October 4th, 2024
“For every action, there is an equal and opposite reaction.”
- Isaac Newton
When riding a wave at its peak, few seldom stop to think about the next sequence of events as it inevitably comes down.
This doesn’t mean that every bull run is followed by a crash.
That said, humans are known for their over-indulgence in both optimistic and pessimistic scenarios; the former manifesting as the largest industrial pipeline in the GTA’s history while the latter took form as enormous overflow and stockpiles following the pandemic.
As we work through supply-side shocks and integrate new technologies, businesses change. And these changes are reflected ultimately in the real estate footprint underlying the operation.
This has led us to a point where the GTA industrial market just saw the highest industrial vacancy rate in a decade, with the largest quarterly negative absorption in 14 years, and the first average rent decline in 8 years.
Heading into the tail-end of 2024, we expect a flurry of transactions as tenants weigh their options, look to re-organize and enhance their spaces, as well as to take advantage of more moderate pricing.
We also forecast the changing landscape and shift towards the on-shoring of manufacturing to result in a strong demand for heavy power facilities and design-build opportunities. General industrial users and logistics and warehousing tenants will continue to purchase and lease, albeit at reasonable levels relative to the recent boom.
That is why, for this week’s newsletter, we will continue our series and take a deeper dive into the various systems and key features of the “Heavy Powered Warehouse.”
Powering Productivity: How Heavy Electrical Capacity is Revolutionizing Industrial Real Estate
Amazon’s Kent Fulfilment Centre. Source: SeattleTimes.
In the Greater Toronto Area (GTA), modern industrial warehouses, often referred to as “heavy-powered warehouses”, are transforming the logistics and warehousing sectors. These warehouses are equipped with advanced automation systems that significantly enhance throughput, reduce labor dependence, improve productivity, and optimize the cubic volume of available space. Here’s how businesses in warehousing and logistics are utilizing heavy power to their advantage:
1. Warehouse Management Systems (WMS)
- Optimized Inventory Control: Warehouse Management Systems (WMS) play a crucial role in automating inventory tracking, ensuring precise stock levels, and reducing the time taken to find products. By connecting to high-powered servers and cloud systems, WMS helps businesses manage large inventories in real-time, making it easier to track the movement of goods and maximize storage space efficiency.
- Demand Forecasting: Modern WMS integrates demand forecasting tools, powered by data analytics, to anticipate stock requirements. This allows businesses to stock the right quantity of goods, reducing overstock and understock scenarios while ensuring smoother operations with minimal downtime.
- Power Needs: WMS requires reliable and continuous power for the software and hardware components, including barcode scanners, RF devices, and high-speed communication networks that link the entire warehouse ecosystem.
Automated storage and retrieval system, ASRS, AS/RS. Source: RaymondCorp.
2. Automated Storage and Retrieval Systems (AS/RS)
- Increased Throughput: AS/RS systems are high-powered, automated systems used to move goods in and out of storage with minimal human intervention. These systems use robotic cranes, shuttle systems, or conveyors to retrieve items from warehouse shelves and deliver them to designated stations for packing or shipping. This automation increases throughput by speeding up the picking and placing process.
- Space Utilization: AS/RS systems allow for high-density storage, utilizing vertical space up to the warehouse’s maximum clearance height. This maximizes the cubic volume of the warehouse, enabling businesses to store more goods within the same footprint.
- Power Demands: These systems require significant power to run the robotics, conveyors, and automated picking systems continuously and efficiently.
3. Robotics and Automated Guided Vehicles (AGVs)
- Reduced Labor Dependence: AGVs and mobile robots are widely used in warehouses to transport goods from one location to another. These robots are capable of moving pallets, boxes, and other materials autonomously, reducing the need for manual labor and minimizing human error.
- Improved Labor Productivity: By handling repetitive and time-consuming tasks, robots allow human workers to focus on more value-added activities, such as quality control or complex problem-solving. This increases overall workforce productivity while ensuring that goods are moved more efficiently.
- Power Requirements: AGVs and robots rely on batteries that are recharged at designated charging stations. The entire operation requires steady heavy power to maintain 24/7 operations without disruption.
Automated Guided Vehicles (AGVs). Source: Cyngn.
4. Conveyor Systems
- Streamlined Goods Movement: High-speed conveyors powered by electric motors are used to move goods between different parts of the warehouse. Conveyors are integrated into the warehouse’s automated systems to enable seamless movement from storage to packing to shipping zones.
- Reduced Manual Handling: With conveyors in place, manual handling of goods is minimized, which not only reduces labor costs but also increases the overall speed of operations, particularly for facilities dealing with high volumes of shipments.
- Power Demands: Continuous operation of motorized conveyors, especially in large warehouses, necessitates a consistent supply of heavy power to maintain operational efficiency.
5. Charging Stations for Electric Vehicles and Machinery
- Forklifts and AGVs: In warehouses utilizing electric forklifts, Automated Guided Vehicles (AGVs), and other battery-powered machinery, high-powered charging stations are essential. These stations ensure that equipment can be quickly recharged during operational downtimes, preventing delays in the supply chain.
- Power Requirements: Charging infrastructure for electric vehicles requires significant power capacity to enable fast charging, especially during high-demand periods. These systems ensure that the warehouse’s fleet of machinery remains operational without interruption.
