By: David Friedland, Executive Director and Chicago Industrial Group Leader
Rapid technological advancements are transforming industrial real estate as we know it. Automation is one of the biggest disruptors, reshaping manufacturing employment, factory floors and the way we do business. As one of the nation’s largest industrial markets, Chicago is home to 1.2 billion square feet (bsf) of inventory and quickly incorporating new automation into its many facilities.
Cushman & Wakefield recently released The Future of Chicago Automation, at our annual industrial event that was held at mHUB, the nation’s largest and fastest growing innovation center for physical product development and manufacturing. The event included a panel discussion with Haven Allen, CEO and Co-founder, mHUB, Alex Jankauskas, Vice President Global Supply Chain, Glanbia Performance Nutrition and Mark Gyöngyösi, CEO, OneTrack.AI, as well as a welcome from Cushman & Wakefield’s new Logistics & Industrial Lead, Americas, Tray Anderson and tours of mHUB. Highlights from the discussion and key takeaways from the report are included below.
New Warehouse Technologies
In the warehouse, automation takes on myriad different forms. This rapid change can be attributed in part to increased venture capital funding within the manufacturing industry. The artificial intelligence industry recorded $7.6 billion invested during the first half of 2019. Highlighted below are some of the advancements in automation that owners and operators will utilize within their facilities. In the next few years, the number of industrial robots shipped annually in the U.S. will nearly double, from 28,000 in 2018 to nearly 55,000 in 2021. In 2018, a record number of robots were shipped to U.S. factories and warehouses.
New technologies discussed in The Future of Chicago Automation include:
- Autonomous Storage Retrieval Systems (ASRS)
- Autonomous Mobile Robotics (AMR)
- Digital Twin Technology (DTT)
Automation and the Industrial Workforce
Advances in automation are reshaping the industrial workforce. By 2025, it is projected that 10-15% of jobs in manufacturing, transportation and storage, and wholesale and retail trade will have high potential for automation. By 2035, the range of jobs with high potential for automation jumps to 35-50% as technology continues to evolve. Automation technologies will arguably impact manufacturing more than any other sector, given that almost half (48%) of hours worked involves manual and routine work. And yet, despite a large portion of jobs being at a high risk of becoming obsolete through automation, the outlook may not be as grim as one might think. The Chicago MSA ranks 6th when compared to other top industrial markets for manufacturing job loss between 2001 and 2018.
The top 3 issues that will impact manufacturing employment over the next decade are:
- Upskilling Needed
- No New Labor
- An Aging Workforce
Changing Warehouse Design
Due to increased automation, design specifications have shifted tremendously over the last decade, and industrial tenants are becoming more particular with building requirements. Historically, tenants would lease up any old space, whereas now tenants have requirements for clear heights, parking ratios and increased power. To compete with new state-of-the-art buildings, existing warehouse and manufacturing facilities will need to be redesigned. Over the last 10 years, industrial buildings have transformed to support automation: buildings are larger, offer higher clear heights, and greater power loads.
What Does this Mean for an Industrial Deal?
As the physical design of warehouse and manufacturing facilities continues to change due to increased automation, commercial real estate terms and services will as well to accommodate this new landscape. Most notably this include longer term leases, increased tenant improvement (TI) costs and increased emphasis on site selection in relation to labor.
What’s Next for Chicago Automation?
Automation will continue to drive change within the manufacturing industry. In Chicago, we are beginning to see industrial coworking facilities such as Cubework and new manufacturing innovation centers such as mHUB and MxD. Both the labor and industrial real estate markets are continually being impacted and reconfigured by new and improved technology. From warehouse design to attracting and retaining a skilled labor force, owners and users will need to adopt new best practices when it comes to industrial real estate.
Interested in learning more? Check out Cushman & Wakefield’s Tech Disruptors and the Supply Chain report.
David Friedland serves as Executive Director and Chicago Industrial Group Leader. He currently represents corporate and institutional clients assisting in tenant advisory, site selection, dispositions, sale/leasebacks, and build-to-suits. During his 22-year career, David has completed over 750 transactions with a value in excess of $1 billion.