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The Next Industrial Revolution

In the post-recession economy, businesses are laser focused on using technology and innovation to do more with less. This mandate for greater efficiencies can be seen in the industrial real estate market as well, where developers are using leading-edge technology as they design and build warehouse and manufacturing space to reduce construction costs, maximize space, streamline operations and take energy efficiency to the next level. These aren’t your grandparent’s dark, dusty warehouses. The industrial buildings of the 21st Century are wonders of engineering, filled with natural light, high-tech inventory systems and eco-friendly energy procedures.

THE BUILDING BLOCKS

It all starts from the ground up, with the use of high-performance building materials, built-in energy efficiencies and lots of natural light.

The changes are dramatic, says Jarrod Hunt, senior vice president of industrial services for CBC Advisors. “The new technology in lighting, heating and base building materials has changed construction, making buildings much more efficient—giving the finished building a longer physical lifespan, utilitarian function and reduction in operational costs for the tenants in the long term.”

One notable change is the trend toward use of more natural light. Tenants want to create comfortable work environments for their people and they increasingly want to be more ecofriendly. So developers are incorporating higher ceilings, more windows, lighter interior colors and natural light into their buildings.

“Those concepts were not seriously considered 10 to 20 years ago,” says Hunt. “I have sold buildings where you walk in and wouldn’t know the lights are off because of the amount of natural light. With enough prismatic skylights, it appears all of the lights are on in the building during normal business hours, when in actuality the lights may be off.”

Developers are starting to incorporate more solar power and other renewable energy sources. Many tenants like the idea of generating more power onsite, so developers will keep adding solar to buildings as the demand grows. A popular trend utilizes the adjacent vacant land to connect buildings with commercial grade wind turbines, virtually placing the property off-grid.

Thanks to advances in construction materials and techniques, many new industrial buildings feature high-performance floors made from concrete with high-tech additives, fiberglass mesh and special hardeners. This creates a durable, smooth floor that will outperform the concrete floors typical of 20th century. Building insulation has also been improved, says Hunt. “The trend to use high-density foam insulation provides much greater performance than the old fiberglass batting of yesteryear—with the added benefit of improved aesthetics, clean-ability, and light reflection from the white vinyl backing.”

The same is true for roofing materials that are designed to reflect the heat, rather than the old black tar roofs that tend to collect heat and drive it into the building. New thermoset membrane and thermoplastic sheet materials wear superior to comparable metal or tar style roofing systems when faced against climate, application and environmental conditions.

Hunt says developers are also incorporating low-speed, high-volume fans in the ceilings of their buildings to keep air moving, which makes the buildings more comfortable and the temperature more consistent throughout the day.

“That’s a big trend,” he says. “Almost all of the new warehouses and industrial buildings have these low-speed, high volume fans that are 10 to 12 feet across. Tenants love them. They are very efficient to operate, have a long lifespan and provide great payback to the building occupants that put them in.”

Developers are also more widely adopting radiant heat in the floors and ceilings of their buildings, rather than the traditional gas-fired unit heaters that blow warm air throughout the entire building envelope. These radiant heaters better isolate the areas that need a higher human heat range in a building, so they don’t waste energy heating an entire building when workers may only occupy about 15 to 20 percent of the space.

INTERNAL DYNAMICS

Beyond the physical building, new technology is changing the way managers store, track, handle and move inventory—and these changes also impact the development of next-generation industrial space. For example, products shipped from overseas normally arrive in 20-foot or 40-foot containers, creating a demand for dock-high doors, even from smaller customers.

“With dock-high doors, the tenant can leave a container docked up to a door for an extended period of time, which gives them greater flexibility and makes material handling and truck scheduling more efficient,” Hunt explains.

With the ability to run a forklift or a pallet jack into the back of the container, companies aren’t forced to unpack by hand and re-palletize the materials or product in the warehouse. It also becomes a worker safety issue. Anytime repetitive motion or awkward lifting motions can be reduced or eliminated, worker injury claims and lost work times dramatically drop. Dock- high doors also greatly reduce the labor costs often hidden in warehouse operations.

In many cases, these reduced costs can easily offset the perceived expenditures of a new modern space that accommodates efficient operational models.

New technologies are also helping companies maximize the use of their space. For example, Roderick Enterprises, one industrial developer in Utah’s North Pointe Business Park, reconfigured the column spacing in their latest building to accommodate a narrow rack layout. By moving the column spacing from a typical 50-foot column grid to a 56-foot column grid, the developer lined up the rack space better, which will allow the tenant to utilize the space more efficiently.

“If a tenant were to adopt the racking layout that the 28-foot-tall building was designed for, the tenant could actually put approximately 25-40 percent more product per square foot into the building. Thinking in terms of cost-per-pallet position is more important than always being focused on cost per square foot when comparing warehouse buildings. The difference can be dramatic, which is all dollars at the bottom line.” Hunt says.

This trend toward narrow and very narrow aisle configurations wouldn’t be nearly so popular without technological developments in lift trucks and order picker vehicles, which can operate in aisles as narrow as five and a half feet—or less for the order picker vehicles.

Improvements in inventory tracking technology have also led to a demand for greater internet connectivity from the warehouse floor. Workers rely on fiber optic or broadband internet connectivity inside and outside the building to communicate with the main office or track product throughout the building via radio-frequency identification (RFID) tags and readers. Logistics managers can accurately track and verify product quantity and location real time, and RF temperature sensors can remotely alert the quality assurance team if a product is close to falling outside the preset parameters.

“We’re seeing a trend by developers to put a lot more technology into their buildings,” says Hunt. “Tenants want to know exactly where their products are at all times, and want them to be traceable. The tenants are forced to work with a higher level of inventory management control as a result of increased product volumes and greater competition in the world today.”

In the past, a developer may not have cared much about bringing broadband into a building because no one was asking for it. “Now everyone is asking for it and developers are spending extra money to pull fiber into their buildings to accommodate the demand,” Hunt says.

A STRONG FOUNDATION

Still, adopting technology trends is a gradual process, and most industrial buildings haven’t adopted every new technology. Hunt says developers still have to balance the addition of new technology with the financial returns the market will give them. While some tenants are willing to pay extra for technology, if it only offers marginal value, other tenants don’t want it.

“For developers, it is a balancing act that takes some education on the part of prospective tenants to understand the cost versus benefit equation,” he says. “It’s a process that continually changes as innovation creates possibilities that were never possible before.”

Guest post contributed by CBC Advisors. CBC Advisors has been the top performing Coldwell Banker Commercial office globally for the past 12 consecutive years. To inquire about industrial properties or to learn more about CBC Advisors visit www.cbcadvisors.com.