How does automation impact the logistics sector?

Besides sustainability, technology has changed the first and last mile

November 9, 2022Real Estate
One of the real estate markets that everyone says is growing in Europe is, undoubtedly, logistics. At a GRI Club Meeting on "Logistics and Warehouse Real Estate” a few weeks ago, the investors, managers and operators discussed the future of this field and how technology and automation can impact the sector, the sustainability of the supply chain and the complexity of funding this new wave in logistics.

One of the speakers, Edmond Leahy, Head of Estates at Evri, a delivery company based in the UK, talked about investments in IT and new delivery models, mainly for the last mile.

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“We invested 11 million pounds in an internationalisation strategy”, explained Leahy. His company now operates in 220 countries around the world, with the aim of reducing 20% of energy consumption per parcel by 2030. They work in the first, middle and last mile, with more than 450 solutions for companies and consumers.

A takeaway from his speech is that automation, along with sustainability, is the main thing companies should focus on in the future. With that, they can be prepared and reduce operational costs.

Technology from the landlord’s side

Jan Hempel, Managing Director at Garbe Industrial Real Estate, spoke about how his company works mostly with “the empty shell” that delivery companies will use to install their technologies.

“But obviously, as a developer, we quite welcome our tenants to build in as much technology because it keeps our investment stable due to its tendency to last longer with larger contracts”, explained Hempel.

About new facilities, Hempel said: “And I think it’s a fact to say that the buildings of modern logistics are sort of designed around the technology and not the other way around.”

New facilities, new jobs and profit

Evri has recently opened a new facility for the first mile, with the capacity to process 1.3 million parcels per day. The highly automated facility is expected to expand to 2 million parcels per day by 2025 in phase two.

Although hiring has been a problem for a lot of UK companies, Leahy affirms that they did not have a problem with that. About the 1400 new jobs created with this newly opened UK facility, he said, “We managed to fill the open positions easily and with very qualified people”.

The building has 34,000 m², a 20-year lease with a construction company, and an investment of 60 million pounds.

“With the parcel rates, we should have a profit. But this building also gives us additional capacity to be able to market ourselves to other customers as well, with big contracts”, said Leahy.

The last mile challenges in urban centres

Thiago Cordeiro, Co-Founder & CEO of GoodStorage, explained that in 2013, after 3 years of focusing on B2C, they turned to B2B.

“We realised there was a gap between what you offer in general warehouse solutions in the neighbourhood and the bulk where the boat warehouse is, something like 30 miles away from the city centre, more like the big warehouses as we know them”, explained Cordeiro. “So we started to look at this lack of urban infrastructure and basically discovered that it was a zoning problem.”

According to him, some areas were designed for residential purposes, so the prices were too high for developing a warehouse downtown. “There was a general consensus that companies would not pay the rent price for these units around the city”, said Cordeiro.

GoodStorage understood that it was necessary to be near the city centres, not only because of e-commerce pressure but also for other services. And the pandemic has put a spotlight on this last-mile matter.

“Brazil is still behind Europe at this point, and ESG matters for buildings”, said Cordeiro. “And automation per se is going to be the next step. I see the automation happening faster around the cities, not closer in downtown, but it will naturally be the next step.”

These points were addressed by real estate leaders at the Club Meeting. To be part of those discussions and be side-by-side with the most prominent names in the global real estate market, see our next events and be part of GRI Club.

Written by Gabriela Colicigno