John H. Boyd (jhb@theboydcompany.com) is founder and principal of The Boyd Co. Inc. Founded in 1975 in Princeton, New Jersey, and now based in Boca Raton, Florida, the firm provides independent site selection counsel to leading U.S. and overseas corporations.
Organizations served by Boyd over the years include The World Bank, The Council of Supply Chain Management Professionals (CSCMP), The Aerospace Industries Association (AIA), MIT’s Work of the Future Project, UPS, Canada's Privy Council, and most recently, the President’s National Economic Council providing insights on policies to reduce supply chain bottlenecks.
While the overall commercial real estate industry is under duress with banks and other lenders seizing control of distressed commercial properties at the highest rate in 10 years, there are signs of recovery in the industrial market. Supply is abating, and demand and rental rates are increasing in most U.S. markets. Leading this rebound is the logistics sector which, by and large, has avoided the worst fallout brought about by high interest rates and economic uncertainties.
On the financing front as interest rates stabilize, investors who have been sitting on mountains of cash are starting to spend their money, and the logistics sector continues to be the favored sector of commercial real estate. By contrast, lending volumes across most other real estate assets, especially the ailing office market, have dropped significantly. Rental rate growth in the warehousing sector has also remained relatively strong, adding to its appeal for investors. While more modest than last year’s 20.6% jump in warehouse rental rates, this year’s increase is projected by BizCosts.com to be 7.9%, translating into a national average asking rate of $10.49 per square foot.
New leases, new construction, and improved financials by several key logistics players are clear signs that the warehousing sector is well in the lead of the industrial real estate comeback. Here are some key logistics players and what they are doing to signal that warehousing’s rebound is well underway.
Amazon is back in the market in a major way and is again buying and leasing warehousing properties after undertaking a pause in expansion over the past 18 months. The e-commerce giant has leased, bought, or announced plans for some 20 million square feet of new warehouse space in the U.S. this year, including deals for two distribution warehouses of 1.0 million square feet each in California’s Inland Empire, where vacancy has been on the rise.
Walmart, now the nation’s largest grocer, is constructing a series of new high-tech warehouses around the country as part of a strategy to grow and make its online grocery business more efficient using robotics. Store pickup of groceries and home delivery drove the company’s 22% e-commerce gains in the U.S. during its latest quarter.
Prologis—the San Francisco-based developer—serves as another indicator that warehouse demand is on the upswing. The world’s largest warehouse operator has increased its financial outlook for the year on the heels of a surge in new leasing activity, including major deals with Home Depot and with Amazon.
Warehousing growth sectors
While demand in general is up for warehouses and distribution centers, there are two notable growth areas: the pharmaceutical industry and retail and office conversions.
The pharmaceutical industry is experiencing a major increase in the approval of cell and gene therapies, which require an entirely new level of control and speed in shipment and storage. Many of these therapies have a shorter lifecycle than traditional pharmaceuticals and require a controlled environment to protect them from temperature fluctuations, humidity, light exposure, and contamination.
Today, about one-third of all pharmaceuticals are transported by air, and that amount is on the upswing. This trend is not going unnoticed by warehouse developers, who are planning new and expanded logistics parks serving the aviation and pharmaceutical sectors. In Southern New Jersey, the Los Angeles-based Industrial Realty Group is breaking ground on a 3.5-million-square-foot logistics park next to the Atlantic City International Airport with great demand expected to come from the hundreds of major pharmaceutical companies operating in New Jersey and Eastern Pennsylvania. Similarly, in North Carolina, the state recently allotted $350 million of taxpayer funds to the NC TransPark in Kinston. This facility is planned to complement the state’s huge $41.8 billion pharmaceutical industry, which relies heavily on climate-controlled warehousing and air transport.
Other high-growth warehousing sectors include retail and corporate campus conversions. In particular, former regional mall sites and outdated suburban office parks are being redeveloped into warehouse facilities, leveraging their good highway access and shovel-readiness in terms of utilities and site preparation.
