If Digital Connectivity Isn't A Problem Now For Industrial Property, It Soon Will Be
Go back a decade and an industrial building was often no more technically advanced than a large shed. The internet was rarely needed, while technology demands extended only to electric doors and basic utilities.
Today, this is no longer the case, said John Meko, vice president of operations at WiredScore. Technology is the cornerstone of everything. The growth in automation and robotics means that any lack of connectivity of industrial property is harming the deal cycle and limiting properties’ attractiveness to new tenants.
“Until now, technology has been an afterthought, and connectivity has been a tenant problem,” he said. “But the rapid adoption of technology is an opportunity for property owners to lead. If they plan ahead, forward-thinking landlords can present move-in connectivity to potential occupiers so they can be up and running quickly.”
Many industrial properties throughout North America are poorly connected, Meko said. In part, this is due to location.
Most of these buildings are outside of dense urban cores in digital deserts, so satellite internet is the main option for tenants that need to get online quickly, he said. However, a lot of this building stock is transitioning from low-tech to high-tech uses of space, putting high-speed fiber-based internet in greater demand.
A smart industrial building uses the same technology as other real estate, such as to control heating, ventilation and security. But on top of these core technologies, industrial and logistics buildings might need Internet of Things devices, robotics, sensors or smart metering.
Many units that have been used as storage facilities for dry goods now need such technology but lack the high-speed fiber and reliable mobile connectivity required, Meko said. Just establishing an internet connection when a tenant first leases a unit can take up to 180 days, he said.
While 90% of industrial and logistics tenants say their operations depend on reliable digital connectivity, 70% have experienced costly delays due to poor digital infrastructure. This also hurts landlords, as they are increasingly struggling to lease units that don’t have the right level of technology, Meko said.
“The rate of technology adoption among industrial tenants compounds year-on-year, which, when mirrored against the static nature of real estate, creates challenges,” he said. “A lot of assets need to be repositioned, or a landlord faces the crunch when the deal cycle comes around.”
The upside for landlords is that tenants are willing to pay more for technology-enabled space, Meko said. According to WiredScore’s research, 50% of occupiers would pay up to 10% more for space that guarantees digital readiness from Day 1.
This shift is similar to the evolution of the office sector more than a decade ago, he said. When WiredScore launched in New York, the norm was for office owners to deliver a box to a tenant, and everything inside the box was the tenant’s responsibility.
“Then tenants started asking more sophisticated questions and relying on technology, and landlords had to develop a mechanism for staying ahead of the adoption curve,” Meko said. “Now owners see this can be a differentiator for their business — they can provide a better experience for occupants, adding value that their peers might not. This is now playing out in industrial.”
WiredScore’s industrial certification can be used as a framework to either improve existing assets or incorporate better design into new developments. The team advises on a broad spectrum of areas across connectivity, mobile performance, sustainability, infrastructure setup and resiliency.
Industrial property owners can work with WiredScore at both development and operational levels. For new construction, the team works with developers from the start, ensuring they have the right infrastructure in place, such as physical pathways into the building and the right connectivity to provide a digitally enabled asset, Meko said.
For existing assets that landlords are looking to reposition to be more technologically advanced, WiredScore highlights gaps through on-site assessments that relate to factors such as mobile connectivity, infrastructure setup and sustainability technology. The team gives clarity about what improvements look like, which the landlord can share with existing and prospective tenants, Meko said.
Improving a property doesn’t have to wait for the asset to be empty. A landlord can engage carriers to proactively start construction and align timelines with an outgoing tenant, because a lot of work has to take place outside the building.
“Getting connectivity right accelerates the deal cycle,” Meko said. “Having information about time frames upfront and working proactively will engage prospective tenants, bringing a tangible financial benefit. And when you do sign a lease, getting tenants into a building fast is important.”
WiredScore brings expertise that a landlord or developer might not otherwise have access to, Meko said. Traditionally, industrial developers and operators haven’t needed to focus on technology as a differentiator, so they haven’t developed the internal expertise.
As the use of technology increases, this expertise is going to become more important, he said. Even if occupiers aren’t asking for technology yet, a landlord needs to be flexible about whom they can market an asset to.
“There’s a good subset of the market that doesn’t realize this yet, and some occupiers are still not asking the right questions,” Meko said. “Often, neither landlord nor tenants really know what they will need to use very soon, but there’s a good chance they’ll use better technology. Getting it right now only enhances the flexibility of an asset.”
This article was produced in collaboration between WiredScore and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
