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Automated Trucking
A CBRE Research Perspective

November 17, 2017
Electric and Automated Trucks Reduce Fuel and Labor Costs

We have seen the rise of automation change real estate, such as how automobile ownership has prompted widespread suburbanization. Although the housing sector has been most affected by the ubiquity of motor vehicles, as future vehicles become increasingly autonomous, we will see trickle effects on housing and retail, and direct effects on logistics facilities, from electric and self-driving trucks.
Between 2008 and 2015, fuel represented the largest share of total average marginal trucking costs at 34%, but in 2016 dropped to 21% primarily due to massive domestic oil production driving down fuel prices. Total driver costs, wages and benefits ticked up to 43% of the total costs in 2016, surpassing fuel as the leading cost for trucking companies, according to the American Transportation Research Institute (ATRI).
Given the challenges with driver shortages, an aging workforce and carrier productivity, driver wages have increased by 27% over the past decade. This is partially attributable to many states and municipalities passing legislation to increase minimum hourly wages from the federally mandated $7.25 to as much as $15, according to CBRE Research.
With the adoption of electric and driverless trucks, the trucking industry will be able to cut both its fuel and labor costs, shifting its focus toward building technological systems that can meet the demand for goods more efficiently while focusing more on inventory and occupancy costs. 

Figure 1: Total Trucking Costs - 2016

Self-driving vehicles have potential to significantly expand the daily coverage that trucks can provide to a logistics operator. Per U.S. federal regulations, truck drivers are restricted to 70 hours per week, effectively limiting them to a maximum of 3,000 miles of travel, or 400–500 miles per day. Automated driving would allow these restrictions to be relaxed, increasing both distance and coverage and thereby bringing remote storage locations into play. The result will be lower delivery costs for the consumer; with compression in industrial and distribution cost structures, e-commerce sales likely will increase.
Autonomous trucking technology is currently being tested all over the world. In April 2016, a caravan of about a dozen self-driving, semi-trailer trucks traveled more than 2,000 miles across Europe, crossing four national borders. The convoy was organized by the Dutch Ministry of Infrastructure and the Environment, and included rigs from six manufacturers. The trucks journeyed from manufacturing facilities in Belgium, Denmark, Germany and Sweden to the port of Rotterdam in the Netherlands, using a method known as “platooning,” in which they form a column, following one another closely (at about 30 feet) at a constant speed, connected by Wi-Fi. The trucking industry is bullish on this technology, and according to a survey by Eyefortransport (EFT), 59% of respondents anticipate driverless trucks in their operations in the next nine years. The success of this trial led Germany to pass comprehensive self-driving vehicle laws in mid-2017, paving the way for mass rollout of self-driving vehicles on German roads. 
In Asia Pacific, several governments, in partnership with private companies and universities, are road testing self-driving technology, with Australia, Singapore, Japan and China leading the region. In late 2015, Volvo partnered with industry bodies to road-test autonomous vehicles in southern Australia. In Singapore, the government has fast-tracked self-driving technology with the help of technology start-up nuTonomy; they tested fully autonomous taxis in Q2 2016. 
Local testing has also been done in China and Japan, helping to pave the way for autonomous vehicles in both the consumer and industrial markets. Ford and local partner Changan Auto-mobile completed a 1,200-mile road test from Chongqing to Beijing in six days. While many of these pilot studies have been for the consumer, they can easily be adapted to the industrial transportation market. Singapore’s Ministry of Transport (MoT) and Port of Singapore Authority (PSA) aim to utilize the platooning method to increase logistics efficiency and reduce traffic congestions in the small city-state.
The rise of self-driving trucks will lead to growth in IT infrastruture and data centers, as there will be a need for real-time traffic data and for providers to be located near their end users. This proliferation will support the development of the “internet-of-things,” with electronic sensors and software in devices, vehicles, buildings and other items collecting and exchanging data. 
Last Mile Delivery
Autonomous technology will also have a significant impact on last-mile delivery. It is unlikely that driverless trucks will be able to handle the doorstep delivery of parcels anytime soon, but we may see the automation of the delivery support vehicle. Some speculate that automated handling technologies may be able to deliver parcels to fixed loading stations. In addition to the fixed locations, driverless trucks may even act as mobile repositories, available for parcel delivery and pickup in certain locations at certain times of the day. It is important to note that last-mile delivery facilities will need to make the modal shift from diesel to electric, and be equipped with extensive battery loading stations.
Autonomous Vehicle Technology Timeline
The timeline for the realization of autonomous vehicles can be broken down into three stages: the technological development stage, the partial driver substitution stage, and the complete self-driving stage, evolving into widespread penetration of driverless cars and trucks. We are currently in the first stage. Here we see the introduction of autonomous features, but the continued need of a licensed driver with full legal responsibility. The corresponding implications will be experienced by long-haul freight and logistics, storage facilities and retail.
In the second stage (partial driver substitution), the requirements for a legally responsible operator will be relaxed, and the driver of the vehicle will be able to multitask. During this stage, one effect may be increased urban sprawl, as self-driving cars will make long commutes more tolerable. During this period, logistics facilities may start to drift further from the seaports, as proximity to the trans-shipment point will not be as critical for the truckers. 
Farther out is the complete self-driving stage, where cars and trucks will be able to drive from point A to point B without human intervention. This stage may usher in a substantial increase in global demand for goods, with trans-shipment capacity growing exponentially. Fuel consumption would likely be reduced for regional transport; the freight transportation industry could potentially save upwards of US$170 billion as a result, according to some industry experts. Such implications would likely vary by carrier, however, as larger, well-capitalized fleets would have a competitive advantage. 
Although full implementation of driverless trucks remains far ahead in the future, advances in the technology have come quite rapidly—quicker than experts had expected. The adoption of this technology may also come faster than anticipated, like smartphones and other transformative products that have been accepted quickly throughout the world. Overall, the industry is on board, and according to EFT, 51% of the trucking industry is expecting driverless trucks by 2025.

