The Close Ties Between Real Estate and Supply Chains Uncovered: The Colliers-SCRC Webinar Reveals It All!
I hosted an incredibly informative webinar today with real estate experts Bill Condon and Matt McGregor of Colliers International for a “fireside chat”. We spoke about a number of seemingly diverse topics: the impact of autonomous vehicles, smart edge technologies, e-commerce and last mile logistics and the industrial real estate market. These topics came together to reveal a fascinating relationship, brought about by shifts in technology and in response to the COVID crisis, that have changed the supply chain landscape forever, as well as the nature of work in supply chains.
You’ll have to watch the entire webinar to understand the full impact of what is happening, but let me paraphrase some of the highlights here:
Rise of autonomous drivers and drones
More transportation vehicles are moving to autonomous drivers, including trucks already driven by Walmart between several of their distribution centers. These trucks are still accompanied by human drivers, but a lot of the driving is done autonomously. The rise of these vehicles is also related to the increase in the use of drones, which are already being used today by Amazon, FedEx and UPS to automate deliveries of packages that are under 5 pounds. These methods are being used primarily for distribution in congested cities where traffic is problematic, as well as remote areas where there are not a lot of other drop-offs to make.
An e-commerce boom
These types of deliveries (autonomous drivers and drones) are becoming more important due to the massive growth in e-commerce sales. Bill and Matt pointed to data that showed that, before COVID, e-commerce accounted for 15% of global sales, but it has since ramped up to 35%–effectively a 10 year ramp-up that took place in only 3 months. This is because more and more people started using e-commerce for almost everything during COVID, and once they started using it, they got hooked! This is unlikely to go down. Another reason is that more and more people began working from home, and as they did so, began buying everything from home.
The impact on real estate
The impact of this rise in e-commerce is that retail was hammered! In fact, 60% of retail store went bankrupt in the US, and most of them won’t be coming back. Over 11,000 stores closed down. And the value of retail space plunged. Malls were hit the worst of all–as stores disappeared, malls emptied and shut down.
But here is the good news–many of these malls are now being converted to fulfillment centers by Amazon and other companies. Some are also being converted into hospital space, as hospitals are expanding significantly. And the other area of real estate that is improving is industrial real estate. Why? As last mile delivery requirements are going up, fulfillment centers are being tasked with same day or next day delivery, which means they need to be close to consumers, especially in major cities. Some malls are also being converted into sport stadiums, such as the Seattle Kraken hockey team which is moving into an old mall area. Industrial real estate is also being snapped up as leases by more supply chain companies are developing leases for distribution centers, which are generally getting smaller as they get closer to customers.
Shifts in logistics and infrastructure
The downside of all this e-commerce is that there will be more trucks and freight in urban cities. This is impacting reverse logistics also, as many of those packages needs to be picked up for returns. Parking and regulations around trucks in cities are starting to emerge, which may also lead to more drones! Some companies are also starting to have their workers move to “flex” centers, where they can get a private work area. While most companies we spoke with agree that workers want to come back to the office, for at least one or two days a week, there will continue to be a large segment that continues to work from home, based on Collier’s study of the problem.
These fascinating insights all came together in our one-hour webinar, which was attended by a number of municipal and town planners. This leads me to believe there are definitely some big changes ahead for the way we work, interact with automation and the internet of things (IoT), and how we operate our global supply chains.
To watch the full recording of the webinar, click here.