Warehouse Rock, what does the future look like?

Published on
August 5, 2022
July 29, 2022

Warehouse, a house to store your wares, goes all the way back to the 1300’s, but it was ancient Rome that made the first warehouse that resembles the large structures as we know them today. Around 2,200 years ago the Romans completed the Horrea Galbae, a massive complex near the Tiber with over 140 rooms used to store grain supply, olive oil, wine, food, and clothing. Around 225,000 square feet of storage!

In the 1700’s warehousing became an official verb and the second industrial revolution in the late 1800’s gave even better ways to store. The invention of the forklift during World War II was responsible for a 300% increase in stacking height (up to 30 feet), providing the first glimpse what warehouses could look like in the modern days.

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Growing automatically

In the second half of the 90’s automation started coming into play. In the 60’s and 70’s automated warehousing started in the US with automated storage and retrieval systems, causing the value of business inventories to double between 1962 and 1972 and, triple between 1972 and 1982. By the late 80’s these systems were outdated and the strategy pivoted to reducing inventories and just-in-time deliveries. Nowadays, when we talk about automated warehousing, we are talking about automated conveyors and automated storage and retrieval machines all of which are run by logic controllers and logistics automation software.

Automation is a crucial aspect of modern-day profitable warehousing. We are seeing large amounts of capital pouring into automation. According to Logistics IQ’s latest 2022 market report, the total market is expected to reach 41 billion US dollars by 2027. A study in 2020, by real estate giant Prologis, showed that automation can boost revenue between 10% and 20% per square foot of logistic space. Surprisingly enough roughly 80% of warehouses still don’t have the necessary automation in place.

Why?

The core problem is that large capital deployment is needed, in combination with in-depth expertise. The sector as a whole is in need for expertise across countries (especially emerging one) + the solution may be in tight collaboration between all stakeholders, from the initial design all the way through completion. Developers to occupiers, every party involved needs to factor in automation from the start and design needs to be flexible for evolving automation requirements in the future as market evolves.

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Man of the warehouse

In 2020 there were 151,000 warehouses world-wide, and this number is expected to grow to 180,000 by 2025. Of those, 25,500 are located in the US. Who owns them? The biggest player in this field is $88 billion company Prologis. And recently the giant got even bigger… Prologis announced to acquire Duke Realty in a $26billon all-stock transaction. The mega deal is expected to close at the end of this year.

Another, maybe unexpected big player in the field is world’s largest e-commerce company Amazon.

Amazon seems to be the silent assassin in the market. Between 2020 and 2022, Amazon tripled the amount of built industrial spaces it owns across North America, by spending billions either on existing properties or bare land.

The transformation from the first “houses of wares” to modern day warehouses: same same, but at the same time very different. What do you think the warehouse of the future looks like?

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1 https://inviarobotics.com/blog/brief-history-warehouses-part-i/?cn-reloaded=1

2 https://www.us.jll.com/en/trends-and-insights/investor/who-funds-the-next-wave-of-warehouse-automation

3 https://www.statista.com/statistics/1271245/warehouses-worldwide/#:~:text=In%202020%2C%20there%20were%20approximately,just%20under%20180%2C000%20by%202025.

4 https://seekingalpha.com/article/4518402-is-prologis-a-buy-after-the-acquisition-of-duke-realty

5 https://www.seattletimes.com/business/amazon-builds-property-empire-quietly-buying-land-across-the-u-s/#:~:text=Amazon%20builds%20property%20empire%2C%20quietly%20buying%20land%20across%20the%20U.S.,-June%2018%2C%202022&text=The%20193%20acres%20just%20outside,biggest%20developers%20in%20the%20U.S.

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