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Robbert Heekelaar, the vice-president for architecture and emerging technologies at Prologis, explains why the developer has invested in its own laboratory to test out the latest logistics and customer solutions.

Rafał Ostrowski, ‘Eurobuild CEE’: What is Prologis hoping to achieve from investing in innovation?

Robbert Heekelaar, vice-president, architecture and emerging technologies, Prologis: What we are doing is providing our customers with solutions to existing pain points. If there are ways in which we can improve warehouse functionality in some shape or form, we will do this. This is completely customer-oriented. If our customers have a particular challenge, or if we see that, for instance there are high costs for energy or labour, then we can run experiments to see if, as a landlord, we can provide a more efficient solution. Our approach to innovation is geared towards our customers.

How can costs be reduced through innovation?

One of the highest supply chain expenses that our customers face is on transportation. This is an interesting subject for us – what can we do as a landlord to help lower these costs? We could explore for example, whether we can reduce docking time or lorry standstill times at warehouses. We could improve traffic flow and make sure that trucks don’t get stuck in traffic jams waiting to unload their cargo, by predicting when the lorry is going to arrive and when it’s likely to leave. Working with other companies to make sure we have more road calculation information on their routes is also a possibility. So really, there are many areas worth exploring that can help customers save on transportation costs. Another important topic is labour. As many operators will attest, it’s difficult to get the right personnel and we believe that developers today can have a greater role in securing qualified labour. We want to make sure that our customers have the right facilities, in the right places, where people are attracted to work. Our first Well ‘Gold’ certified building is in Tilburg in the Netherlands and provides our customers’ employees with a good, safe and healthy environment to work in. Effectively, there are many costs that our customers have to contend with and our aim is simple – to help them become more efficient and reduce operating costs.

Well certification has already become popular in the office sector. How does it work for warehouses?

Actually, what we did was to take a look at Well certification for offices and how this could be applied to warehouses. Together with the International Well Building Institute we have established the Well building standard for logistics real estate.

How is a Well certified building different from one that isn’t?

There are seven main criteria and many different compliances within that, which are have scientifically tested and measured in operating conditions. Very simply, it guarantees a brighter, more pleasant place to work in, with more light and better air quality. There will be a lot of greenery in the warehouse, with plants on the wall that filter the air and improve its quality. There will be more fresh air flowing through the warehouse. It will be a clean warehouse. You know there are many small things that you have to do to get this certificate, a lot of things we have to comply with.

Will you be seeking Well certification for any buildings in Poland?

We are moving things along. It’s still a bit of a pilot project and we’re not including this in our standard specs just yet, but probably that will come. What I do know is that a few of the next developments we are about to build in the Netherlands are to be Well certified. Everything of course depends on our customers’ expectations. If our customer is interested in it, we can discuss it and tailor the facility to their needs.

Are Prologis’ standards any different to the buildings of other developers?

There are many factors by which we are able to distinguish ourselves. From service to scale, there is so much innovation in the pipeline that in the near future we will be delivering fully smart warehouses – and then we will be totally different to other developers.

But what is a smart warehouse really?

A smart warehouse is one that can actually provide you with a lot of meaningful information that you can use to improve your business operations. A lot of it involves the Internet of Things (IoT), but it is not only about IoT. It is generally about how you gather information from the warehouse. So, yes, we have to put up sensors, but we also have to give our customers a good internet fibre line. We have to give them a mesh network to get the data out of the warehouse, we have to give them a number of points where they can put additional sensors. Thus we have to give them the entire infrastructure needed in order to make the building smart.

Last November Prologis set up Prologis Labs in California as a centre for warehouse experiments. What is your assessment of the first year of the lab’s operations?

The first few months were obviously much like any start-up. First we had to sign a lease. So we, as Prologis Labs, became a customer at one of Prologis’ facilities. And then we had to do what all our customers do - equip the warehouse. That that was a very good learning exercise. We then started to experiment. We have made great strides with smart metering, for example. It’s now important that we prioritise the right experiments as we have so many big questions, so many use cases, so many problems coming in, that we have to make sure that we start by doing the right things in the right place, at the right time. We focus on doing a lot of things together with our customers, who mostly have very highly utilised warehouses and don’t have the space to do the experiments that they would like to do. We invite them to our facility and we determine the use case together. That has been very interesting so far. We’ve already completed three different experiments with customers.

