Smart assets for the future | Industrial + Logistics summary
In a year like no other, online retail has been the saviour of us all, and the logistics sector supporting it grows ever more sophisticated.
With automation, robotics, last-mile fulfilment and electric vehicles all marching on, PlaceTech gathered a cross-section of industry experts to hammer out the big talking points.
Full video recording of the event is available to watch here.
The event was sponsored by Bruntwood Works, Node, Mills & Reeve, Mallcomm and Arup. It was hosted by PlaceTech editor Paul Unger, on the Remo networking platform.
Panel One – data and deals
Julian Carey, managing director, Stenprop
Vanessa Curtis, director, CBRE
Charlie Wade, managing director EMEA, VTS
Mike Edge, partner, Mills & Reeve
Presentation: Julian Carey, Stenprop, data-based decisions
“Too often in property, people look at deals done: months-old data. We’ve started to use call-centre data on enquiries for investment purposes. It shows demand and allowed us to deploy £40m in picking up attractively priced opportunities, where others took longer to return to the market.
“We see data as giving buildings provenance as with classic cars, the more you know, the more it’s worth.
“We’re now working with two lease types: traditional, with lawyers involved; and smart – in-house, all digital. The latter now accounts for 65% of what we do, although that reflects our business model and tenant profile.
“What’s become evident is the smart leases are twice as fast to put in place, and the deals are twice as likely to reach completion as the others. Customer satisfaction is a lot higher. Not all leases can be done this way, but lawyers need to try and close that gap.
“Letting agents and landlords each need to contribute. Sharing intelligence – there’s risk and opportunity for agents as landlords build their own data.”
Are landlords catching on to data?
Julian Carey: There are some amazing ideas in different sectors: student accommodation, self-storage, serviced offices, PRS. The industrial space has historically been relatively unsophisticated.
Vanessa Curtis: Among the global corporates we work with, there’s a huge focus on supply chain resilience: for years it’s been about offshoring, whittling inventory, reducing supplier numbers. Now, with natural disasters, political tensions, trade wars and of course a pandemic, it’s about de-risking: onshoring, business continuity, meeting demand to buy locally and ethically.
Mike Edge: There’s certainly more onshoring, but demand is exceeding supply – good news if you’re a landlord. There are two approaches we’re seeing in logistics deals: the likes of Amazon taking long-term space, maybe 15 years; and the third party distributors who’ll sign for the length of a supply contract. From a lawyer’s perspective, standardising and simplifying contracts is fine, but you’ve got big players dictating terms.
Charlie Wade: Getting on top of digital is about cultural change first and foremost and it doesn’t happen overnight. There’s still a place for gut feel, but it alone is not good enough anymore. I believe the industrial sector can become more data-enabled and tech-driven than other property types. Traditionally, industrial property’s had so many players involved on an asset it’s hard, but recognising it’s an issue helps now.
Carey: The question is ‘what percentage of your asset value do you see it as reasonable to invest to have an impact on profitability every year going forward?’
Wade: Those quick wins can be so easy, it’s just about getting a better understanding of your tenants, exploring how to improve the customer experience – aligning the real estate strategy with what they want. The cost is low, in the grand scheme of things.
Is collaboration really growing?
Edge: We are seeing more of clients and lawyers working together on platforms, and both sides recognise the potential for improving building performance environmentally by sharing information. People are keen to get more information on air and water quality, waste, energy consumption.
Wade: The conversation is moving towards ethical, ‘who are our tenants, and what is their impact on society?’ If anyone’s thinking on how to advise clients, don’t talk about the big buzzwords: it feels far off and unattainable. Begin with the basics: can you pull data to understand tens at the click of a button. It will be a catalyst to them wanting more.
Carey: It will become commonplace to ask what people are doing around ESG. Lots of people still don’t store that data. I recently spoke with someone who’d needed six weeks to work out the average unexpired lease term in their portfolio. It won’t be long before capital partners are demanding that immediately.
Curtis As tech grows in logistics, the other space there is becoming more flexible, that need to attract talent we’ve seen in office markets is working the same way: there’s a different talent set with analysts, software programmers, graduates who want cool spaces.
Panel Two – agents of change
Uwe Klatt, VP sales, Disruptive Technologies
Kevin Theobold, head of construction, Tritax Symmetry
Simon Evans, digital energy leader, Arup
Presentation: Uwe Klatt, Disruptive Technologies – Time for sensors
Sensors can be installed in minutes, they weigh two grams, are wireless, last 15 years and work in areas measuring anything from water, humidity and temperature. One of our clients has 2,000 in one warehouse.
One customer has a food fulfilment centre, some areas need to be chilled, some not, temperature sensors have reduced production incidents – which cost thousands per incident – by more than 50%. The scheduled maintenance window is extended by 67% because they can monitor equipment effectively by sensor.
On one engineering services application in a commercial building, sensors saved 600l of water per tap annually, and 2,900kg of carbon across the building.
Thoughts on Government’s green industrial revolution 10-point plan?
Simon Evans: We welcome the 10-point plan and what it will do to bring us towards net zero carbon. The issue is the technologies and areas we need to advance are so wide-ranging, and all have to be part of the mix. How can we actually deliver?
Uwe Klatt: The switch to green energy is one piece of the puzzle, and Internet of Things definitely has an important contribution to make.
Why is the concept of digital twins important? What other areas are advancing?
Evans: A digital twin in simple terms means a digital representation of a physical asset, ultimately it’s about converging the physical and digital worlds in some capacity. For me the biggest trend is around the interchange of data around energy. We’re mostly just consumers, but the energy system has over time become more complex, and a market with data flowing freely is a better market for the consumer. It’s a big part of creating smart assets for the future.
Theobold: We’ve been working hard on changing our base builds, understanding fully our carbon use. We feel we now fully understand embedded carbon in our builds and have initiatives to reduce that so we can be net-zero in construction – and we’re working hard with our supply chain to move towards net zero in operational use.
Klatt: At the start of the pandemic, initial shock turned quite quickly to people looking for solutions to deal with a short-term crisis – it highlighted important technologies that have been around for a while in being able to do things off-site through IoT and video-conferencing.
Evans: Covid has become the first real driver for digital transformation in organisations, where previously many paid lip-service. People who’ve done it have found things smoother, we’ve seen change programmes happening in a matter of days rather than months.
Are companies prepared to invest?
Klatt: People are starting to spend money on productive, data informed solutions. For a couple of years people have been building an understanding of IoT and what it can do, and now service industries around real estate are embracing it.
Theobold: Elements we’ve focused on include rooflights to maintain daylight provision and promote low energy use, photovoltaic arrays, EV charging. We’re keen to get our base build product there to help our customers achieve their own aspirations. It’s not always a big cost, it just has to be smart.
Evans: There will always be a capital outlay at first, though: the ROI is in the long-term play and efficiency over time. If we’re developing assets and not digital twins, all you’re doing is creating a dumb asset for the future – do you want to be the odd one out down the road? Data assets now have value – are they going to be recognised on balance sheets? We could get to a position where a building is equally regarded as a digital asset, and lenders and insurers won’t lend without it. We can’t really predict where it’s going, but data will have an intrinsic value.
How about wellbeing?
Klatt: Wellbeing apps are definitely important. There are simple things: giving people the opportunity to voice a concern at the click of a button, or ask for products. Anything to help the experience of the workplace.
Evans: The focus on wellbeing varies across sectors and companies, depending on the maturity of the client and who are the guiding minds.