Trucking Innovation in Industrial Real Estate: A Catalyst for Growth?
by Jon Pharris | October 22, 2018
Rapid innovations in commercial trucking are generating headlines, with industry advances creating new methods for commercial operators to enhance their shipping and carrier services.
For example, Tesla’s fully electric semi-autonomous Class 8 truck, equipped with advanced safety features, boasts the ability to haul up to 80,000 pounds for up to 500 miles, and Nikola Motor Co.’s hydrogen-electric semi can travel 500 to 1,200 miles before needing to be refueled. Waymo and Starsky Robotics have similar products in development. The question remains: when these innovations hit the market, how will they impact industrial real estate?
With national absorption records reaching an all-time high, innovations in freight delivery are not lost on industrial investors and developers. Early proponents of self-driving trucks are touting how these innovations will move the industry forward, resulting in optimized operational efficiencies, increased revenue, reduced emissions and lower overhead costs. While safety will be paramount, industrial developers and owners who stand to be affected by new these technologies remain optimistic about the positive impact they will make on the logistics market.
Transportation trade technology is evolving quickly. Urban and suburban lifestyles have shifted. The rise of retail technology and e-commerce has intensified consumer appetite for on-demand goods and services. Markets are becoming denser, cities more walkable and, as a result, delivery methods have adapted to get boxes into a buyer’s hands within one to two hours.
To fulfill new customer expectations, manufacturing, storage and delivery logistics have transformed their processes to do more with less. Consider the relationship dynamics between new commercial trucking and the industrial buildings where regional shipments originate. Automation is certainly not new to industrial tenants. For years they have used robot technology to enhance supply-chain productivity. In the last few years, building designs and tenant floor plans have embraced drive-through configurations to load and send off trucks faster.
That said, with the latest trend in on-demand self-driving and electric trucks, there are specific ways that new truck capacity will impact the way buildings are being designed, redeveloped and valued. Additionally, the manufacturing features of advanced truck models will positively impact environmental considerations. And with that come policy improvements on how industrial buildings and truckers operate.
A technological transformation in transportation and manufacturing is taking shape to disrupt industrial real estate in advantageous ways. One notable trend is a potential cab size reduction in self-driving trucks that might no longer need the space for a manual driver. This simple change not only decreases the amount of building entrance and loading space needed in industrial park driving areas, but also impacts the turning radii necessary for commercial trucks on streets. The development could free up square footage, translating into more rent.
Electric trucks potentially could transform the way in which commercial vehicles interact on the road. Vehicles that can increase and decrease speeds effectively could bring faster delivery times and added safety, as a result of a truck’s ability to react and quickly avoid major accidents and highway pile-ups. Whereas rail companies have historically been the best option for heavier loads, enhanced hauling maximums of up to 80,000 pounds could put road freight head-to-head with rail transport, reducing the cost of transportation by 30 to 40 percent. And the lower the freight cost, the better it is for consumers and the economy.
Reduce Environmental Impact
Future transformation in the industry will not only benefit carriers, truckers and shippers, but also positively impact the environment and communities at large.
Mitigation of carbon dioxide emissions and noise bring significant benefits. From an environmental perspective, reducing or even preventing harmful effects on humans, animals and the earth is a major win. By eliminating engine noise, operators could obtain more favorable permitting and expand the hours during which trucks are allowed to operate. Such an increase will drive revenues for industrial real estate as a whole. In the end, with a streamlined pre-development, environmental review and delivery process, the time to market for redevelopment and new construction will be reduced, resulting in an expedited return on investment.
All considered, industrial industry stakeholders are staying abreast of the evolving transportation landscape. For commercial real estate holders of industrial properties, those at the forefront of enhancing design and operations for the new era of transportation will benefit the most, as these innovations take shape and disrupt the market.
Jon Pharris is co-founder and president of CapRock Partners, a private industrial commercial real estate firm.
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