The demand for logistics properties is booming - from both investors and users. Numerous studies thus look at the topic and try to anticipate the development of the asset class. Daniela Reich, Head of Real Estate Management at Aurelis reports on whether the industry has to prepare for a revolution.
Germany’s economic power is based on the production of goods and the key function of logistics is an integral part of this. Logistics helps provide manufacturing companies with their parts as well as deliver goods to stores and customers or export them to other countries.
Logistics has become the focus of corporate strategy. The industry is being forced to innovate and many influences are responsible for this: Digitization is the primary factor influencing the process in the B2B sector: from supply and production through to storage and shipping. The delivery systems coalesce with the production processes and are seen as an integrated part of the entire value creation chain. Other factors demand new solutions in the B2C segment: the increasing number of packages for end users as well as the expectations of consumers for product diversity and delivery speed, while the density traffic flows increases.
The real estate sector should keep an eye on these developments and examine their impact on logistics real estate and locations.
Networked processes for Industry 4.0
The delivery process has already been digitized. The ability to track the status of goods ordered online gives us an inkling of the many other possibilities. The future of logistics will however be largely automated and much more networked. With Industry 4.0 information and communication technology will interlink the supply of elements, the steps of industrial production and the delivery of the finished product.
The German Federal Ministry of Education and Research (BMBF) supports various projects and initiatives for “Hybrid Services in Logistics.” * The question is: What will human-machine interaction look like in the future? Among other things, solutions allowing people to communicate with robots and cyberphysical systems are being worked on.
Cyberphysical systems? These are, for example, intelligent shelves, containers or vehicles you can interact with. This is made possible, for example, by sensors that receive physical or chemical stimuli and react with electrical signals, or actuators that can be controlled by electrical signals. An example? The container uses a sensor network to ensure that the correct goods are loaded and that they are not damaged. It calls up a transport vehicle and ensures an optimal climate over the entire transport period. But the machines also communicate with each other. The shelves send a signal to the robot that they have to be refilled. The robot takes care of this along with packing and loading the vehicles.
But how will these topics affect the real estate of the future?
Cyberphysical systems should not bring great changes
Although the use of cyberphysical systems and robotics is not likely to have a significant impact on the design of logistics centers, the need for flexibility could increase. Companies may be able (and want) to stock more and higher shelves as a result of optimized and automated processes. The consequences are requirements that are not necessarily spectacular, but merely a further development: higher halls, a floor load capacity of 10 to 15 tons or more, as few pillars as possible, a powerful data and electricity network as well as intelligent building technology and, if necessary, e-mobility charging stations. Due to higher electricity consumption, supply and production of renewable energies could become more important. Digital control of work processes also reduces the need for human labor. The proportion of office space, which is currently around 10 percent of the total leased area, could thus shrink.
These are all not particularly exotic topics. And this should reassure project developers, financiers and investors. For them, it is essential that no highly specialized logistics real estate is created in the future, but rather that - despite customization - third-party usability is ensured for the user. This should also be possible in the future. **
City logistics needs new ideas
B2C business, on the other hand, requires more imagination. Ever more goods are already being transported to metropolitan areas and city centers via a nearly collapsing infrastructure. Three different approaches are thus being explored:
- The logistics properties will be better integrated into the cities for the organization of the so-called last mile. The closer they are to centers and residential areas, the smaller-scale they become, including hybrid buildings, where individual floors are occupied by logistics companies. A model that could fit the bill: co-storing spaces such as store me, an Austrian supplier offering digitized self-storage space.
Logistics near the city center can also score points thanks to interesting architectural solutions: Real estate companies are already building two-story halls that make better use of space. There are now also appealing design ideas for facades, if the user so wishes.
Mobile package containers are a solution that allow the real estate company or the municipality to provide only a small area. They function as pick-up stations and work with intelligent technology without personnel.
- New and unusual traffic routes are being tested. In Switzerland, for example, there are plans to transport goods underground in the future (see also the interview: “This could transform the logistics world!”). Whether airborne delivery, for example via package drones, has a future, is not yet foreseeable.
- Mobility itself is changing: self-propelled transport vehicles controlled by artificial intelligence, environmentally friendly electric vehicles or mobile robots, for example. Real estate, however, is not likely to look much different than before.
3D printing: is this where the revolution is taking place?
The spread of 3D printing as a new production technology could gradually become a revolution for production and logistics as well. It starts quite harmlessly with the possibility of small series sizes and custom product design. It may thus make sense to combine production and transport spatially. This in turn would result in a higher demand for multi-tenant real estate. As long as production continues taking place on company premises, it would also change the demand, from areas for expansive production lines to a demand for storage space for the raw materials. The associated real estate could be the cross-docking hall with many ramp gateways. On one side, trucks with raw materials are unloaded and on the other side the finished products are loaded for delivery.
However, once the 3D printer becomes affordable and manageable for the end user, everyone will be able to set up their own production site. The new designer furniture from England or the colorful French ceramic tableware will then be printed at home. This would mean more decentralization and could also have an impact on the (real estate) economy. Goods transport would be partially replaced by raw material transports. And only the goods manufactured of several components would continue to be produced centrally. This may hold the greatest potential for change.
Not far off anymore
Intensive research is taking place and major logistics companies such as Deutsche Post DHL are forging ahead with projects and studies on 3D printing, big data, robotics or self-propelled vehicles. Deutsche Post DHL already developed a study of the future back in 2012: “Delivering Tomorrow: Logistics 2050”. Best-selling author Frank Schätzing was incidentally also part of the team. And what may have sounded rather futuristic five years ago no longer seems quite so far off today. ***
** The following market report includes detailed statements and market data on this topic: pdf.euro.savills.co.uk/germany-research/ger-ger-2016/bulwiengesa-logistikstudie-2016-de-studie-screen.pdf