Corporate campus conversions are being seen in states with transitioning economies. For example, many of the pharmaceutical companies located in Connecticut have migrated to New Jersey or the Carolinas. Their former signature corporate sites—like Bristol Myers Squibb’s campus in Wallingford and Sanofi’s research and development center in Meriden—are now slated for major warehouse conversions.
Geographic shifts
Figure 1: Total annual geographically variable operating costs for alternative warehouse locations in Western U.S.
BizCosts.com, 2024
Another key trend affecting the warehousing market is a geographic shift in terms of where companies are looking to locate new facilities.
For example, companies, job creators, and wealth are continuing to exit California at record levels due to the state’s high taxes and difficult regulatory climate—all of which have an especially big impact on the warehousing sector. The state’s new $20 minimum wage for fast-food workers is only the latest bill to create challenges for warehousing operators, who are being forced to increase wages and benefits to remain competitive. Regulators fined Amazon nearly $6 million under California’s Warehouse Quotas Law for failing to give written notices to its warehouse workers of any productivity quotas that apply to them, as well as explanations of any discipline they may face in failing to meet them.
California’s difficult business climate along with a significant shift of cargo back to West Coast ports due to disruptions from the Suez Canal and Panama Canal is generating a high level of interest in alternative warehouse locations in the Western United States.
A 2024 Boyd Co. site selection report identified a series of top warehouse sites in 11 Western states. Selected locations are smaller market cities on or proximate to major interstate highways, which have attractive industrial sites and a precedent for successful warehouse operations. Annual operating costs for these 20 Western cities are ranked in the Figure 1 and range from a high of $15.6 million in Otay Mesa, California, near San Diego, to a low of $12.3 million in Minden, Nevada. Minden is a popular landing spot near Lake Tahoe for companies leaving California’s costly Bay Area that has prime, shovel-ready warehouse sites.
Another geographic shift involves responding to the rise in nearshoring, as companies from around the globe move their operations closer to the U.S. to minimize extended supply chain risks. Mexico has become the top destination for nearshoring, and, for the first time in more than 20 years, has passed China as the leading exporter of goods to the United States. Nuevo León, bordering Central Texas, has become the leading destination in Mexico for nearshoring. The state has attracted some $50 billion during the past year in new manufacturing investment, most near its capital of Monterrey.
The SH 130 Corridor in Central Texas—which links the high-growth Austin and San Antonio markets with Monterrey via superior highway and rail access—houses one of the hottest logistics markets in the country. Texas’ State Highway 130 was built as a high-speed alternative to I-35—one of the most congested interstates in the U.S. and notorious within the logistics community for heavy traffic, frequent accidents, and costly delays. Central Texas counties served by SH 130 are attracting significant new warehouse investment spurred by nearshoring as well as by demand generated by massive new investments by Tesla’s Gigafactory and numerous other new plant startups in the region.
These geographic shifts and developing growth markets are indicative of the dynamic and constantly evolving nature of the warehousing market. The sector’s strategic responses to nearshoring, regulatory pressures, and economic uncertainties are setting the stage for continued growth and transformation. Investors and industry stakeholders alike would be wise to keep a close eye on the market.
Five material handling companies have merged into a single entity, forming an Elgin, Illinois-based company called “Systems in Motion” that will function as a tier-one, turnkey material handling integrator, the members said.
The initiative is the culmination of the companies’ close working relationship for the past five years and represents their unified strength. “We recognized that going to market under a cadre of names was not helping our customers understand our complete turn-key services and approach,” Scott Lee, CEO of Systems in Motion, said in a release. “Operating as one voice, and one company, Systems in Motion will move forward to continue offering superior industrial automation.”
Systems in Motion provides material handling systems for warehousing, fulfillment, distribution, and manufacturing companies. The firm plans to complete a rebranded web site in January of 2025.
Interest in warehouse robotics remains high, driven by labor pressures and a general desire to further automate distribution processes. Likewise, the number of robot makers also continues to grow. By one count, more than 50 providers exhibited at the big MODEX show in Atlanta in March 2024.
