The Labor and Location Challenges Tied to Industry 4.0

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The Internet of Things (IoT), automation, connected and wireless networks, Artificial Intelligence (AI), big data, and Cyber-Physical Systems (CPS) that facilitate innovative human/machine interactions – these and other emerging technologies are driving a fourth industrial revolution.
 
Industry 4.0 is transforming the very nature of work across all industries in the early 21st century, with an impact expected to be no less dramatic than that of mechanization and the steam engine in the late 18th century, the assembly line in the early 20th century, and the widespread adoption of computers in the workplace in the 1970’s.
 
“You go to bed an industrial company. You wake up in the morning a software company.”
– Dr. Stefan Bungart, Head of Digitalization, Siemens

The Bureau of Labor Statistics is finding that each year, as it compiles a list of jobs in the marketplace, 1.0% - 1.5% of the occupations identified didn’t exist the previous year. That statistic might not sound particularly noteworthy, until one extrapolates 16 years into the future (i.e. the duration of a student’s high school and university education) when this trend will have altered the economic landscape from bottom to top, from individuals to nations.
 
Some existing job roles will change dramatically as AI replaces tasks once performed by humans. Other occupations will disappear entirely. Colleges and universities will need to evolve rapidly to train graduates for these new occupational categories, and individuals’ skills will have to keep pace with technology to remain relevant in the workforce. Likewise, the organizations these individuals work for, their unions, trade associations, and the localities, states, regions, and countries the organizations operate in will need to continuously adapt to remain competitive globally.
 
Geography is not dead
For years we’ve been told borders are disappearing, that, from a business perspective globalization and the Internet are rendering geography meaningless. Not true; while globalization has certainly changed the economic playing field, it hasn’t leveled it. Geography matters more and more. Industry 4.0-driven disruption – both positive and negative – will be localized; there will be winners and losers in places all over the world as companies, cities, and countries grapple with how to adapt.   
 
Countries taking a leadership in AI and technological development right now – US, Canada, UK, Germany, China, South Korea, and Israel – are poised to capture a disproportionate share of economic benefit over time as early adopters; whereas, laggard countries will likely be playing perpetual catch-up, capturing a smaller share of the aggregate benefits. That same dynamic applies to specific localities within countries, among industry sectors, and among companies in any given industry.
 
Companies base location decisions on many factors including where they can best serve their customer base or where talent may be found, but technology is becoming an increasingly important consideration, and it’s not being adopted and implemented in the same way everywhere. Consequently, successful companies will be looking at world maps and paying attention to how, or if, different countries and regions are adapting to Industry 4.0 more or less effectively than others.

Implications for CRE
As corporate real estate professionals, we have an important role to play, particularly as we refine our understanding of Industry 4.0 and how it ultimately influences business needs and corporate real estate requirements.
 
Because change is happening so quickly, it is critical for CRE managers and consultants to monitor trends at multiple levels – at the human experience-level (understanding how individuals interact with each other and their workplace) and at the building level (understanding how buildings interact with each other, with little human intervention.). From there, we need to begin thinking in terms of the evolution of cities and smart-city planning; how our smart-buildings can connect with smart cities. More and more, our role will include educating our clients on the technological infrastructure of buildings and how that infrastructure will facilitate a changing workplace.

We need to monitor labor market trends as well. Industry 4.0’s influence will shape location strategies, as organizations compete to attract and retain talent proficient in current technologies, with an education that has prepared them for new and emerging occupations. Additionally, more organizations will reevaluate their property ownership and leasing decisions. As economic, technological and human resource unpredictability increases, flexibility will be sought for a premium.
 
Industry 4.0 is a transformative force, both globally and locally, ushering in an era of extraordinary possibility and uncertainty. At this dawn of the fourth industrial revolution, we’re still learning and theorizing about the impact on the real estate industry, though we do know the impact will vary dramatically by industry, asset, occupation, and geography. It’s incumbent on all of us to keep learning.

GWassmansdorfHeadshot-(3).jpgGregg Wassmansdorf
Senior Managing Director
416.998.8848
gwassmansdorf@ngkf.com

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