Rapid adoption of new technology, a renewed focus on the environment, online shopping and growing development of everything from 3D printing to autonomous vehicles have all radically reshaped what landlords in the industry have to deliver.
Sponsored by Mallcomm and chaired by Dan Hughes, founder of Alpha Property Insight, the latest PlaceTech event discussed these changes and the best ways to harness technology to keep up with an ever-changing market.
Watch the video of the event below
- Phill Davies, co-founder, Magway
- Matthew Bird, head of UK, Cromwell Property Group
- Tim Hurdiss, associate director, major projects, Harworth Group
- Kevin Mofid, head of industrial and logistics research, Savills
Savills’ Kevin Mofid kicked off the discussion by setting the scene in the industrial sector: “The biggest observation I have is how macro events that are out of everybody’s control really are impacting the market,” he said.
From HGV driver shortages to trading arrangements with the EU, global events are forcing companies to approach industrial space in a new way. Mofid added: “The occupiers of warehouse space are saying, ‘Well, we can’t control what’s going on globally. The only thing we can control is how much inventory we’re holding and where we’re holding.’”
As a result, occupier requirements have increased every month since March 2020, according to Savills data. But, at the same time, the industry also faces a shortage of steel and concrete, pushing costs up and putting pressure on rents and land values.
Disruption to supply chains, Matthew Bird argued, has shifted occupiers’ needs from having “just in time” to “just in case” inventory. The amount of space they need has grown to accommodate extra stock in the event of further uncontrollable problems.
Between the pandemic accelerating the need for automation and COP26 refocusing the industry on sustainability, another major change in the sector is the demand for electricity.
Tim Hurdiss said occupiers are asking for “more than traditionally we would expect” to power EV charging points, robotics within the warehouse and, increasingly, for heating as gas is phased out in the drive to reach net zero.
His advice was simple: “Get as much electricity as you can secured early doors and then almost double it again, to make sure you’ve got a bit of resilience in there.”
While sustainability is a high priority, Bird said ESG reporting has not gone far enough. “Across the particulars or the opportunities we’ve looked at, we haven’t yet seen anyone stating what their carbon footprint or a carbon rating for a building is.”
LEED and BREEAM ratings are available, but no one has come up with an all-encompassing rating, he said. One problem is that landlords and occupiers still don’t know how to collect all the data they need on the environmental impact of their buildings. Even if they did, the industry has yet to agree shared standards to ensure that everyone is measuring ESG criteria on a like-for-like basis.
Hurdiss said: “We’ve got to be working off the same basis: what is net zero carbon? What is the basis that we’re working from? Are we assessing it on the same criteria?”
Poor data is a fundamental issue for the industry. As Mofid pointed out: “There is no public body that actually knows what real estate is in existence.
“It sounds like a very simple question: how much warehousing is there? And where is it? No one knows. It’s as simple as that.”
Across Europe, there are major gaps in basic data, and even in the UK, which has good datasets from Ordnance Survey, the Land Registry and other organisations, that data is not necessarily compatible with each other.
Mofid said this needs to be addressed at the government level to ensure the public has access to open source data. Understanding the industry’s environmental impact before that is accomplished will be difficult.
Turning towards automation – the other major topic of conversation in the industry – Phill Davies talked about the gap that exists in between automation in logistics and automation in cities. Warehouses themselves are automated and cities are introducing new forms of transport, he said, but industrial space is “extremely manual” at the edges.
“People are still lugging crates onto cages, rolling the cages onto vehicles, the vehicles are congesting the road, polluting the environment,” he said. Magway is developing an all-electric goods delivery system to fill that gap in order to, as Davies said, “extend automation beyond the warehouse”.
Automation in the warehouse will increasingly have an effect on investment decisions. Bird said: “It’s absolute imperative that sites and investments and buildings that are purchased or developed have that ability for power and for connectivity.”