In distribution environments, there is especially strong interest in autonomous mobile robots (AMRs) for collaborative order picking. In this application, the AMR meets pickers at the right inventory location, and the workers then place picks in totes on the robot, which then moves on to another location/picker or off to packing, greatly reducing human travel time.
While the use of robots in distribution is still early in its maturity, for many, if not most, companies, the future is one of heterogeneous robots—different types of bots from different vendors operating in a given facility. With the growth in robotics, these different robots will often need to communicate with each other—either directly or indirectly through use of an integration platform—to automate the flow of information and work. This is broadly termed “interoperability,” and it is an important concept for companies planning warehouse robotics initiatives, with the ultimate goal of achieving a “plug and play” environments where new robots can easily be added to the automation mix and processes adapted over time.
Interoperability example
Why is interoperability important?
Consider the following example. A company buys perhaps 20 AMRs to support collaborative picking. A few years later, additional AMRs are needed to support growth. But now there is another AMR from a different vendor that the company prefers for cost, design, change in stock keeping unit (SKU) attributes, or other factors.
Interoperability will allow a company to keep the AMRs they have and seamlessly add the new AMRs to the mix. Beyond basic integration, a company will want to manage the robots across both vendors in terms of visibility, task assignment, performance measurement, and more, operating as if it’s a single fleet.
That’s a good example of what interoperability is all about.
Are there interoperability standards?
There are some initiatives across the robotics sector to develop cross-vendor integration protocols that will make interoperability much easier. However, these standards, such as VDA5050 (a standardized interface for automated guided vehicles) and the Mass Robotics 2.0 AMR Interoperability Standard, are either not widely used or are still under development.
Many vendors have also started offering support for what is called a “robot operating system” (ROS/ROS2). However, this is a loose, open source framework (not a full standard) that doesn’t fully address the interoperability challenge.
The robotics platform alternative
In the absence of useful standards, companies still have a few options for achieving interoperability. One is the traditional approach of manually programming interfaces between different robots and interfaces between robots and software systems such as warehouse management (WMS) or warehouse execution systems (WES).
The downsides of this approach are well understood. They include extended developing times and the high cost to get the integrations done, as well as a significant lack of flexibility down the road, with some added risk thrown into the mix as well.
A better alternative is the use of a platform strategy. Which begs the question: What is a robotics platform?
A robotics software platform is a middleware ecosystem—cloud-based or on-premise—that provides various capabilities and services from integration to fulfillment planning and execution. It also acts as a bridge between automation systems and various enterprise software applications.
The starting point for any robotic platform success is, in fact, integration. That integration capability includes advanced tools that enable flexible “no code/low code” approaches to connecting robot fleets.
The right platform can also more rapidly integrate with WMS/WES or other software applications, using AI to greatly accelerate the often time-consuming data-mapping process. Once the WMS/WES is connected to the platform, then the robots are also connected to enable real-time, bidirectional access to the WMS/WES data.
Such a platform delivers interoperability across robot types and connects different automated processes. A simple example would be a communication from the platform to a robot needed to move goods from receiving to reserve storage, where another robot is made aware via the platform that there is a new putaway task ready for completion.
Other interoperability considerations
To maximize interoperability opportunities, companies should consider the following interoperability-related capabilities that may be available from a given robotics platform:
Flexibility in integration based on robot software functionality: Different robot vendors come with software at different levels of maturity. An interoperability platform should be able to work with robotic vendors at any level of software functional capability, ensuring flexibility in robot selection.
User experience consistency: For interoperability to be functionally effective, the user interface across robotic-enabled processes should be consistent, so that users can easily interact and switch between different tasks.
Flexible communication protocols: A platform should provide support for a wide range of different protocols, such as application programming interfaces (APIs), socket communication (a two-way communication link between a server and a client program), web services, ROS/ROS2.0, and VDA5050, to name just a few.
Observability: AMRs especially will generate huge of amount of data on their movements and activities that can be used for analytics. The robotics platform should normalize data packets from different vendors to create a unified dashboard.