LED technology has become the warehousing standard in the last few years. Is there any other tech in the warehousing sector that is set to become so successful?

I think IoT will definitely change the whole perspective. Another is smart lighting in combination with LED, which goes on and off as you move through the warehouse. And one thing I find interesting is that we are still struggling with the rules and regulations and the various aspects of automated guided forklifts. This is very interesting, but because such forklifts can drive themselves there are certain rules and regulations that make this technology a little bit too expensive or too time consuming to use. Unless you change your business model and go from ten-hour warehouse utilisation to 24/7. The automated guided forklift example will be a very interesting prospect if it is embraced by customers. They go a little bit slower, but at least they work through the night. And that’s what people are starting to recognise.

What’s happened with solar energy? Warehouses would seem to be ideal for installing solar panels, but this is not really happening on a large scale.

It is actually starting to happen. We are fitting solar panels on a lot of roofs. What we are checking out now is what we can actually do with solar energy that will directly benefit our customers. Because you obviously have to have a good business model for this, but mainly because it’s not very efficient as you often need to give generated solar energy back to the utility company. So what we are trying to do – and we are doing experiments on this – is find out how we can export the energy from solar panels to batteries and how our customers can use that battery power to make things cheaper for everybody. In different regions we have different pilot projects for testing batteries

Anything here in the CEE region?

I think we have one battery trial in Poland. It is just in the exploration phase. We also have a solar-paving project in Hungary which uses special tiles in the road that can charge electric vehicles at Prologis Park Budapest-Harbor. This year or the next, around. 50 of our buildings in Netherlands will be using solar panel technology.


Prologis Labs, the new logistics related innovation centre in San Leandro, California

Returning to Prologis Labs, what percentage of the projects you are testing do you think will be successfully deployed in the future?

It’s too early to tell. This is the start-up year, so it’s very difficult to determine the success rate. If you ask me what my gut feeling is, I would tell you that at least 40 pct of everything we are testing (and doing) will end up not being deployed at all… and that’s not because we haven‘t been successful, but because of the cost or timing or market maturity, or we haven’t been able to find the right use case for it. We are not here to deliver successful projects in order to test things that are out there, but to see whether an opportunity exists for Prologis. We stand to gain better knowledge of good operations and we can advise our customers on what to do and, importantly, on what not to do.

Why have you chosen the path of setting up your own lab specialising in the innovation sector, when you’re not really a technology company? Isn’t it better just to employ a firm that specialises in proptech?

We could have chosen to do that, but if you consider the fact that we would like to understand our customers better and would like to know what kind of pain points they encounter, what better way to do this than to set up your own fully-functioning warehouse? It’s about understanding. If you hand this over to an external company, then they will gain this understanding. If you want to show your customers that you are the best party to do business with, it’s better that you gain it yourself. For us this is not some marketing exercise. If you look around our facilities, you won’t see any flying shiny things or designer furniture or whatever – it’s a place of work. We just want to learn and we want our customers to benefit from that. That’s the reason why we set up our lab.

What are the typical challenges that companies face when they want to invest in proptech and become more innovative?

Proptech has now become a buzzword – everybody is using it. Many companies are trying to help you embrace proptech and that makes it more difficult to select the right company you actually want to work with. At the moment, a lot of companies are offering you much of the same thing – yes, we can provide you with AI, yes, we can offer you machine learning, but it takes a lot of research to select the right one. So proptech is good in a sense, but you just have to do what you normally do in an organisation: find the right fit and go with it.

And how do you do that?

In many different ways. Most of the time, it’s just a lot of hype and some marketing. What sometimes happens is that people look for the solution first and then for the problem that it solves. But you have to start the other way round. You have to know your organisation, you have to know the problems it has. If you have problems, if you have certain use cases, then you can reach out to global proptech companies and start a discussion on what you are specifically looking for instead of just listening to people who come to you because they have something to offer.

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