Autonomous Trucking's Effect on Industrial Real Estate
By: Jon Pharris, CapRock Partners
The next game-changer will speed delivery times and improve use of warehouse space.
INNOVATIONS IN autonomous trucking are generating headlines, with technological advancements creating new and innovative ways to deliver goods to consumers. While industry observers believe that fully autonomous vehicles are at least a decade away, it is important to begin to think about the potential effects.
Tesla’s Class 8 fully electric, semi-autonomous truck is expected to haul up to 80,000 pounds for 500 miles, and Nikola’s hydrogen-electric technology will be able to travel between 500 and 1,200 miles before refueling. It doesn’t stop there, as Waymo, Starsky Robotics, Daimler and others also have similar products in development, leaving many asking: how are these advancements going to affect industrial real estate?
Fulfilling Customer Expectations. Consumers now expect next-day or even next-hour delivery, and e-commerce is revolutionizing the supply chain. Infill warehouse spaces are moving closer to urban consumers, and the transformation in last-mile logistics is helping to optimize the supply chain to improve delivery times. Autonomous trucking may be the next game-changer, and it could dramatically enhance delivery times to better meet consumer expectations. Without having to account for a maximum number of hours that a driver can work during a 24-hour period, autonomous trucks will get goods in consumers’ hands much more quickly.
Improved Use of Space. The evolution of the trucking industry to meet consumer needs will significantly improve the use of building, parking and circulation space at industrial facilities and will change how warehouses are being designed, redeveloped and valued. The absence of a driver, for example, will most likely reduce cab space. This seemingly minor adjustment allows warehouses to decrease dock door and loading dock sizes, resulting in more usable space in the facility. This change also may reduce the turning radius needed for commercial trucks, which could translate to smaller parking and circulation areas, potentially resulting in more square footage available for lease in industrial parks. Additionally, a host of slightly smaller land parcels could suddenly become viable for accommodating industrial facilities.
Safer, Faster Deliveries. Autonomous trucks could alter the efficiency and safety of commercial vehicles. When autonomous systems are fully functional and reliable, human fatigue and error will decline as trucks react quickly and effectively to avoid accidents. Such an advancement improves safety for everyone on the road and reduces significant delays, damages and costs caused by collisions. With the American Trucking Association’s chief economist reporting a shortage of 51,000 truck drivers at the end of 2017, autonomous trucking also plays a role in solving the industry’s labor scarcity. Additionally, autonomous driving could extend the number of hours that truck drivers can work and operate vehicles, mitigating forced stops throughout the day.
Coupling Autonomous with Electronic. As autonomous features for vehicles have advanced, so too has the electric motor. The convergence of these two technologies implies that fully autonomous vehicles will likely feature electric motors instead of internal combustion engines. This coupling provides even more potential benefits. Whereas shipping by train has historically been the go-to choice for heavier loads, electric trucks with increased capacities of more than 80,000 pounds may give rail transportation a run for its money. Transportation fees typically account for about 30 to 40 percent of a good’s cost, so lower freight costs will provide significant savings for the consumer.
Reduced Effects on Communities and the Environment. Technological innovations in autonomous electrification will significantly reduce carbon emissions and other negative environmental consequences that are typically associated with commercial vehicles. According to the Union of Concerned Scientists, experiments comparing electric to gasoline-powered autonomous vehicles showed that electric vehicles reduce global warming emissions by 20 to 80 percent, depending on a variety of factors and conditions. As electric and hydrogen-electric semitrailer trucks come to market, the environment and people in surrounding communities may benefit.
With the use of the electric motor also comes reduced noise. When noise is less of a concern, regulators are more likely to grant permits for new development and potentially loosen regulations relating to hours in which trucks can operate in urban environments.
Increased Returns. Shifts from rail to trucking, longer hours for drivers and quieter engines for nighttime deliveries are likely to drive substantial revenues for the carriers, truckers, shippers and e-commerce companies that are working to improve delivery times. Additionally, the pre-development, environmental review, entitlement and delivery processes are also likely to be streamlined because of diminished environmental and noise concerns. Such changes could expedite new development and construction and result in improved return on investment for industrial developers and investors.
These innovations present an enormous opportunity for an already thriving industry, but it’s important that industrial stakeholders prepare now for the industrial space of the future. The answers are not all there yet, but those who aren’t agile in adapting to the rapidly evolving sector will fall behind and be overtaken by more forward-thinking competitors.
By Jon Pharris, president, CapRock Partners, firstname.lastname@example.org