In the same way that we are starting to see a ‘green premium’ for buildings with high ESG standards as other buildings are left behind, “the same will be true also for buildings that don’t have the ability to be as connected,” Bird said.
Demand for industrial space might be at an all-time high, but that does not mean all industrial space is future-proof. To succeed, the sector needs to stay connected and it needs to stay green.
- Gareth Sumner, commercial innovation lead, Transport for London
- Will Young, head of UK, NavigatorCRE
- Patricia La Torre, head of strategic partnerships, Humanising Autonomy
- Robbert Heekelaar, VP, architecture and emerging technologies, Prologis
- Lois Barton, head of customer success, Edozo
Speakers on the second panel picked up where the previous session ended, exploring practical ways for the sector to try out and adopt new technology.
The reason better data is important, Will Young said, is that there is a pool of capital looking at the industrial sector. Executives and their teams, therefore, have to move faster to respond to rapid changes, which requires access to accurate market data.
But that’s easier said than done. Sharing a landlord’s perspective, Robbert Heekelaar, said real estate companies struggle to choose the right software companies for their needs, and they might be daunted thinking they have to stick to the first one they choose.
He said: “What people should do more is just pick a solution, experiment with it… for a few days or for a few weeks or a month or so and determine which use case can be solved with that – and then move on.
“Don’t get married to the first company that you encounter.”
Another potential hurdle is having a lot of data to begin with but not knowing what to do with it. Young made the case for NavigatorCRE, which combines and visualises whatever data sources a company has to make it useful and interoperable. He said: “We’ve seen a lot of customers have large swaths of data, whether they generate it or are subscribed to it, but they can’t really use it because it’s either not clean, it’s not accessible or it’s not integrated.”
When starting to think about what data and what tools a company wants, Lois Barton said teams should decide what their specific needs are and why. “Really understand what it is you’re trying to get out of that data and technology, because then I think that will give you a clear path moving forward,” she said. Like Heekelaar, she recommended companies ask software providers for a free trial to determine whether a product is right for them.
The process of choosing the right tools for the right uses can be more complicated for public sector bodies, according to Gareth Sumner. The bare minimum for Transport for London , he said, was complying with GDPR “but then building on that and understanding more about what the public believe we should be doing with data, so understanding the kind of public perception, public feeling about what we can and can’t do.
“It doesn’t matter if it’s written down in the rule or not. If we do something which is seen as not essential to the public, we’re doing the wrong thing based on our objectives.” Those objectives include finding ways of reducing road deaths to zero.
Patricia La Torre, whose company provides software that can analyse, understand and predict the behaviours of vulnerable road users, said that trust is key when using data. “I always say to businesses that are looking to use any data analytics platforms to make sure they understand the AI that they’re going to be buying so that it’s ethical and explainable AI,” she said. In other words, people whose data the software collects have to know what it does, why it does it and whether it is secure.
“People only use the technology if they understand it and trust it,” she said, adding that this ultimately goes back to educating users.
Both Transport for London and Prologis have set up dedicated teams for innovation in recent years in order to work directly with external teams and, in Transport for London’s case, run “innovation challenges” asking for solutions to problems they are trying to solve.
But the reality is that even the most dedicated innovation team has a limit on how quickly it can bring in new technology. At Prologis, Heekelaar said, occupiers want the company to start monitoring air quality and other metrics. With 5,000 buildings across the world, however, retrofits will take time. “It will not go that fast. It is a handshake between the customer and ourselves in that sense,” Heekelaar said.
The company has adopted WELL Certification in some of its new developments and is putting sensors in its warehouses to start monitoring air quality. Going through the whole portfolio will be a monumental task, but it’s a task that Prologis and its competitors will have to tackle.
As Heekelaar put it: “[The warehouse] has to be a healthy and a safe environment… and you have to make sure that your warehouse is better to work in than your neighbour’s.” After all, every major landlord in the sector will have this on their agenda.