RFIDs Chipping Away at Warehouse Demand
Once again, retail behemoth Wal-Mart is changing the way companies do business and impacting logistics and the future of industrial properties.
Beginning January 1, 2005, Wal-Mart will require its top 100 suppliers to use miniaturized tracking chips on pallets moving through its warehouses. The chips, called Radio Frequency Identification (RFIDs), use radio frequency signals to improve tracking and inventory management. They will enable Wal-Mart to track the content of and movements of shipments, in real time and with a degree of precision not previously possible.
For Wal-Mart, both the investment and the savings will be substantial. CNET News reported that the retailer plans to spend $3 billion over the next several years on RFID. But the pay-off for Wal-Mart is estimated to be a savings of nearly $8.4 billion annually, once the project is complete.
Josh Scovill, research strategist with Property & Portfolio Research (PPR), sees RFID as forcing dramatic changes for warehouse investors and developers. In a recent report entitled, "RFID Could Streamline the Supply Chain and Warehouse Demand," PPR sees RFID's impact as causing "major concerns, given the new technology's potential to depress demand growth for warehouse space in the future." Although PPR calls them "far-fetched expectations," they do cite a report by Credit Suisse/First Boston that RFID technology will allow Procter & Gamble to cut their inventories by up to 50 percent.
However, PPR believes it is more likely that RFID will result in a projected five to 10 percent increase in warehouse vacancy rates. Scovill says that the biggest impact of RFID implementation will be to consolidate the location of distribution hubs and increase the size of industrial properties.
"There will be larger warehouses, in fewer locations across the country - Chicago, Atlanta, Dallas, Los Angeles and Northern New Jersey" - in short, the super-regional markets that already have the greatest demand today will be impacted less negatively than smaller local markets, such as New Orleans, San Francisco and Stamford.
However, some semi-regional and tertiary markets could actually benefit. The report projects that "As a result of having greater visibility and control over how much product is needed and where it is, companies will be able to lower their transportation costs by having more warehouses closer to consumers. This could boost semi-regional and tertiary markets, particularly those with strong population growth, such as Denver, Fort Lauderdale, Las Vegas, Portland and Sacramento."
RFID will also impact the design of warehouse and distribution facilities. As the PPR report noted, "One key benefit of RFID tags will be more efficient use of space, as a radio signal will be able to instantly read RFID tags on boxes or pallets within the warehouse and relay the contents and location of each pallet without a person having to see and read a face label."
Here is how PPR believes that will play out, with regard to changes in building design:
- Users will be able to rack inventory higher and deeper within the warehouse and eliminate some aisle space.
- The share of space needed for a staging area may also decline.
- By doing more with less space, overall demand for space will decrease.
- Clear heights may be pushed beyond 32-foot clear.
- Higher velocity of goods (more frequent and smaller shipments) may lead to increasing requirements for cross-dock configuration.
- This will require more land, to accommodate a second truck court, more doors, more docks and more efficient movement.
- Single-loaded buildings may face functional obsolescence.
- Technological infrastructure will rise in importance, with RFID tracking equipment up and running 24/7.
Reflecting on the need to retrofit existing building technology to accommodate RFID,Fred Dougherty, vice president, Portfolio Technology, for Liberty Property Trust thinks "The wireless nature of the RFID technology allows for an easy and low cost installation for our customers." He believes that the bulk of the technology investment will fall largely on the part of Wal-Mart and their suppliers.
However, building owners should also be prepared to make some changes. "The key for building owners will be to design the optimal pathway for the wireless backbone infrastructure," Dougherty explained. "Identifying the best location to lay out the wireless backbone of the system will potentially make these buildings stand out when compared to others that have ignored the customer's implementation of this technology. An RFID system could operate in just about any property, so the retrofit cost would be minimal to owners. By their nature wireless networks are easy to deploy."
For more information
Property & Portfolio Research, Real Estate/Portfolio Strategist, "RFID Could Streamline the Supply Chain and Warehouse Demand," vol. 7, #8, November 2003.
NAIOP members get a 50% discount on the PPR White Paper entitled, "RFID Could Streamline the Supply ChainAnd Warehouse Demand," when purchased before April, 2004. Must use promotion code: NAIOP
http://www.ppr.info/bookstore/servlet/ppr.bookstore.Bookstore?toPage =/reps/reps.jsp
From Derelict to Dynamic
That's the objective of the National Vacant Properties Campaign, a project of Smart Growth America, the Local Initiatives Support Corporation (LISC) and the International City/County Management Association (ICMA). As the country faces an ever-growing problem of abandoned and/or derelict properties in its cities, with the accompanying issues of crime, property value decrease and a slide in tax revenues, some of these cities are gearing up for action. The National Vacant Properties Campaign was formulated to help.
