Robots Are Reshaping Commercial Real Estate: Here’s How
What are the implications for the explosion of robotics on commercial real estate
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Robots are transforming real estate, you just don’t know it yet.
In today’s post we explore the ways robots are reshaping the commercial real estate landscape, from retail to industrial and beyond. Read on…
According to a recent Wall Street Journal article, there is a new Sav-A-Lot grocery “store” in New York City, except it isn’t a store at all, it’s a “micro-fulfillment center” that deliveries groceries to customers. Not a totally new idea.
What is new is the level of automation and robotics at this new facility. According to Curt Avallone, Co-CEO of Fabric the company that developed the advanced automated fulfillment technology, shopper’s grocery bill will be about 30% lower and can be delivered in as little as 30 minutes.
The new automated micro-fulfillment center in Brooklyn is part of a movement to reinvent grocery delivery with robotics, making it faster and cheaper for consumers and companies. - Kate King of the WSJ
Oh and Sav-A-Lot doesn’t plan on opening an actual store in New York City, just using this warehouse to fulfill online orders. Read more in the Wall Street Journal article here.
What does this mean for retail? Well we all know retail is “evolving” due to online shopping and 1-day delivery via Amazon.
My wife hates going to the grocery store. She almost exclusively orders our groceries online for delivery. Yes, that’s our specific situation, but the convenience and return on investment of time and headache makes the fairly low delivery costs worthwhile. At least that’s what she tells me…
Back to real estate, the use of an almost fully automated facility to fulfill orders is not entirely new. Walmart is apparently building mini-warehouses next to their stores and stocking them with their bestselling items. Robots then assemble orders and workers finish them off by collecting the remaining items from the store.
All of these trends indicate smaller workforces to manage grocery store inventory processing and smaller real estate footprints for stores/fulfillment centers.
What does the grocery anchored shopping center become when the grocery store morphs into a micro-fulfillment center?
It becomes a strip mall. Or maybe it creates a void that is filled by another use? It seems like the entire shopping center typology comes into question when you no longer have anchors. Shopping malls anyone? And please don’t say housing.
Do shopping centers and malls go away when robots pack what you want and then deliver it? They will evolve and whoever figures out where that evolution goes will be well rewarded. The landscape is shifting so fast it’s hard to keep up.
For some reason I’ve always been interested in robotics. I even built a few simple ones while in grad school. I think it might have been watching the Jetsons in the early 1980’s as a youngster.
Flying cars and on-demand delivery have become reality…or at least close to reality.
That begs the question, is Tesla going to lead the way on robotics like they have on Electric Vehicles (EV’s)? Tesla’s Optimus - Gen 2 is something else.
When it comes to robotics in general business applications and their second-order effects where is real estate headed?
Let’s start with the implications of robotics on business processes looking through the lens of grocery centers.
Here are some specific ways robots are being utilized:
Warehousing and Fulfillment: Robots like Amazon's Kiva, Hercules, Pegasus, Fetch robots help pick, pack, and ship orders quickly and accurately, reducing labor costs and increasing productivity. Learn more about Amazon Robotics Research here. In case you missed it, the company that automated the new NYC grocery warehouse is named Fabric. They are looking to be the leader in 3rd party automation for companies.
Supply Chain Management: Robots optimize inventory management, tracking, and transportation, streamlining logistics and reducing errors.
Customer Service: Chatbots and virtual assistants provide 24/7 support, answering queries and freeing human staff for complex issues. IBM Watson is leading the way on providing customer service and chatbot platforms for companies.
Manufacturing: Industrial robots perform tasks like assembly, welding, and inspection, improving quality and reducing production time. Will the Tesla Bot take over or will Tesla just sell some of its technology to those so far behind in automating their processes? It’s hard too say, right now but I won’t bet against them.
Retail: Robots assist with inventory management, restocking shelves, and even helping customers navigate stores.
Food Service: Robots prepare and cook food, reducing labor costs and improving consistency. Staubli and Miso Robotics are leading the way. Here are some more top companies.
Delivery: Robots and drones are being tested for last-mile delivery, reducing transportation costs and environmental impact. Zipline Drones is a leader in the delivery service business. They can fly orders to people’s homes for goods they buy online. Again maybe Tesla will use their autonomous robotaxi to delivery food via UberEats?
The Implications for Real Estate:
Industrial - Warehousing and fulfillment has already begun to impact demand for warehouse space, especially with large fulfillment centers and smaller last-mile centers located strategically around urban centers. This trend will continue, though the rush towards it over Covid has abated and turned into a longer term trajectory of growth.
Industrial - Robot manufacturing space will become a thing in the near future. Will robots be made in cheaper markets offshore or will their manufacturing be onshore in the United States? If so, this could drive significant demand for space as the demand ratchets up.
Retail - Distribution disrupts the strip center through removing the grocery store and possibly other goods stores, though many of those were going away anyway due to Amazon. Experiential retail continues its rise coupled with restaurants and specialty shops (artisanal wines & cheeses, Italian grocers, etc).
Retail - In restaurants, less employees are needed, so floorpans and Tenant Improvement Allowances change. With more equipment (robots and automated machines), more of the build-out costs would be pushed to the tenant.
Office - Back office customer service jobs answering phones go away, to be replaced by servers in data centers. This could be trouble for places that house large numbers of back-office employees. Demand for office space continues to drop, but does it rise with other requirements we have yet to consider?
Industrial/Utility Infrastructure - Delivery by drone and ground-level robots, coupled with Autonomous Vehicles like Waymo, will change what is needed for roadways, sidewalks, landing/launch pads and urban transportation infrastructure. These demands coupled with the need for more electricity to facilitate the AI necessary and to manage the compute required for real-world sensing robots drives demand for more electricity generation. This has implications for the construction of power plants, alternative energy and nuclear.
For reference, the leading robotics companies right now:
ABB - Key industries served: Manufacturing, Utilities, and Construction; Key technologies: Industrial automation, Motion control, and AI-enhanced robotics.
Vecna Robotics - Key industries served: Warehousing and Logistics; Key technologies: AI-driven navigation, Autonomous mobile robots.
Boston Dynamics - Key industries served: Logistics; Key technologies: Dynamic control systems, Computer vision, and Advanced Sensors.
FANUC - Key industries served: Manufacturing; Key technologies: Computer Numerical Control (CNC) systems, Robotic software automation.
Yaskawa - Key industries served: Manufacturing and Healthcare. Key technologies: Motion control, Servo motors, and Machine vision.
Piaggio Fast Forward - Key industries served: Last-mile delivery and Personal mobility; Key technologies: Path planning, Object recognition, and Autonomous navigation. Check out their Gita Robots for your home. I’m getting one for Christmas! Kind of kidding.
Tesla - At this point you may have heard of them, but they build cars. The company was entirely made possible by efficiencies in the manufacturing process, which integrates the use of robots as a starting point, instead of an add-on. Their Optimus robot is still in the research phase, but it could have major implications for manufacturing and home applications once it is release for sale.
Whether you like the idea of working with or around robots, they are coming. As real estate professionals, we all need to keep the future in mind when planning for new initiatives and future developments. Yes, Robotics is a totally separate industry, but the impacts from it are yet to be fully felt in our real estate industry.
Until next time, keep an eye towards the future.
Cheers, John
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