It was announced recently that the U.S. Patent Office awarded Amazon patent approval of an “AIRBORNE FULFILLMENT CENTER UTILIZING UNMANNED AERIAL VEHICLES FOR ITEM DELIVERY.” This is essentially a warehouse in the sky designed to air-drop packages directly to consumers. At first, I thought Amazon had finally gone too far with the last mile but, after reading the full patent, it started to become clear the implications may be less science fiction than at first blush.
Let’s start with the basics of the concept: Amazon proposes a huge helium-filled blimp that floats above commercial airline traffic at around 45,000 feet and rarely (if ever) lands. Suspended from that is a warehouse with presumably lightweight items they refer to as an Airborne Fulfillment Center (AFC). When a consumer orders an item that is stored in the AFC, that item drops from the sky attached to a new quasi-drone that glides to its destination via a wing. After dropping the package off with the consumer, the drone does not return to the AFC but rather to a local Amazon warehouse. Every so often, smaller delivery blimps will ascend to the mother ship to deliver the delivery drones, supplies and, potentially, the people who work in the AFC.
Image Source: Amazon's Patent
This advanced concept and truly out-of-the-box thinking may seem like it’s 100 years out before becoming reality, but don’t forget that, just over 60 years ago in 1955, no one had ever heard of a TEU. There were no containerized cargo ships. Malcolm McLean launched the world’s first containerized cargo vessel, the Ideal X, on April 26, 1956, and it carried 58 standardized containers. Almost everyone dismissed McLean's idea, but the proof was in the numbers; he was able to effectively show a significant reduction in cost, and the modern era of global ocean-going containerization was born.
The implications for this type of delivery are immense. A few examples:
Of course there are a few details that will need to get worked out, and the FAA will certainly need to be heavily involved with regulations. The graphic below is from the United States Air Force and overlays all commercial airline routes in the U.S. Now imagine thousands of drones with boxes trying to glide its way through this web of airplanes:
Image Source: Remotely Piloted Aircraft Report
The effect on land-based industrial warehouses remains far from clear. Amazon currently leases roughly 70 million square feet of industrial space across the continental U.S. How much of that do they plan to go airborne? Who knows? They will certainly need to keep some of the square footage on the ground for the delivery of the feeder drones and return of the delivery drones. One might think that these warehouses could be in even more remote locations since they aren’t worried about the last mile “horizontal” delivery costs via truck. However, don’t forget the labor factor involved with these drones and technology behind them could be enormous. Finding qualified employees to service, repair and potentially fly the drone network would almost certainly require it to be in close proximity to metropolitan areas.
Our advice to current industrial owners and occupiers is to watch this technology and talk about it at cocktail parties but certainly not make any investment decisions based on flying warehouses. Just as Malcolm McLean revolutionized the containerized cargo industry, this didn’t happen overnight.
Marty Busekrus is a Director in the Miami office of HFF, where he is in charge of industrial investment transactions throughout the southeastern U.S. In this role, he is responsible for sourcing industrial opportunities by partnering owners with potential capital sources for joint ventures, debt solutions and/or buyers.
Prior to joining HFF in December of 2012, Mr. Busekrus was a Senior Associate in CBRE’s Private Capital Group and focused on the dispositions of office and industrial projects throughout Southeast Florida. He got his start in commercial real estate at NAI – Rauch Weaver Norfleet Kurtz & Co in Fort Lauderdale, where he specialized in investment sales and was the No. one sales producer for two of the four years that he was there.