Introduced in 2003, the Campaign's goals are fourfold:
- Develop a national group of experts in reclamation
- Act as a resource clearinghouse for information on policy and practice
- Bring the issue of reclamation to the forefront
- Make sure communities have access to expert assistance
Reclamation of abandoned properties has been successful in cities such as Atlanta, GA, San Diego, CA and Richmond, VA. These cities have implemented such strategies as code enforcement, legislative initiatives that address property disposition and, in Richmond, the development of the Neighborhoods in Bloom program that brings together local government and residents for positive action. Case studies for these and other reclamation projects are available through the National Vacant Properties Campaign Web site.
For more information
National Vacant Properties Campaign www.vacantproperties.org
Real Estate Briefing: Urban Redevelopment. Articles and case studies profiling various urban redevelopment projects and issues. To order, go to http://store.naiop.org or call NAIOP's Publications Department at (800) 666-6780. |
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NAIOP Has a New National Forum
focusing on Urban Redevelopment.
NAIOP National Forums are special interest groups for NAIOP members that provide them with an opportunity for exclusive networking and experience exchange with their peers. For more information on Forums membership, go to www.naiop.org/nationalforums/index.cfm.
What Goes Down Must Come Up
Form follows function - or, in the case of the U.S. industrial market, the U.S. economy sets the tone, according to a new report from ProLogis. The report, "U.S. Property Market Review," targets the warehouse/distribution sector in depth, with profiles of 30 U.S. markets and, in its debut, offers cautious optimism for both the economy and the future of industrial property.
The ProLogis report is distinguished by its focus on warehouse and distribution facilities, which are usually classified under the broader "industrial" umbrella. Among the highlights of the report are forecasts for declining vacancies, increased deliveries and moderate demand for warehouse/distribution facilities. Charts offer market-by-market comparisons of vacancy rates, asking rents, deliveries and projected recovery.
The current report highlights market data from midyear 2003, and ProLogis plans to update the report with year-end data. The report will then continue publication twice a year.
For more information
U.S. Property Market Review
http://ir.prologis.com/downloads/
marketreview1203.pdf |
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Think It's An Escalator? Look Again
With more big-box retailers opting to build up instead of out, a new challenge presents itself to developers: how to transport shopping carts between floors quickly and efficiently. One company has risen to the challenge with the Cartveyor, a shopping cart conveyor that is gaining ground in retail.
Working on the same principle as an escalator, the Cartveyor consists of two tracks, ascending and descending, that run between conventional escalator stairs. The shopper pushes a cart through the entry gates, where it is locked in place and follows a smooth path to the upper floor while the shopper rides the escalator next to the cart.
Numerous safety devices have been incorporated into the Cartveyor system. These features include one-way gate hinges and photoelectric sensors at the entry and exit gates that detect the presence of passengers or overloaded carts. According to David Dux, vice president of sales for Pflow Industries, which manufactures the Cartveyor, most escalators run at a speed of about 90 feet per minute; the Cartveyor, which can be easily adjusted on site, usually runs at about 65 feet per minute. This allows shoppers time to board the escalator and retrieve their shopping cart at the next level without having to hurry.
The first Cartveyor was installed in 2001 at The Great Indoors store in Novi, Michigan. Dux estimates that there are currently 30 Cartveyors in use nationwide, in stores such as Target, Wal-Mart, Sam's Club, Safeway and The Great Indoors. Pflow Industries, a privately held company with annual sales of $12 million, also manufactures standard and specialty lifts and conveyors for distribution facilities.
For more information
Cartveyor
www.cartveyor.com
Nanotechnology: Everything Small is Big
Nanotechnology. A long word to describe a concept that's based on what may be the smallest facet of R&D today. Applications for nanoscience range from the medical field to manufacturing to consumer products, but this area of R&D is just beginning to blossom.
R. Malcolm Richards, Ph.D., director of the Real Estate Center at Texas A & M University and a NAIOP Distinguished Fellow, theorized that the nanotechnology industry may be the "quantum leap" that North America has been looking for to put it ahead in the tech world. It's no secret that a large percentage of tech jobs are being outsourced to countries overseas, where labor costs are lower. While Asia and the European Union are also involved in the industry, nanotechnology could be a primary force for keeping a larger number of tech-related jobs from leaving North America.
Nanoscience R&D facilities are being developed in regions such as Upstate New York, Illinois, Pennsylvania and Texas. Often partnered with university research programs, the facilities are funded by both public and private interests. Estimates of the amount of manufacturing space that will be needed aren't known, but the burgeoning nanotechnology industry will definitely impact the industrial sector.
Careful site planning is important, however; Richards cautioned that the industry boom may face the same issues that some wannabe-biotech hubs have, in that a region markets itself as a leader in the field without fully understanding the effort and expense involved in attracting the experts who can do the work in question.
For more information
National Nanotechnology Initiative
www.nano.gov
First Look:
By Sheila K. Vertino, NAIOP's vice president for information and research, and Anne Simpson Prior, NAIOP's manager of information services.
