The logistics and industrial (L&I) real estate sector plays a crucial role in the global economy. It provides the infrastructure that enables the movement of goods from manufacturers to distributors, and ultimately to consumers.

Yet despite its importance, the adoption of automation technology in the Asia-Pacific (APAC) L&I sector has been gradual. Even in today’s digital economy, nearly 40% of businesses in the region are not currently using any form of automation technology in their warehouse or logistics operations, according to JLL. Moreover, for those that do employ automation, its usage remains relatively limited.

However, there is a noticeable shift occurring. By 2030, more than half of businesses in the APAC L&I sector plan to increase their use of automation technology by more than 25% compared to current levels. Although the current penetration of automation technology in the sector is still low, businesses are already employing a wide range of automation technologies. The top three technologies include automated stretch wrap machines, automated storage and retrieval systems (AS/RS), and automated guided vehicles (AGVs). These systems offer significant efficiency benefits, lower long-term operating costs, and enhance safety outcomes.

Slow and steady is the way to go

In the race to automate L&I real estate, industry players are proceeding cautiously, and understandably so. The adoption of automation technology does not come without roadblocks.

Unsurprisingly, one of the biggest challenges facing businesses in the APAC L&I sector is the high initial capital investment costs associated with implementing automation technologies. According to JLL’s latest research, 85% of respondents cited this as a top-three factor, with 62% considering it a top roadblock. Furthermore, the time to recoup costs and the long payback period were also cited as significant barriers.

Despite these challenges, businesses must continue to prioritise solutions that allow them to improve their operational processes and become more cost-effective. To do so, they must work towards achieving a balanced labour-technology strategy in the long run.

Currently, around nine in ten respondents employ a labour workload-heavy strategy, where more than 80% of their workload is done by manual labour and less than 20% is done by automation technology. However, a shift to a more balanced strategy will mean that technology capital expenditures (CAPEX) will increasingly replace labour wages.

For this shift to occur, automation technology costs will need to fall so that tenants can achieve their technological goals. The promising news is that by 2025, the average cost of an industrial robot is expected to fall by 60% from 2017 levels, according to Statista. JLL research estimates that by 2030, the majority of businesses expect to transition into a balanced labour-technology strategy – with a workload ratio of 40-60% labour or 40-60% automation technology.

Another challenge facing businesses is the need to grow their logistics requirements. Similar to their ambitious technological ambitions, industry players in the region have robust expansionary goals – almost one in three expect to increase their APAC warehouse or logistics footprint by between 25% and 50% by 2030. An even more ambitious one in five businesses expect their companies’ footprint to rise by more than 50% over the same time period.

However, recent macroeconomic events may cause this growth to slow. The current banking crisis that started in early March, while still a quickly evolving issue, is likely to further slow inflation and economic growth, which were already decelerating. Along with high interest rates, it will continue to make lending tougher. Add higher construction costs to the mix, and it is likely that we can expect widespread project delays across the global real estate industry. This means that expansion in the L&I sector will need to be a long-term goal, rather than a short-term solution.

Playing the long game of automating L&I facilities

Despite these challenges, the adoption of automation in L&I facilities is one that will reap significant benefits in the long run. Businesses in APAC must continue to adopt automation technology, despite the initial roadblocks, and prioritise solutions that allow them to improve operational processes and be more cost-effective.

One important outcome of the movement towards greater technology utilisation is the impact that this will have on how L&I facilities are designed, and how prime-grade assets and portfolios are assessed in the future. By taking a slow and steady approach, businesses can achieve success in their automation efforts and remain competitive in the ever-evolving logistics and industrial landscape.