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Proptech Decoded – Proptech and its impact on the logistics sector

Robots; underwater warehouses; airships releasing drones for deliveries. No, this isn’t a pitch for a science fiction film but the future of distribution centres. The rise in global e-commerce together with shifts in customer delivery expectations and technological innovation are driving major developments in the logistics sector. In this blog we explore three such developments.

The location and shape of distribution centres

The near future could see distribution centres underwater or even taking to the skies!

A shortage of land is a constant and pressing issue for the logistics sector. Coupled with the growing need to ensure last-mile and last-minute deliveries, the price of traditional warehouses located in the vicinity of big cities is likely to increase drastically. Technology may offer alternative solutions.

Online retailers are already filing patents for airships to release drones or parachute deliveries, and underwater warehouses in lakes.

Coming back down to earth (quite literally), Hounslow Council has granted planning permission for a 2million sq ft underground warehouse alongside the Parkway (A312) near Heathrow Airport. The potential for subterranean development has already been spotted in America with the world’s largest underground business complex, “SubTropolis” located in Kansas City. This is housed in an excavated mine the size of 140 football fields and provides 6million sq ft of lettable space, with more than 8million sq ft available for expansion.

Developers are also looking at taller distribution centres as automation allows for higher racking systems as square footage is looking increasingly expensive. The natural way is up. All new P3 warehouses for example have 12m clear internal heights, which is 2m more than the current norm. This increases storage capacity by 20%.

Robots and smart tools

Technology is also changing how existing distribution centres operate.

Robots already play a significant role and this is set to increase. Certain retailers’ distribution centres are now almost fully automated and can process millions of items a week. Ocado Technology is trialling “CargoPod” autonomous vehicles to deliver groceries in residential areas of Greenwich. A growing shortage of labour, potentially exacerbated by Brexit, may lead to Wall-E lookalikes working in warehouses and handling our groceries before long!

The introduction of AI management systems also allows for the receipt and dispatch of more goods through quicker loading turnaround times. While current warehouses may need about 25 loading bays, warehouses of the future may use drones leading to higher site density and ultimately greater value.

Powering the future

The main challenge will be to ensure the warehouses of the future have enough power. Some owners have set out ambitious solar panel installation projects on the roofs of distribution centres, hoping to see as much as 80% of their energy generated in this way. IM Properties has built a 69,000 sq ft warehouse in Birmingham with photovoltaic roof panels which is fully electricity-cost neutral.

The world’s first carbon-neutral warehouse was launched in Enfield, Middlesex in 2016. The 173,000 sq ft development has reduced its power consumption through the use of motion controlled LED lighting and creates its own power through photovoltaic panels across its three buildings.

By enabling self-sufficiency, businesses can keep operating costs down and provide customers with cheaper warehouses.

Conclusion

Technological innovation is likely to face greater demand due to changing consumer behaviour as well as the redesign of logistics networks.

It is important to note that the road to automated distribution centres has been littered with obstacles, such as high costs, inflexibility, and non-scalability. As such, only 8% of warehouses in the grocery retailing industry are currently automated. But the future is coming …

Ever wondered what PropTech was all about? Our PropTech event on Thursday 4 October will decode what it’s really about and how to stay ahead of the game. If you are interested in attending please contact Lauren.Boyle@hoganlovells.com

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