Safety and risk mitigation: A robotics platform can help achieve safety across different types of robots by understanding the safety protocols of different machines and coming up with a common set of rules. These rules will exist in an extended fleet manager that runs in the platform and sits on top of the fleet managers of each individual brand of AMR.
While some of these capabilities may not be relevant in a company’s early years in warehouse robotics, they could prove valuable down the road, so give them some consideration today.
Interoperability use cases
We’ve already covered a couple of common robotic interoperability use cases:
Adding new robots of the same type but from a different vendor and having all of them operate together as a single fleet.
Connecting different types of robots or automation to support multi-step process flows (for example, receiving to putaway).
Here is another: One global consumer goods company wants to heavily automate distribution processes but give individual regions or countries they operate in the flexibility to select the vendor for a specific type of robot (for example, a layer picker) and be able to easily plug that specific equipment into the larger platform infrastructure. This allows a centralized automation strategy with local execution.
The Interoperability Imperative
For a significant and growing number of companies, the future on the distribution center floor will be robotics of multiple types and vendors. To maximize flow and productivity, these heterogeneous environments must adopt interoperability strategies, enabling systems of different types to operate as if a single fleet. While standards to help with all this may arrive in future, for now a robotics integration and execution platform will provide an attractive alternative to traditional programming-heavy approaches.
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Amazon's new fulfillment center in Shreveport, Louisiana, utilizes Proteus autonomous mobile robots.
Mega-retailer Amazon says its newest fulfillment center, located in Shreveport, Louisiana, uses 10 times more robots than previous warehouse designs, and relies on artificial intelligence (AI) to direct the eight different models deployed in its bustling operation.
“Over the years, we’ve built and scaled the world’s largest fleet of industrial robotics that ease tasks for employees and improve operational safety while creating hundreds of thousands of new jobs along the way,” the company said in a blog post Wednesday. “For the first time, we have introduced technology solutions in all key production areas at the site, meaning our employees will work alongside our growing fleet of robotic systems seamlessly in a way that wasn’t possible until now.”
The Shreveport site spans five floors and more than 3 million square feet—equivalent to 55 football fields—making it one of Amazon's largest sites. It will employ 2,500 employees once it’s fully ramped up.
The technology at the center of the huge building is called Sequoia, a “multilevel containerized inventory system” that can hold more than 30 million items, making it five times bigger than Amazon’s first deployment of that system in Houston, Texas.
As inventory and packages move through the facility, Robin, Cardinal, and Sparrow—an AI-powered trio of robotic arms—sort, stack, and consolidate millions of items and customer orders. The latest version of Sparrow uses computer vision and AI systems that give it the versatility to handle over 200 million unique products of all different shapes, sizes, and weights.
And Proteus, which Amazon calls its “first fully autonomous mobile robot,” navigates carts of packages to the site’s outbound dock so they can be loaded into trucks, while safely moving around employees in open spaces. The remaining three robot models include larger AMRs called Hercules and Titan and a packaging automation system that creates custom-sized packages to fit each order’s dimensions.
Although the increased automation allows the facility to handle more orders than older sites, Amazon insists it is not replacing workers’ jobs. “As we deploy this new generation of robotics across our network, we expect our headcount to continue to grow and we’re really excited by how this technology also creates more opportunities for skilled jobs. In fact, our next-generation fulfillment centers and sites with advanced robotics will require 30% more employees in reliability, maintenance, and engineering roles,” the company said.
According to Amazon, it trains workers for skilled jobs by helping them earn certifications through a corporate “Career Choice program” and a “mechatronics and robotics apprenticeship” that provides hourly wages up to 40% higher than entry-level roles.
Fort Worth, TX – September 10, 2024 – EP North America, a fast-growing, lithium-ion focusedmaterial handling equipment provider offering innovative and competitive options to the market, today debuted two new forklifts. The CPD45F8/50F8 and EFLA251 help warehouse and DC managers provide powerful lithium-ion solutions that will upgrade any fleet of diesel and LPG warehouse vehicles and are available today via EP North America’s dealer network.
