InterFace Panel: Demand for Automated Labor Growing in Industrial Sector

by Taylor Williams

HOUSTON — The number of American manufacturing jobs has been decreasing for more than a decade, radically enough that the pledge to return them became a cornerstone of President Donald Trump’s campaign.

Between 2004 and 2014, the country lost about 2.1 million manufacturing jobs, according to the U.S. Bureau of Labor Statistics (BLS), which also projects that another 814,000 manufacturing jobs will be cut by 2024.

The decline in manufacturing jobs has coincided with job growth in other industrial subfields, particularly transportation and warehousing. The total number of jobs in this sector increased by about 391,000 between 2004 and 2014, with an additional 137,000 new positions expected to be created by 2024, per the BLS.

Analyzed in the context of e-commerce, these trends suggest that industrial activity is still robust throughout the country, but that distribution is outstripping manufacturing as the primary form of industrial-using employment. Yet the growth of e-commerce alone does not account for the radical dip in the number of manufacturing jobs available.

The substitution of human labor for automated robot workers has also been a driving force behind sluggish job growth in the manufacturing sector, according to a panel of industrial real estate professionals who gathered at the InterFace Houston Industrial conference on Oct. 31. Held at the Royal Sonesta Hotel in Houston’s Galleria district, the conference drew about 115 industrial investors, developers, brokers and lenders throughout Texas.

Trent Agnew, HFF

Trent Agnew, HFF

Panelist Trent Agnew, a director in HFF’s Houston office, pointed toward activity at the Ports of Los Angeles and Long Beach, which together represent the country’s biggest commercial waterways based on cargo volume. The West Coast ports, renown for past issues with labor strikes, have already brought automated labor to its docks in the form of self-driving cranes and forklifts that transport containers between ships, terminals, trucks and warehouses alike.

“When you look at all the things LA-Long Beach has done from an automation standpoint and eliminate much of the labor cost, you realize there are huge implications for robotics in that region,” said Agnew. “It requires amazing infrastructural investment, but that’s why so many big private equity players are in that space.”

In addition to cutting labor costs, the introduction of robotics at the Los Angeles/Long Beach ports has helped reduce greenhouse gas emissions and incidence of work-related injuries and lawsuits.

Panelist Travis Land, a partner at NAI Partners in Houston, noted that although the majority of industrial sales and leases executed in the current market center around distribution facilities, it’s within the manufacturing space that demand for robotics is expected to rise. In Land’s view, that trend could coincide with the next boom in the oil cycle.

Travis Land, NAI Houston

Travis Land, NAI Partners

“I have a client, an international firm that focuses on robotics, and it’s very bullish about the manufacturing side of Houston’s oil and gas business,” said Land. “It’s expecting its operating budgets to expand and for demand for its product to come along for the ride. As oil prices come up, there’s likely to be significant capital investment in robotics in the manufacturing space.”

Panelist Chad Parrish, an investment and development officer for publicly traded REIT First Industrial Realty Trust, cited emerging patterns in designs of industrial buildings as potential catalysts for more automated labor. Specifically, Parrish offered anecdotal evidence of a number of industrial developers having issues with floor slabs at their properties.

“We spend a lot of time studying the floors and trying to figure out how to keep our floor slabs flat at a reasonable cost,” said Parrish. “So I think we have to pay attention to automated solutions in terms of building design, because it’s coming.”

Chad Parrish, First Industrial

Chad Parrish, First Industrial

As population growth and e-commerce have surged, so too has demand for industrial space. And as industrial buildings have consequently expanded in size, the altitudes of their clear heights have increased, allowing for heavier and more advanced machinery and equipment to enter the picture. The pressure created by this gear on floor slabs can affect the flatness of the structures, causing delays in production.

“We definitely have to pay attention to automated solutions in terms of building design, because it’s coming,” added Parrish.

While the logistics of introducing robotics into industrial real estate are still very much in their infancy, the panelists concurred that like e-commerce, automated labor represents an industry-wide shift that simply can’t be ignored.

Taylor Williams

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