Tom Arnold, the global head of real estate at Abu Dhabi Investment Authority (ADIA), recently travelled to China where he met officials at Alibaba.

China’s e-commerce giant is one of ADIA’s largest real estate tenants in the country, and Arnold was keen to learn what it had been doing right but also why Alibaba had been developing some of its own facilities. “In other words, there was something that they needed that we weren’t necessarily accommodating,” he says.

The overriding message is that technology – especially in the world of e-commerce – is running at its own pace, and the real estate industry needs to keep up. “I’m not going to rely on a research piece or [something] second-hand for that type of information,” Arnold says of his trip to China.

Understanding how technology will change the logistics market over the next 10 to 20 years is critical for long-term investors like ADIA, he says. The sovereign wealth fund’s real estate arm is taking the point so seriously that it has assigned a dedicated team to ensure it remains abreast of technological developments and can respond accordingly.

Similarly, Aberdeen Standard Investments, which manages more than €8bn in logistics assets, mostly in Europe, is seeking to understand what the changes will mean. It anticipates a “technology-led inflection point”.

One of the key changes relates to automation and the effect this will have on the staff in logistics facilities. Put bluntly, robots and higher-skilled workers will become commonplace, effectively displacing the traditional need for lower-skilled workers.

Today, 11m people work in the logistics and transportation sector in Europe, according to a joint report by Aberdeen Standard and Transport Intelligence, with many working in low-skilled, highly manual roles like picking, sorting and moving goods. The size of that labour force could shrink with 47% of survey respondents saying that warehouse automation will impact the amount of labour required to operate facilities.

“There is an inflection point approaching where logistics becomes much less about generic sheds employing low-skilled workers and much more about high-skilled workers working with increasingly sophisticated technology,” says Craig Wright, senior research analyst at Aberdeen Standard.

ADIA has made similar conclusions. “One trend I see is fewer and fewer human beings, and larger and larger industrial buildings,” Arnold says. “It used to be that machines and robots were very effective on medium and large-sized goods, but if you were picking paper clips or nails… human hand dexterity was superior, so humans were running around backstopping some of that. The technology has moved now that a robotic hand can pick a straight pin out of a box. So some of that nuanced movement that used to be the domain of a human supervisor is no longer necessary.”

The institutional real estate industry has become somewhat fixated on technology, as it becomes a common feature of research reports and conference programmes. The logistics market is perhaps one of the most interesting case studies and confirms that such fixation is well placed (for more, start reading here).

Logistics has been one of the most favoured – and best-performing – real estate sectors in recent years. Its long run of performance has begun to raise the question of how long it can last. But all indications suggest it is still in an enviable position versus other property markets.

As the survey by Aberdeen Standard and Transport Intelligence shows, demand is still outweighing supply. More than two thirds (34%) of supply-chain executives said they did not have enough capacity to satisfy customer demand over the next one to two years; a further 39% said that a lack of available, efficient logistics facilities were hindering the growth of their businesses.

In the US, institutional investors are desperate to increase their exposure to the sector – mainly, because it is one of the few parts of the US property market that can be expected to generate strong returns. Some of the country’s biggest core property funds are having to resort to innovative ways redress their underweight positions – which can be difficult when individual assets are typically small (see here).

From here we look at the growth of pan-European and pan-Asian core real estate funds, which are still much smaller in number and size than their US counterparts. Europe in particular is becoming more competitive, not least with the arrival of a new Australian outfit. IPFM, the creation of IFM Investors and IPST, is raising capital among Australian superannuation schemes to invest in core European markets (see here).