“EP North America continues to expand its portfolio to solve a wider range of material handling applications, leveraging our unparalleled strength in lithium-powered solutions,” said Jason Bratton, general manager, EP North America. “Whether leading occasional or multi-shift operations, these lithium-ion powered solutions provide exceptional value, quality and dependability that we believe our dealer network and their customers have been looking for.”
The CPD45F8/50F8 is an IPX4 Rated, pneumatic forklift designed for outdoor use to suit applications up to 10,000 lbs. The CPD45F8/50F8 utilizes an integrated EP Energy 80V lithium-ion battery, requiring zero maintenance and eliminating ongoing fuel costsassociated with diesel/LPG units. By removing the internal combustion engine, it reduces fatigue by eliminating vibration, heat, noise and exhaust, which creates a more comfortable and productive work environment.
EFLA251 is a Class I forklift engineered to provide a direct alternative in both utilization and cost to Class IV LP equivalent. Featuring a lifting capacity of 5,000 lbs., the EFLA251 is powered by an EP Energy 80V Lithium-ion battery with onboard charging as a standard feature and is capable of empty-to-full in just over two hours, eliminating all dependencies on LPG.
EP controls cost and supply through a vertical integration strategy that ensures readily available stock and consistently short lead times on factory orders. EP has loaded dedicated demo units to its fleet to make available through the remainder of 2024, supporting its efforts in driving conversion adoption from IC to E.
About EP North America
EP North America is leading the IC to E movement in North America, offering a range of material handling solutions from lithium-ion Class 1 forklifts to lithium battery solutions, stackers, pallet jacks and task support vehicles. For more information, visit epforklifts.com or follow us on social media.
The Raymond Corp. has expanded its energy storage solutions business with the opening of a manufacturing plant that will produce lithium-ion and thin plate pure lead (TPPL) batteries for its forklifts and other material handling equipment. Located in Binghamton, N.Y., Raymond’s Energy Solutions Manufacturing Center of Excellence adds to the more than 100-year-old company’s commitment to supporting the local economy and reinvigorating Upstate New York as an innovation hub, according to company officials and local government and business leaders who gathered for a ribbon cutting and grand opening this week.
“This region has a rich history of innovation,” Jennifer Lupo, Raymond’s vice president of energy solutions, supply chain, and leasing, said in welcoming attendees to the ribbon cutting ceremony Monday.
Lupo referred to the new factory as an “exciting milestone” in Raymond’s history and described it as the next step in the company’s energy storage solutions business, which began nearly 10 years ago with the development of a lithium-ion battery to power its “walkie” pallet jack. That work has expanded to include larger batteries and other technologies to support battery-electric equipment.
“We’re not just keeping up with the electrification movement,” Lupo said. “We’re leading it.”
Raymond, a business unit of Toyota Material Handling, has been building forklifts, pallet jacks, and other material handling equipment at its nearby Greene, New York, headquarters since 1922. The Binghamton factory supports local efforts to boost manufacturing and innovation in New York’s Southern Tier, which was recently designated as a regional technology and innovation hub by the Biden Administration.
Raymond is leasing the 124,000 square foot facility at 196 Corporate Drive, situated in an established industrial park. The manufacturer is currently utilizing just 10,000 square feet of the space to produce its 8250 lithium-ion battery, which can power Raymond’s class 1 and class 2 fork trucks, as well as a smaller TPPL battery for powering pallet jacks.
The Binghamton factory employs 15 people, but the company expects to scale up quickly in space and personnel, adding 12 to 25 employees next year and ramping up to 60 employees by 2027, according to Jim Priestly, battery manufacturing manager for energy solutions at Raymond.
The Binghamton facility also represents Raymond’s larger commitment to helping develop greener, more sustainable supply chains, according to company President and CEO Michael Field.
“We recognize energy’s critical role in shaping our future,” Field told attendees at the grand opening, adding that Raymond is seizing the opportunity to participate in the clean energy transition locally and beyond.
“This facility is just the beginning,” Field said.