- Eduardo J. Quant
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How Technology is Shaping the Industrial Sector
According to recent studies, the logistics and industrial sectors are set to continue their growth in 2017, as consumer demand for online purchasing grows. Excluding automobile sales, eCommerce has grown from 1% in the first quarter of 2000 to 9.3% in the third quarter of 2016. We expect that share to increase by another 1% by the end of 2018. The current rate of $100 billion eCommerce sales per month will increase by roughly 25% to nearly $125 billion per month in the fourth quarter of 2018.
As a result, the national industrial vacancy rate—at 5.8% in the third quarter of 2016—will continue to decline through the second quarter of 2017. This evolving technology is changing the way people shop, as traditional stores continue to lose business to online shopping. If these growth projections remain true, several elements of the logistics landscape could begin to change this year.
Th result of all this? Two-day shipping – the standard for services like Amazon Prime — is no longer satisfactory. Instead, they’re demanding same-day delivery, meaning that developers are being called increasingly to build smaller, urban-based properties with ample available access for delivery vans, Dubbed “last-mile deliveries” these are buildings of about 50,000 to 60,000 square feet with available docking areas, van access, parking garages and high ceilings. Consider that Amazon with its Prime services, signed half of the 10 largest new leases in Chicago in 2016 (about 4 million square feet).
Another element is that shops and retail outlets could relocate their stores to more affordable, but less accessible locations. Prime downtown spaces may become less valuable, as people are less and less likely to purchase in-stores instead of online. In addition, consumers are already becoming more likely to purchase products from retailers abroad if the price is cheap enough. This could mean an additional relocation of warehouses to be nearer international borders in order to keep shipping prices under control.
New technology is shaping the industrial sector in other ways as well. With warehouses becoming larger and taller in order to accommodate more product, we’ve long seen the use of robots to speed up the rate of shipments. Drones are already being used as delivery methods, and usage would increase as distribution centers move out of easily accessible locations. What’s next? Self-driving cars would no doubt impart drastic changes on delivery methods, as the competition is increasing for the fastest delivery times.
These changes would not happen uniformly across the globe, but would be defined by the existing commercial landscape. Countries like the U.S., China, and Germany already possess a thriving online commercial base, and so would likely be the countries most affected by these shifts. Areas where manual labor is cheaper, such as Mexico and parts of Eastern Europe, could benefit greatly during the transition as the supply of in-person retailers dwindle.
There is no doubt about it; technology has already had a demonstrable effect on the logistics and industrial sectors. 2016 was the strongest year yet, and studies predict that this growth will only increase in 2017 as new technology continues to make its mark.