Article | Adaptive Spaces
Breaking New Ground
How e-commerce is driving digital transformation in industrial real estate in Asia Pacific
October 27, 2022
Asia Pacific has witnessed the rapid growth of e-commerce in recent years, with future growth in the region expected to outpace the rest of the world. This growth is likely to have a significant impact on retail and industrial real estate, with digital transformation presenting efficiency and growth opportunities for the industrial sector.
According to CBRE’s report on Omnichannel Retail and its Impact on Asia Pacific Real Estate,1 between 2020 and 2030, the urban population in Asia Pacific is forecast to expand by 320 million – an increase of 15% – with mainland China, Southeast Asia and India leading the growth. Continued urbanisation in these economies will also lead to a larger consumer base with significant consumption power.
Digital wallets are being widely embraced in many emerging markets, and convenient access to an entire ecosystem of online retail players is fuelling demand for e-commerce in Asia Pacific, resulting in a boom in the number of e-commerce players within the region.
Growth of the Industrial asset class reflects growth in e-commerce
As e-commerce grows and evolves, factories and warehouses need to rapidly adapt to keep up with demand. E-commerce supply chain operations require more warehouse and logistics space — typically three times more than a traditional brick-and-mortar supply chain, according to a recent CBRE report.2
Distributors and retailers are therefore going to compete for more modern and tech-driven logistics space. Over the next five years, CBRE estimates that 100 to 130 million sq. m. of additional e‑commerce-dedicated logistics space will be required in Asia Pacific to support the growth of internet sales.
A surge in demand for Industry 4.0-enabled factories and warehouses (or digitally transformed factories and warehouses for the future) is expected over the next few years as more businesses refine their production and supply chain model to align with these new expectations. Industry 4.0 is characterised by the integration between the physical, digital and human interface and is born out of a fusion of technologies leading to trends such as cyber physical systems, cloud computing and the Internet of Things. As more firms transition to Industry 4.0, competition for high-tech factories with relevant infrastructure will increase.
Given the rapid advancement in technology and consolidation of information technology, robotics and telecommunication, the cost of implementing Industry 4.0 technologies for factories and warehouses will continue to drop. Furthermore, the high productivity of Industry 4.0 factories means they may not require as large a footprint as their mass manufacturing counterparts.
Strategies to secure modern and tech-driven logistics space
CBRE’s report on omnichannel retail highlights that key strategies to secure modern and tech-driven logistics spaces could include build-to-suit, which is most applicable to e-commerce markets in the initiating or growing stage, and which currently lack modern logistics stock, especially large facilities for fulfilment and distribution centres. These projects can also be built to fit the right logistics technology required. This model is more sought-after among markets where land/construction is expensive or where there is ample investment interest from institutional investors/developers.
As an example, since 2012 CBRE’s Project Management team has worked on build-to-suit projects for a global e-commerce client in over 80 locations in India, totalling 6 million square feet, with the projects including a number of sorting, fulfilment and delivery centres. As there is a greater need to synchronise with the omni-channel functionality of the world's largest retailers to ensure a seamless experience from order processing to fulfilment, this requires both manufacturers and logistics providers to maintain an integrated view of all customer channels and inventory. Omnichannel warehouses and factories have to move at the speed of “Now”, at a scale such as this, to enable retailers to deliver anything, anytime, from anywhere.
Another strategy is to explore investing in logistics technology to improve operational efficiency, to reduce additional space needed to accommodate sales growth, especially as sales growth stabilises in maturing e-commerce markets, or urban cities with a limited development pipeline.
Warehouses featuring Automated Storage and Retrieval Systems (ASRS) are in demand these days, with key e-commerce players taking the lead. These warehouses depend on autonomous robots to haul heavy packages to improve packing and shipping efficiency, generating significant productivity gains in the process. We have observed that warehouse operators are increasingly recognising the advantages of operating ASRS Warehouses and have progressively started to deploy ASRS capabilities in their warehouses to remain relevant, and to provide more efficient turnaround for packing and shipping requests.
Robots and ASRS platforms also allow for greater cost efficiency and for warehouse operators to hedge against rising labour costs, while also allowing them to manage labour shortages during peak holiday seasons.
It is ideal to align warehouse layouts, automated picking robots and work processes with the predictive models generated by advanced analytics and artificial intelligence in order to support faster order processing and shipping. For our client, we provided project management services for the construction of amenity areas, shelving areas along with services including HVAC, Electrical & FPS. We also managed the implementation of automated systems integrating multiple wide belt conveyors, tote conveyors, cross docking systems connecting inbound and outbound highways, controlled by BMS and warehouse control software for the smooth running of all conveyors.
This allowed for increased warehouse space utilisation, since automated picking and sorting solutions allow for higher racks and narrower aisles as traffic and aisle congestion is reduced compared to traditional warehouses. The warehouse also included technology tools such as handheld scanners, barcode scanners, OCR cameras for easy inventory stocking and reconciliation.
As e-commerce continues to grow, retail and industrial real estate will continue to be interlinked. The value of supporting and staffing manufacturers must not be underestimated, and we must make equal room in the real estate portfolio for tech-enabled logistics facilities to support shifts in retail strategy. Today, as consumers’ expectations shift and the demand for e-commerce or omnichannel retail grows, delivery, logistics and the larger supply chain infrastructure have also become pivotal in delivering customer satisfaction.
The implementation of Industry 4.0 technology for warehouses and factories has the potential to support faster shipping, lower prices and quicker time to market. Companies that focus on smart industrial and logistics facilities can help to deliver on evolving consumer expectations, and transform and optimise end-to-end value chains in the manufacturing and logistics industry.
