Commercial Real Estate News / Technology / How the Landscape of Warehouse Investing Is Shifting Due to Robots and AI

How the Landscape of Warehouse Investing Is Shifting Due to Robots and AI

Published: 07-29-21 Category: Technology

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Robotic arms working inside of a warehouse.

This article was updated on 7/11/2023.

If investors were to go around and compile a list of the most profitable types of commercial real estate properties, warehouse real estate would be near the top of that list.

In this era of technological advancements that are reshaping the world, the storage and warehouse industry has not been left untouched.

Let's look at the how and why.

Why Does It Make Sense to Invest in Warehouses?

One of the characteristics that attract investors to warehouse real estate is its ability to appreciate due to both internal and external factors.

Internal factors are influenced by acting management's decisions that result in greater warehouse efficiency and productivity. External factors have to do with the market supply and demand dynamics for warehouses. Markets and enterprises expand while warehouse space becomes increasingly scarce, often resulting in a rise in the value of warehouses over the long term.

Furthermore, the COVID-19 epidemic forced some retail establishments to undergo a business paradigm shift, converting their brick-and-mortar business model to online sales. The transition to e-commerce platforms will almost certainly increase warehouse real estate demand, and, along with aiding in the survival of their business, it would improve financial results by saving the amount of money associated with carrying out physical sales.

Improved inventory management, cheaper sales costs, a long-term source of passive income, and the adaptable nature of warehouse real estate are some other elements that make warehouses more appealing as an investment.

Robots and Artificial Intelligence Knocking on the Door of Warehouses

According to roboticsbusinessreview.com, based on strong macro and industry growth factors like e-commerce fulfillment and rising warehousing labor costs, the worldwide warehouse automation market is expected to increase more than 2x from 2019 to 2025.

Money pours into companies that constantly improve their capacity to contribute to economic development by bridging the supply-demand gap, and the storage industry is likely to gain significant funding as a result of the expanding e-commerce trend.

The logic is bolstered by the introduction of technology, such as robotics and artificial intelligence, to the industry.

Rather than relying on the traditional way of using manual labor, organizations ranging from giant multinationals, like Amazon, to manufacturing startups in small locations across the globe are installing hi-tech tools in their storage facilities.

Amazon Robotics uses more than 80,000 autonomous mobile robots to automate the company's fulfillment centers, up from 30,000 at the end of 2015.

AI and machine learning, better sensors and response capability, and warehouse management software are the three main points that enable robots to function autonomously in warehouses.

The following are a few of the significant difficulties that advanced technologies are expected to solve in the warehouse real estate industry:

The majority of picking methods are still manual.
High labor costs and labor shortages
Excess product damage
Delivery efficiencies fall short

Here's a rundown of how robotics and artificial intelligence are causing investors to give heed to warehouse real estate:

#1 – People Put to Greater Use

The cost-effective collaborative robots are getting together with the labor forces of warehouse real estate to perform direct, simple, and repetitive tasks, freeing people to focus on far more complicated jobs, such as creating, programming, monitoring, and developing, adding more value to the business.

#2 – Lower Overhead Expenses and Increased Warehouse Safety

Robots can run continuously and only halt for maintenance, providing flexibility. Unlike humans, robots are not prone to bad weather and operational inefficiencies, which helps businesses save handsomely in areas of employee compensation, like paid sick leaves.

Heavy loads can be handled by equipment in the warehouse. This benefit lowers the likelihood of significant accidents that could jeopardize the worker's health and safety.

#3 – Reduce Errors and Waste

Technology is programmed to work on defined algorithms that lower the likelihood of errors in routine operations crucial to the efficiency of warehouse real estate.

AI robots can cognitively comprehend their surroundings and, hence, properly place and retrieve goods as needed. Internet of Things (IoT), computer vision, and AI are examples of technology that can be used in warehouse real estate to reduce operational errors.

In the case of perishable goods, the process of communicating data detailing when products will expire and need to be sold or disposed of using machines that have been programmed with artificial intelligence becomes effortless.

#4 – Improve Productivity and Higher Customer Satisfaction

Apart from safety and better handling capabilities, AI and robots also add in terms of scale, accuracy, and speed.

Pick-and-pack processes can be streamlined with the use of artificial intelligence. AI solutions may operate 24 hours a day, seven days a week. To ensure accurate and precise inventory control, AI robots can be used to scan digital tags. AI robots can figure out the quickest routes to arrange objects and even avoid colliding with one another. They can also assist in reducing the time and distance required to place items in warehouse inventory.

All these elements will ultimately lead to businesses becoming more efficient and successful by allowing them to produce more output with fewer inputs.

#5 – Upgraded Customer Support

Features like support chat have become a part of the value-added services that businesses ought to provide to their clients. This is an efficient approach to let customers ask fast and easy queries without jamming up the phone lines or making them wait on extended hold times.

However, deploying the human assistance option is also necessary, along with using automated customer service on the phone lines to screen out routine questions.

Most businesses now have warehouse real estate management as a vital element of their operations. A transition phase, which has become essential to remaining competitive in today's environment, has begun to emerge: The majority of warehouse real estate operations and administration are being carried out using heavy machinery systems replacing the traditional methods.

However, these modern solutions have also raised questions concerning significant capital investment, considerable maintenance costs, and employment opportunities for low-skilled laborers.