What is a Conveyor System? Definition, Types, Design, and Uses
6. Automation Software and Data Systems
- Real-Time Data Analytics: Heavy power supports the back-end IT infrastructure needed for real-time data processing, which is crucial for managing automation systems, tracking performance, and optimizing warehouse operations. High-powered servers and cloud computing systems ensure that warehouse data is accessible and analyzed efficiently.
- Machine Learning and AI: Many warehouses are adopting machine learning and artificial intelligence (AI) technologies to optimize their operations further. These systems analyze data from WMS and AS/RS systems to optimize workflows, reduce bottlenecks, and predict future inventory needs. The integration of these advanced technologies requires a continuous, reliable power supply to run powerful computing systems.
7. Temperature-Controlled Environments
- Climate Control Systems: For warehouses that store temperature-sensitive goods (e.g., pharmaceuticals, perishable food items), maintaining strict climate control is critical. Heavy power is required to operate large HVAC systems that regulate temperature and humidity levels across the warehouse.
- Energy-Efficient Solutions: Modern warehouses are using energy-efficient climate control systems, but they still require significant power, especially when maintaining precise environmental conditions across large cubic spaces.
Temperature controlled warehouses. Source: Interlake Mecalux.
8. Energy Management Systems (EMS)
- Power Optimization: To manage the high power demands of automated warehouses, many businesses install Energy Management Systems (EMS). These systems optimize power usage by monitoring energy consumption across all operations and redistributing power where necessary. For instance, EMS can ensure that AGVs are charged during off-peak hours to reduce energy costs.
- Cost Savings: By leveraging EMS, warehouses can reduce their overall energy costs while ensuring that critical systems remain operational 24/7.
9. Net Zero Carbon Ready Certifications: Industrial facilities aiming for Net Zero Carbon Ready certifications require significant upgrades in power infrastructure to accommodate fully electric systems and reduce reliance on fossil fuels. These properties will need electric HVAC systems, energy-efficient lighting, and EV charging stations to support electric vehicle fleets. These transitions increase the demand for heavy power, as electrification of heating and cooling systems, alongside the charging infrastructure for EVs, significantly boosts the facility’s power consumption.
- Electric HVAC Systems: Unlike gas-powered systems, electric HVAC systems—such as heat pumps—require continuous, high-voltage power to maintain temperature control in large industrial spaces, particularly in climate-sensitive operations.
- EV Charging Stations: Charging infrastructure for logistics fleets and employee vehicles requires substantial power to ensure multiple EVs can be charged simultaneously, particularly for fast-charging stations that demand high current. This requires reinforced electrical grids and high-capacity transformers.
- Power Storage and Management: Facilities may also need to invest in energy storage systems to balance power loads and support intermittent renewable energy sources, contributing further to the need for reliable heavy power.
Zero Carbon Building – Performance and Design Standards Comparison. Source: CAGBC.
Conclusion:
In summary, heavy-powered warehouses in the GTA are leveraging modern automation technologies to streamline operations, reduce reliance on labor, and maximize productivity and storage capacity.
From Warehouse Management Systems (WMS) and Automated Storage and Retrieval Systems (AS/RS) to robotics and conveyors, each component requires a significant and reliable power supply to function efficiently and continuously.
This shift toward automation in logistics and warehousing is increasing throughput, reducing costs, and ensuring that businesses can scale to meet growing demand while maximizing the cubic volume of their facilities.
As a continuation in this series, there has been a shift back to reality with respect to logistics and warehousing leasing and speculative development. No – this industry vertical is not going away, it is simply counterbalancing following the enormous growth of the past several years.
In the meantime, businesses are looking to nearshore their manufacturing, processing, and packaging operations just as all industrial users are exploring ways to enhance productivity and leverage automated systems. Finally, the rise of AI and quantum computing means a need for semiconductors and data centers. All of these translate into a need for heavy power capacity.
Just as high-clear warehouses draw a premium on rents due to their ability to better-service warehousers through racking and cubic volumes, so too may heavy power facilities command higher prices, particularly due to the time and cost required to bring said power to an industrial property.
Next week, we will look into some examples of heavy powered warehouses, as well as shift into an overview of a new, emerging niche that is taking the world by storm.
In the meantime, for a confidential consultation or a complimentary opinion of value of your property please give us a call.
Until next week…
Goran Brelih and his team have been servicing Investors and Occupiers of Industrial properties in Toronto Central and Toronto North markets for the past 30 years.
Goran Brelih is an Executive Vice President for Cushman & Wakefield ULC in the Greater Toronto Area.
Over the past 30 years, he has been involved in the lease or sale of approximately 25.7 million square feet of industrial space, valued in excess of $1.6 billion dollars while averaging between 40 and 50 transactions per year and achieving the highest level of sales, from the President’s Round Table to Top Ten in GTA and the National Top Ten.
Specialties:
Industrial Real Estate Sales and Leasing, Investment Sales, Design-Build and Land Development
About Cushman & Wakefield ULC.
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 53,000 employees in 400 offices and 60 countries.
In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.
For more information on GTA Industrial Real Estate Market or to discuss how they can assist you with your real estate needs please contact Goran at 416-756-5456, email at goran.brelih@cushwake.com, or visit www.goranbrelih.com.
Connect with Me Here! – Goran Brelih’s Linkedin Profile: https://ca.linkedin.com/in/goranbrelih
Goran Brelih, SIOR
Executive Vice President, Broker
Cushman & Wakefield ULC, Brokerage.
www.cushmanwakefield.com
Office: 416-756-5456
Mobile: 416-458-4264
Mail: goran.brelih@cushwake.com
Website: www.goranbrelih.com