1 https://www.cbre.com/insights/reports/asia-pacific-report-omnichannel-retail-and-its-impact-on-asia-pacific-real-estate-october-2022
2 https://www.cbre.com/insights/briefs/ecommerces-impact-on-industrial-real-estate-demand
According to CBRE’s report on Omnichannel Retail and its Impact on Asia Pacific Real Estate,1 between 2020 and 2030, the urban population in Asia Pacific is forecast to expand by 320 million – an increase of 15% – with mainland China, Southeast Asia and India leading the growth. Continued urbanisation in these economies will also lead to a larger consumer base with significant consumption power.
Digital wallets are being widely embraced in many emerging markets, and convenient access to an entire ecosystem of online retail players is fuelling demand for e-commerce in Asia Pacific, resulting in a boom in the number of e-commerce players within the region.
Growth of the Industrial asset class reflects growth in e-commerce
As e-commerce grows and evolves, factories and warehouses need to rapidly adapt to keep up with demand. E-commerce supply chain operations require more warehouse and logistics space — typically three times more than a traditional brick-and-mortar supply chain, according to a recent CBRE report.2
Distributors and retailers are therefore going to compete for more modern and tech-driven logistics space. Over the next five years, CBRE estimates that 100 to 130 million sq. m. of additional e‑commerce-dedicated logistics space will be required in Asia Pacific to support the growth of internet sales.
A surge in demand for Industry 4.0-enabled factories and warehouses (or digitally transformed factories and warehouses for the future) is expected over the next few years as more businesses refine their production and supply chain model to align with these new expectations. Industry 4.0 is characterised by the integration between the physical, digital and human interface and is born out of a fusion of technologies leading to trends such as cyber physical systems, cloud computing and the Internet of Things. As more firms transition to Industry 4.0, competition for high-tech factories with relevant infrastructure will increase.
Given the rapid advancement in technology and consolidation of information technology, robotics and telecommunication, the cost of implementing Industry 4.0 technologies for factories and warehouses will continue to drop. Furthermore, the high productivity of Industry 4.0 factories means they may not require as large a footprint as their mass manufacturing counterparts.
Strategies to secure modern and tech-driven logistics space
CBRE’s report on omnichannel retail highlights that key strategies to secure modern and tech-driven logistics spaces could include build-to-suit, which is most applicable to e-commerce markets in the initiating or growing stage, and which currently lack modern logistics stock, especially large facilities for fulfilment and distribution centres. These projects can also be built to fit the right logistics technology required. This model is more sought-after among markets where land/construction is expensive or where there is ample investment interest from institutional investors/developers.
As an example, since 2012 CBRE’s Project Management team has worked on build-to-suit projects for a global e-commerce client in over 80 locations in India, totalling 6 million square feet, with the projects including a number of sorting, fulfilment and delivery centres. As there is a greater need to synchronise with the omni-channel functionality of the world's largest retailers to ensure a seamless experience from order processing to fulfilment, this requires both manufacturers and logistics providers to maintain an integrated view of all customer channels and inventory. Omnichannel warehouses and factories have to move at the speed of “Now”, at a scale such as this, to enable retailers to deliver anything, anytime, from anywhere.
Another strategy is to explore investing in logistics technology to improve operational efficiency, to reduce additional space needed to accommodate sales growth, especially as sales growth stabilises in maturing e-commerce markets, or urban cities with a limited development pipeline.
Warehouses featuring Automated Storage and Retrieval Systems (ASRS) are in demand these days, with key e-commerce players taking the lead. These warehouses depend on autonomous robots to haul heavy packages to improve packing and shipping efficiency, generating significant productivity gains in the process. We have observed that warehouse operators are increasingly recognising the advantages of operating ASRS Warehouses and have progressively started to deploy ASRS capabilities in their warehouses to remain relevant, and to provide more efficient turnaround for packing and shipping requests.
Robots and ASRS platforms also allow for greater cost efficiency and for warehouse operators to hedge against rising labour costs, while also allowing them to manage labour shortages during peak holiday seasons.
It is ideal to align warehouse layouts, automated picking robots and work processes with the predictive models generated by advanced analytics and artificial intelligence in order to support faster order processing and shipping. For our client, we provided project management services for the construction of amenity areas, shelving areas along with services including HVAC, Electrical & FPS. We also managed the implementation of automated systems integrating multiple wide belt conveyors, tote conveyors, cross docking systems connecting inbound and outbound highways, controlled by BMS and warehouse control software for the smooth running of all conveyors.
This allowed for increased warehouse space utilisation, since automated picking and sorting solutions allow for higher racks and narrower aisles as traffic and aisle congestion is reduced compared to traditional warehouses. The warehouse also included technology tools such as handheld scanners, barcode scanners, OCR cameras for easy inventory stocking and reconciliation.
As e-commerce continues to grow, retail and industrial real estate will continue to be interlinked. The value of supporting and staffing manufacturers must not be underestimated, and we must make equal room in the real estate portfolio for tech-enabled logistics facilities to support shifts in retail strategy. Today, as consumers’ expectations shift and the demand for e-commerce or omnichannel retail grows, delivery, logistics and the larger supply chain infrastructure have also become pivotal in delivering customer satisfaction.
The implementation of Industry 4.0 technology for warehouses and factories has the potential to support faster shipping, lower prices and quicker time to market. Companies that focus on smart industrial and logistics facilities can help to deliver on evolving consumer expectations, and transform and optimise end-to-end value chains in the manufacturing and logistics industry.
1 https://www.cbre.com/insights/reports/asia-pacific-report-omnichannel-retail-and-its-impact-on-asia-pacific-real-estate-october-2022
2 https://www.cbre.com/insights/briefs/ecommerces-impact-on-industrial-real-estate-demand
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Royston Toh
APAC Sales and Solutions Lead, Sector Director for Energy & Resources | Industrial & Logistics, GWS Enterprise Project Management
