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Shift in location of logistics assets to be closer to workforce

The attractiveness of logistics assets will depend on how green they are but also on their location, experts agreed at Real Asset Media’s Infrastructure Summit: Transport & Logistics, which took place online recently on the REALX.Global platform.

Tobias Kassner, Head of Research, Garbe Industrial Real Estate

“There was a great shortage of labour and of land even before the pandemic, but now it has got worse,” said Tobias Kassner, head of research, Garbe Industrial Real Estate. “As people demand ever faster deliveries and one-hour time slots it has become essential to be closer to where people live.”

The problem is that there is no available land and costs are high. “One option is extending the life of existing stock,” said Kassner. “People still focus on the risks in distressed assets but if they are located near metropolitan areas then transport costs will be low.”

Given the challenges the sector faces, adapting to change applies not only to modes of transport and new technologies but also to different locations.

“From a real estate development point of view we’ve always been told to locate on the transportation hubs and what logistics operators like DHL want is a reduction in the cost of their transportation fleet,” said Ben Segelman, head of capital markets UK, Ireland, mainland Europe, Middle East and Africa, DHL Supply Chain. “But at the moment at DHL we’ve recognised that it may be worthwhile to increase the cost of the transportation routes to be located closer to the labour resources.”

So the new rule is follow the workforce, rather than the money. Shortage – or even lack of labour in some areas – has become the main issue.

“Labour has become the key driver for us,” Segelman said. “We employ 500,000 people globally across DHL and it’s incredibly difficult to ensure staff retention and have the ability to guarantee that all of our facilities are properly resourced.”

Automation not yet causing reduction in demand for labour

Despite all the automation that has been put in warehouses and despite the potential for driverless vehicles in the future, at present a lot more people are needed to run the operations.

Technology could solve many problems in the years ahead. “If automated driving became the norm that could solve the shortage of drivers issue and also the parking issue as trucks could drive at night,” said Kassner.

Even drones could come to the rescue at some point in the future.

“We’re investing in drone technology and continue to monitor and engage with it, but authorisations now are a real obstacle to a mass roll-out,” said Segelman. “But it’s just a matter of time. In the next 10 to 20 years drones will be integrated in the supply chain.”

The shortage of labour issue is now being recognised across the industry because it is leading to significant changes in companies’ choices, but it can still raise questions with investors.

“We sometimes get asked why have you not built inside of the golden triangle in the UK or why have you not built in a capital city in Europe,” he said. “There are reasons why and more often than not they are fuelled by the understanding of the operations inside the warehouse rather than just what traditionally we have been told was a good thing.”