industrial parks and warehouses are becoming a means of attracting tenants. Wearable technology such as headsets and wristbands, which can help to better route workers throughout large warehouse spaces are also being used to improve workplace productivity.
5. Autonomous & Electric Vehicles
With electric and semi-autonomous trucks becoming a reality soon, site and yard designs are starting to adapt. In anticipation of the autonomous vehicles and electric trucks more industrial owners are building parking lots with conduit, installing dedicated electric charging stations for trucks on-site, embedding sensor technology into loading areas and yard spaces, and creating new safety protocols for vehicles within overall warehouse operations.
It’s likely that more than one of the technologies discussed above will play a transformative role in the design and development of industrial facilities in the next five years. The delivery of industrial space in the future will be about providing a well-designed space and a digital infrastructure that enables these technologies to be easily deployed by tenants.