Prologis research paper examines impact of various technologies on logistics real estate efficiency

A new research paper released this week by San Francisco-based real estate investment trust company Prologis examines the impact of various technologies on logistics real estate.

The research paper, entitled “Future Proofing the Global Supply Chain:  How AI, Automation and Other Technologies Are Impacting Efficiency,” noted that logistics real estate investments outpaced revenue growth by 57% over the past decade despite advancements in automation and data analytics, which it labeled “the supply chain productivity paradox.”

Chris Caton, Managing Director, Global Strategy and Analytics at Prologis, explained that the fundamental shift in supply chain strategies is quite durable and is predicted to drive the expansion of logistics real estate faster than revenue growth.

“This is particularly emphasized by three prevailing trends: transforming the supply chain landscape: convenience, resilience, and choice,” he said. “Considering these three trends, we anticipate the logistics real estate footprint will continue to outpace revenue growth in the coming decade.”

The report added that the driver for the supply chain productivity paradox is attributable to larger, decentralized logistics real estate networks unlocking revenues and saving on costs in ways which were not previously possible or well-understood.

When taking a detailed look at the 57% increase in logistics real estate used per unit of revenue over the last ten years, Prologis said that logistics real estate footprints have grown more over the last decade—2.5 billion square-feet) than the previous two decades—2.1 billion square-feet, with current supply chains amounting to 1.2 billion square-feet while supporting $1.4 trillion in retail sales.

“The logistics real estate required to support $1B in retail sales increased from 500,000 square-feet 10 years ago to 800,000 square-feet today, a 57% increase,” said Prologis.

Other key findings cited by Prologis included five drivers increasing logistics real estate use and fueling the supply chain paradox, including: e-commerce (Prologis was the first to recognize that e-commerce requires three times more logistics space than brick-and-mortar sales, due to piece picking, product variety, direct-to-consumer shipping, and the need to process returns); omnichannel operations; product variety; transportation cost management; and regulatory compliance.

On the technology side, Prologis took a look at five technologies shaping supply chain operations, including: AI and big data; basic IT and data analytics; legacy automation; autonomous mobile robots, which Prologis said are likely to be in half of logistics facilities over time); and automated sortation/retrieval (AS/RS).

When asked what he views as the biggest changes in logistics real estate-related operations and technologies over the last three-to-five years and what does the outlook over the coming three-to-five years look like, Prologis’s Caton said that the most significant transformation in logistics real estate operations and technologies over the past three-to-five years is the importance of their role as major revenue drivers.

“Increasingly, logistics operations are prioritized by customer C-suites, resulting in investments in operational upgrades and quality facilities, as we’ve seen with the rents they are paying,” he said. “The sector is seeing an increase in the adoption of advanced technologies and automation as customers strive to maximize value and efficiency. We're just in the early innings of integrating technologies like autonomous robots, AI-powered systems, and more into these facilities. The next three-to-five years is likely to see a continuation and arguably an acceleration of these trends. As operations become more complex and the need for efficiency more critical, investments in technology and automation are poised to rise further.”