Report Says RFID Technology Will Not Affect Real Estate Demand
A recent report by the San Francisco–based AMB Property Corp. said emerging radio frequency identification technology (RFID) should not have the dramatic impact on real estate that some experts have been predicting.
RFID allows manufacturers and retailers to track their goods with small wireless tags. Major retailers, including the Target Corp. and Wal-Mart Stores Inc., will be using the tags to track merchandise next year. As a result, some analysts said the technology could substantially reduce inventories and alter demand for warehouse space.
But that’s unlikely, according to David C. Twist, AMB’s director of research, who said that the efficiencies created by RFID will generate opportunities to boost inventories..
AMB’s real estate division owns and operates industrial real estate in North America, Europe and Asia.
“Our research indicates that RFID-generated inventory reductions will be more than offset by increases in SKU [stock-keeping unit] proliferation, shorter product life cycles, globalization and distribution outsourcing,” Twist said. “The net effect of RFID on the macro demand for occupied industrial real estate will likely be less than 1 percent of overall net demand.”
The report points to the mid-1980s, when analysts said that new bar-code technology and a host of other advances in information technology could substantially reduce demand for industrial real estate. “The opposite occurred,” Twist said. “Since 1980, occupied industrial space has increased 45 percent.”
Twist said broad-based implementation of RFID faces significant challenges because of a lack of universal standards and concern from consumer groups that fear the technology’s ability to store information about consumers and tag items beyond the sales floor will lead to privacy issues.
Issues about cost and the operation of the tags on multiple frequencies have been raised. The report did conclude that RFID will have a profound benefit on global businesses and be in widespread use within the next five to 10 years. The main benefits will come through speeding up warehouse activity and inventory turns, cutting handling and transportation costs, and reducing theft and fulfillment errors, according to the report.
“RFID’s impact on logistics real estate will be less focused on reduction in space needs and more focused on driving efficiencies through configuration and design,” Twist said. “Look for increases in cross-dock facilities as goods move more quickly. Clear height will become less important, but layout of the storage and staging areas will be more important. Dock doors will become increasingly productive as trucks spend less in loading activities.”
—Robert McAllister
