Will robots overtake humans? The Changing Landscape of Industry 4.0

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changing landscape

Welcome to episode 15 of Real Time, JLL Chicago’s industrial podcast. In this special post-event episode, the team recaps JLL Chicago Industrial’s recent client event, “The Changing Landscape of Chicago Industrial Real Estate,” held at Chicago’s first innovation center for physical product development and manufacturing, mHUB. Prognosticating on the future of supply chain, our all-star panel of industrial pros included:

Hosted by: Industrial market research experts George Cutro and Chad Buch

Listen to this podcast with the player above or click here. Also be sure to read our event recap below.

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changing landscape

Our host, mHUB CEO and Co-Founder Haven Allen, kicked things off with a keynote. In just over a year, mHUB’s 150-plus companies and 750-plus users have launched new product and manufacturing-based businesses generating $18 million in revenue last year, as well as $19 million in investment capital. The Fourth Industrial Revolution is focused on the automation and networking of the Internet of Things, Haven said, turning data into useful information to help businesses make smart decisions. mHUB member innovations include everything from underwater wireless communication to quality control devices for legacy manufacturers, and with time they’ll become growing occupiers of Chicago’s industrial real estate.

Consolidation of industrial ownership

changing landscape

An unbelievable $90 billion is on track to be sold in 2018 in the latest industrial M&A frenzy, with names like Cabot, Blackstone, Mapletree and Prologis dominating the headlines. As ownership continues to consolidate, you’re seeing capital with a lot of patience, Huguenard says, which allows them to boost rents. Last year, we saw 39 markets across the U.S. with greater than 5 percent rent growth and 13 over 10 percent, numbers that haven’t been seen in recent memory. That means cap rates have nowhere to go but down, benefiting landlords. How far owners can drive rents in Chicago is very submarket dependent, but we’ll likely see more than 5 percent rent growth, consistent with the rest of the country. There are positives for tenants as well, Keith said, in the efficiencies gained by working with the same landlord across multiple markets.

Site selection priorities

changing landscape

When it comes to site selection, the word of the day is labor. As unemployment hangs below four percent nationally, we’re seeing tremendous compression on labor, prompting industrial users to pay close attention to their competitive set. Every dollar increase in wages adds double that to the bottom line, George said. Companies are narrowing in on micro markets as tight as a five-mile radius, Keith said, forgetting that drive time norms locally mean they can draw from a larger population than anticipated. Another necessity is intermodal proximity, especially as transportation costs rise and the speed and flexibility of supply chains becomes more important than ever.

What does the future industrial labor force look like? Just look at mHUB’s membership base of mechanical, electrical, computer and industrial engineers. As advanced automation takes hold, inflationary wage pressures rise and labor shortages continue, industries like construction, transportation, logistics and manufacturing are trending toward a higher-skilled labor force. And that requires a fundamental shift in how we approach these careers, Haven said. With the rate of technological innovation increasing exponentially, continuing education will be the key to production-level job security

Last-mile urban fulfillment

changing landscape

Uncovering Millennium Chicago

Downtown Chicago’s opportunities for last-mile urban fulfillment will look a lot more like mixed use than multistory, the panel agreed. Just look at Millennium Chicago, the transformation of a 3.8-million-square-foot, city-owned parking garage beneath Millennium Park. The JLL team is close to signing its first tenant at the project, Keith said, which will feature below-grade truck docks and almost immediate access to the dense urban core. Investors will be looking at these early adaptive reuse projects to validate pro forma rents, Huguenard said. On the question of multistory, the trend of building up seems unlikely in Chicago for the moment. Companies like FedEx and UPS already have sites within 20 to 30 minutes of all city residents. With land still available on the South Side and prices still palatable, there’s no reason to go skyward just yet, George said.

Will robots overtake humans?

changing landscape

While the panel assured us we won’t have to worry about robot overlords, industrial investors do need to begin future-proofing their real estate. For starters, truck and car charging stations for autonomous vehicles, higher clear heights and tons of power will be necessary to accommodate automation within the box, Keith said. Buildings need to have state-of-the-art wiring and internal communication, accommodate not-yet-seen amounts of data transfer and act on that data to gain valuable insights into the efficiency of their operations. People will always have a role in manufacturing and the supply chain, but machines will play a larger role, Haven said. As raw materials are taken out of the ground, molded into products, sold, reach end of life and eventually get reclaimed, everything will be captured in data. Try computing that one.