Which Regions Will Adopt This Technology
Since basic infrastructure is necessary for the functionality of self-driving vehicles, developed markets are better suited for this technology in the short term. The ability to pay for and implement the technology is also higher in these markets than in emerging hubs. The U.S., European and developed APAC markets (Australia, Japan, China and Singapore) are currently most likely to adopt self-driving vehicles—particularly as they are already testing the technology. However, emerging markets stand to benefit the most from this technology, as traffic congestion and traffic-related deaths are more prevalent in countries such as India, China and Brazil, and autonomous vehicles would likely improve driving standards if the cars are controlling the flow of traffic. Furthermore, as these economies mature and their middle classes grow—especially in China—demand for goods will rise, which will mean greater need for additional logistics space and distribution capacity. Finally, China and Singapore may well become leaders in the implementation process, as the technology has strong government backing and faces fewer regulatory hurdles in those countries. Singapore’s Ministry of Transport is committed to developing the autonomous technology, which should be aided by Singapore’s new “SMART Nation” policy, which seeks to digitally connect everything and everyone in the city
Figure 2: Timeline of autonomous vehicle technology: Short, medium and long term
Powering the Real Estate that Powers Business
Industrial and Logistics Services
Legal Implications
While some legislation on automated vehicles and standards has been passed, there is still a long way to go for this technology to operate within legal boundaries. Cyber security laws will be necessary as well, since large amounts of data will be generated. In the U.S., for example, the initial steps have been taken to formulate a legal framework, with California and Nevada granting licenses to self-driving autonomous vehicles and the U.S. Department of Transportation issuing guidelines for the implementation of autonomous vehicles. At least 23 states have passed 53 pieces of legislation on the subject; however, some argue that federal regulation is necessary to prevent varying state laws from hindering state-to-state implementation. The White House proposed a $4 billion bill that aims to connect federal regulators with automakers, to develop policies and laws that enable safe and reliable driverless vehicles. This bill has neither congressional approval nor appropriation at this time, however. In Asia Pacific, China and Singapore should have fewer legal issues, with a more concentrated regulatory system. Other nations like Australia and Japan, as well as European countries, may have more regulatory issues to overcome before any self-driving technology can be implemented.

"Although full implementation of driverless trucks remains far ahead in the future, advances in technology have come about quicker than experts anticipated. The adoption of this technology will also come faster than anticipated." Richard Barkham, CBRE Chief Economist 

Consequences for Real Estate
Ultimately, autonomous trucking technology is likely to affect industrial real estate in three important ways:
  1. Lower transport costs will mean that, at a given level, a supply chain will need fewer warehouses. We expect this to strengthen the already visible trend of warehouse consolidation and increase in scale. As a result, we are likely to see fewer but larger warehouses being built in remote locations.
  2. Last-mile delivery facilities will be crucial elements in the network, as they need to be able to make the modal shift from diesel to electric. They will need to be able to receive large (semi-) automated truck convoys and deploy electric city delivery vehicles. The sites will need to be equipped with extensive battery loading stations. 
  3. All warehouses will need a courtyard that allows automatic maneuvering, accommodating the self-driving trucks as they pass to and from the facilities.  

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