How do autonomous vehicles in logistics impact real estate?

Above: The 440,000-square-foot REI Distribution Center in Phoenix utilizes an omni-channel automated fulfillment system that delivers products to customers and retail stores up to eight times faster than average. (Provided photo) Real Estate | 19 Jun, 2017 |

By now we’ve all heard the buzz about autonomous vehicles. Companies like Amazon, Mercedes-Benz and Uber are heavily investing in this technology and many have begun open road testing.

The arrival of these vehicles is imminent and fast approaching. In a report published by Edmonds last month, by the year 2030, 95 percent of U.S. car miles will be in driverless vehicles.

In commercial applications, autonomous vehicles (AVs) have been utilized by the logistics industry for years in the confined areas of a warehouse or stock yard, and it’s only a matter of time before automation expands to line haul transportation and last-mile delivery.

So what does this mean for industrial users and their distribution centers in particular? While there are many implications, building design and location should be top of mind for these companies.

Building Design

Both existing buildings and new construction have already begun to see changes in their design.

Traditional expansion plans of more square footage are being challenged by this developing technology. Real estate is typically the second or third largest expense on a company’s balance sheet so it’s a huge advantage for them to more efficiently utilize their existing space as opposed to tacking on more square footage.

A recent Wall Street Journal article highlighted the impact of AVs on a Target distribution center. Target was considering building a new warehouse to meet their growth and higher volume demands. Symbotic, LLC, a robotics and software company, was able to provide Target with an automated system that was capable of handling their increased volume in the existing facility, eliminating the need to move and the costs associated with a new build.

Developers of industrial buildings have already begun accommodating higher automation needs by incorporating heavier power and higher ceilings into their warehouses. New construction more commonly has a clear height of 40-feet plus, which is 25 percent higher than the typical 32-foot ceilings.

Location

The adoption of autonomous vehicles will allow logistics companies to reach a wider geographical area in a single day because trucks can travel further without the restrictions of drive time limits.

The Federal Motor Carrier Safety Administration requires that a driver may only drive for 11 hours in a 14-hour period. With autonomous vehicles in play, companies will be less restricted by the FMCSA, and territories for individual distribution centers will increase, giving logistics companies more freedom in choosing locations.

Even as territories grow and warehouses become more efficient, the overall need for space will increase. The current demands of e-commerce companies and faster delivery times (i.e. same day) require more fulfillment centers in urban areas that are tied to the bigger distribution centers. These companies will become reliant upon smaller local warehouses to provide speedy deliveries.

With the help of AVs, companies can enhance their distribution centers to achieve higher efficiency and cost savings. The trends of e-commerce are only fueling the advancement of autonomous vehicle technology and logistics companies will need to integrate this technology if they want to survive.


Kari Hartman is an industrial broker specializing in real estate advisory services for distribution, manufacturing and transportation companies at Keyser, a tenant-representation firm representing corporate users.

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