Automation in the Warehouse Sector Leads to Changing Real Estate Needs

How automation technology in warehouses is affecting their real estate demands.

As the e-commerce industry continues to expand at unprecedented rates, warehouse tenants are looking for ways to keep up with the growing demand despite a considerable labor shortage. The popular solution to these issues is introducing automation technology in warehouses and fulfillment centers across the country.

  • The Role of Automation in the Warehouse Industry

With Amazon leading the way in this new automation trend, many other online retailers will soon follow suit. According to Amazon executive, Dave Clark, the use of automation technology has reduced operating costs by about 20%, which totals out to about $22 million in savings per fulfillment center.

With demand from the e-commerce industry increasing rapidly, there has been a matching increase in labor costs as companies compete for a limited number of workers. In some locations, labor accounts for up to 75% of warehouse operating costs. To overcome the shortage of labor and the subsequent high-costs of maintaining warehouse workers, many companies are pursuing strategies that include the introduction of automation technology.

  • How Labor Shortages and Automation Affects Real Estate Needs

As more and more companies look to implement automation technology, the money they save can now be used to acquire more space. With less money going toward labor, e-commerce companies will now be able to enter locations that they were not able to before due to higher rent costs. This demonstrates that the emerging role of technology will not decrease the demand for industrial space.

This being said, warehouse tenants will probably have different demands when it comes to new spaces. For instance, they may look for locations that have the proper infrastructure to support the installation and use of automation technology. Additionally, experts indicate that warehouse occupants will start making decisions based on labor availability near a site. There is a fear that a facility will fail due to insufficient labor supply.

This is how the use of automation technology in warehouses is leading to changes in their real estate needs. Interested in learning more about commercial real estate trends or looking for assistance with your own industrial or real estate needs? If so, contact the experts at California Commercial Realty Advisors, Inc. We are ready to offer you our expertise today.

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