Despite trends in the office and retail sectors, industrial real estate is busier than ever and is mainly being propped up by the increasing demand for e-commerce. According to Cushman & Wakefield, net absorption in this sector in 2020 was 268 million square feet, up 11.4 percent year over year.
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This trend is driving investment and development in the sector, but it also has far-reaching implications for security. More goods flowing through the system mean more workers and more shifts and thus more pressure on industrial tenants to provide their employees with a safe and comfortable environment. The risk of coronavirus infection is currently dominating safety concerns, but a move to promote healthy workplaces in logistics buildings precedes the pandemic.
One issue that is shaping the trend is the adoption of environmental, social and governance goals. Prologis, to name just one large logistics service provider, has set itself the goal of pursuing ESG initiatives. In 2018, the REIT opened the first logistics facility to be certified by the International WELL Building Institute. Park Tacoma Building D in Tacoma, Washington offers natural daylight and an outdoor walking path, as well as sustainable design features such as energy efficient lighting.
To some extent, the occupational safety issue is influenced by the rental conditions. Institutional warehouse owners tend to take a relatively straightforward approach due to the triple net rental structure that places much of the responsibility for operations on tenants. The landlord still plays a crucial role. Property owners can help tenants on multiple fronts by acting as a sounding board for best practices. Forwarding your customers to specialized professionals; and use information from industry associations and local, state and federal agencies.
Located south of Seattle, Prologis Park Tacoma Building D has received WELL certification with features like natural daylight and an outdoor walking path that employees can use during breaks. Image courtesy of Prologis
Air and light
The onset of COVID-19 brought ventilation concerns to the fore and prompted many industrial tenants to switch to higher-efficiency filters for their heating, ventilation and air conditioning systems. Often times, this is a simple solution, depending on the capabilities of the HVAC system. “Ventilation has been shown to be critical to improving and reducing the transmission of the virus in work environments,” said Marc Wendell, vice president of health, safety and environmental protection at C&W Services, the facility services group of Cushman & Wakefield.
“We want at least a MERV of 13,” he added, referring to the minimum required to report on the efficiency of a filtration system. The standard developed by the American Society of Heating, Refrigeration and Air Conditioning Engineers is defined by the organization as the proportion of particles that are removed from the air flowing through a filter. “And we try to make sure that they handle as much air as is appropriate in the work environment,” said Wendell.
Even before the pandemic, industrial tenants were looking for better air circulation to ensure workers’ comfort in storage rooms, which, unlike break rooms and offices, are usually not air-conditioned because they are impractical due to their size. One solution that is gaining ground in many warehouses is to use huge ceiling fans to provide cool airflow in summer or divert warm air in winter.
Some manufacturers are upgrading their warehouse products to keep workers safe and improve productivity. Last year, for example, Big Ass fans added ion disinfection technology to their high-volume, low-speed fans. Each ceiling fan draws air upwards, so the UV-C rays produced by the device kill airborne pathogens, including the virus that causes COVID-19. Disinfected air is then returned to the work area. According to the company, the product can reduce the risk of COVID-19 infection by 89.9 percent.
It should be noted that such products also require a significant investment. Industrial tenants who add fans to a warehouse or upgrade an HVAC system typically pay for the hardware while the landlord pays for the installation. In this case, the tenant would pay the costs directly or have them amortized over the lease and paid for through operating costs, said Jim Clemo, senior vice president and real estate operations manager at Duke Realty. “There is some flexibility there, but it is determined by the tenant and their responsibility for the space,” he said.
Robots are touted for maintaining social distancing in the warehouse and handling unprecedented demand for e-commerce. Image courtesy Frost & Sullivan
Cleaner spaces and distancing
The pandemic sparked keen interest in the commercial real estate industry in cleaning and disinfecting contact points to protect inmates from infectious microbes. Hygiene concerns are particularly important in industrial facilities where local people handle materials and often need to share equipment.
“We are currently focused on ensuring that many locations have automation for scrubbing and vacuuming,” said Wendell. “Then our people go through and do more touchpoints where people might be touching surfaces.”
These surfaces, he added, will be sanitized with chemicals or disinfectants on the Environmental Protection Agency List N, which if used properly are expected to kill the coronavirus. In some cases, the C&W Services team does multiple daily cleanups of touchpoints and public areas that are heavily used.
Industrial real estate also needs to address the wider pursuit of social distancing. Ecommerce businesses grappling with the combined pressures of rising consumer demand and the need for greater physical distancing are increasingly turning to robots. Last summer, Gap Inc. added 73 units to the robot fleet in its US distribution centers, manufactured by Kindred Systems Inc., a San Francisco-based startup. American Eagle Outfitters added 26 of the robots. Kindred’s SORT systems use artificial intelligence to perform pick and place operations so that one worker can manage three to four robots at the same time instead of standing next to other team members.
“Building automation was a hot spot for industry even before the pandemic,” said Clemo. “Tenants were looking for savings in occupancy costs. They looked for alignment with their ESG processes and culture. “
In the long term, technology will play an even more important role in the new era of industrial property security. Automation could provide much of the answer, observe Steve Weikal and James Robert Scott of the Massachusetts Institute of Technology’s Real Estate Innovation Lab in an October 2020 NAIOP report. A 2019 study by ABI Research estimated that the number of warehouses with robots will increase from 4,000 in 2018 to 50,000 in 2025.
Amazon announced to a major media fanfare last spring that it had developed an experimental robot that could be used to disinfect large spaces such as distribution centers and retail stores. The prototype shown in “60 Minutes” by CBS can autonomously patrol the aisles of large facilities such as distribution centers or retail outlets and emit ultraviolet light for disinfection. MIT’s Computer Science and Artificial Intelligence Laboratory has developed a similar prototype, Weikal and Scott noted.
It may take time for such technology to become widely available as protection against the COVID-19 virus and other pathogens. Investing in these products requires a significant investment of time and resources. In this dramatically changed environment, exploring options is a new part of the industrial company’s best practices.
Read the March 2021 edition of CPE.