Warehouse projection insights

• The global economy’s volatility has led to revised projections in the warehouse construction and automation sectors.
• Warehouse construction and fixed automation forecasts have been reduced due to factors like excess capacity, declining e-commerce rates and a slowdown in the economy, while the demand for mobile robots has increased, especially in the automated forklift market, driven by factors like pricing adjustments and rising labor costs.

With ongoing volatility in the global economy, Interact Analysis will provide mid-year forecast updates for warehouse construction, warehouse automation and mobile robots. As market conditions continue to fluctuate, significant adjustments have been made to the projections. While there has been a downward revision in warehouse construction and associated fixed automation, the outlook on demand for mobile robots has been raised.

Warehouse construction projections have been revised downwards. This adjustment takes into account factors such as excess capacity built during the pandemic, the decline in e-commerce rates and the overall slowdown in the global economy. These conditions have resulted in a reduction in the number of new warehouses expected to be built compared with our previous forecasts.

Moreover, forecast updates indicate a corresponding downward revision in fixed automation associated with warehouse construction. As companies re-evaluate their investment plans and prioritize cost-efficiency, the demand for end-to-end automation solutions has seen a decline. However, this downturn is anticipated to be temporary and its expected a rebound in warehouse construction and associated automation over the coming years.

In contrast, the mobile robot industry has shown resilience and even witnessed an uplift in demand. The forecast updates reveal a promising trend for mobile robot adoption. The current market dynamics, including pricing adjustments and evolving industry requirements, have contributed to this positive outlook. Mobile robots, particularly automated forklifts, have experienced higher-than-expected demand. Despite slower price erosion, increased labor costs have made mobile robots a more attractive investment option for businesses. As a result, the revised projections upwards to reflect this growing demand for mobile robot solutions.

Warehouse Construction Forecast Reduced

The updated forecasts show the construction of new warehouses is projected to decline. In comparison to the forecast made in Q3 2022, the current estimate is 6,700 fewer warehouses will be built by 2027. This reduction translates to a decrease of 1.4 billion square feet of warehousing space. The primary reason for this reduction is the lower number of fulfillment centers anticipated to be constructed. This can be attributed to excess capacity built during the pandemic, the decline in e-commerce rates and the overall slowdown in the global economy.

Courtesy: Interact Analysis

Warehouse automation orders expected to decline

In 2023, there has been a significant slowdown in the addition of new warehouses in North America and major European countries, amounting to approximately 35% fewer new warehouses compared with the previous year. This decrease has resulted in lower orders for end-to-end automation solutions, which are typically associated with greenfield sites. However, this slowdown will be temporary and warehouse construction is expected to rebound by 2025.

Downstream verticals slowdown

Consumer-facing verticals such as grocery, apparel and general merchandise, which have traditionally been the fastest-growing segments, experienced a slowdown in growth in 2022. This deceleration can be attributed to the decline in e-commerce demand during that period.

Upstream vertical upswing

Despite the slowdown in downstream verticals, upstream verticals, such as food and beverage, and manufacturing, are expected to witness an increase in demand. Manufacturers are investing in automation due to two primary factors: near-shoring and government incentives provided in regions like the Americas and Europe. The growth rate of food and beverage automation also increased in 2022, with many consumer packaged goods (CPG) companies investing in new facilities. This upward trend is expected to continue in the short term.

APAC region showing resilience

While North America and Europe experienced a slowdown in automation demand, Asia-Pacific (APAC) seems to be less affected by global macroeconomic conditions. The region continues to exhibit growth rates similar to those seen in previous years.

Increasing popularity of point solutions

As the demand for end-to-end solutions decreases due to fewer greenfield facilities, warehouse operators are shifting their focus to existing facilities. Consequently, there has been an increase in demand for point solutions used within brownfield sites.

Courtesy: Interact Analysis

Mobile robot revenue forecast increases

The forecast for mobile robot revenues has had an upward adjustment, and which has tempered the prediction of price erosion considerably. Prices of AGVs and AMRs have not fallen as quickly as expected so far in 2023, and in some cases have increased. Supply chain challenges have led to raw material price increases which have been passed on to customers. Additionally, extended lead times have shifted negotiations from price-focused to delivery-focused discussions.

Pricing uplift

The long-term expectations for price reductions have also changed. While it is common for prices to decrease with growing product volumes in other industries, the forecast predicts that mobile robot prices will be sustained by rising labor costs. This factor is expected to make the return on investment (ROI) for mobile robots more attractive.

More brownfield solutions, less greenfield building

The reduced forecast for warehouse construction is expected to particularly impact shelf-to-person robots, as the majority of these robots are added to greenfield sites. Consequently, the forecast for revenue from shelf-to-person robots has been lowered. On the other hand, there has been a noticeable acceleration in the adoption of AMRs by third-party logistics (3PL) providers globally. This trend has led to an increase in the forecast for person-to-goods and tote-to-person robots, which are favored by 3PLs.

Courtesy: Interact Analysis

Forklift demand staying strong

Forklift demand has outperformed expectations, with the automated forklift market performing better than projected in 2022. These forklifts are typically part of large multi-vehicle solutions that can take up to two years to be commissioned. Due to the potential variability in commissioning dates, it becomes challenging to accurately predict when revenues will be recognized. In 2022, revenues from automated forklifts were nearly $200 million higher than previously projected.

The forecast for automated forklift shipments has also been increased for the period leading up to 2027. The higher-than-expected order intake in 2022 and more rapid adoption, especially in the United States where larger fleet sizes are typically adopted, have contributed to this upward adjustment.

Regional variations in the forecast

The shipment forecast for Europe, the Middle East and Africa (EMEA) has been reduced due to weak short-term demand. Various macro factors, such as the Ukraine war, high energy costs, high inflation and interest rates, have resulted in a slowdown in customer spending in the region. In contrast, the United States economy is performing remarkably well, leading to increased demand for mobile robots.

Overall, the latest updates to the forecasts indicate a dynamic landscape in the warehouse construction and mobile robot sectors. While poor economic conditions are expected to slow down warehouse construction, mobile robot revenues are anticipated to grow, driven by various factors such as pricing adjustments, industry dynamics, and shifting demands across different regions and verticals. These developments highlight the need for continuous monitoring and adaptation in response to changing market conditions.

– Interact Analysis is a CFE Media content partner.

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