1. When Robots come to town: What does automation do to Local Industrial Space Markets?
Bill Wheaton
MIT, CRE
Senior Consultant, CBRE

2. Robotics Robots are made by a number of companies internationally
Unlike “capital” A robot must be programmable - to do a variety of tasks under varied conditions
“Installing” a set of robots is a large part of the job: programming, coordinating, adjusting can take years.
Industrial Robots concentrated in certain industries:
auto, chemicals, Electronics, appliances,
metals, glass and ceramics.

3. Hypothetical Robot impacts:
Robotic based factories require less (more) production space per unit of output relative to workforce production.
Robotic factories need less (more) surrounding ancillary space for inventories, spare parts…
Towns with robotic factories generate less (more) industrial space demand for installers, parts makers, service contractor, supply chain
More space demand = new factories, higher rents
Less space demand = vacant factories, lower rents

4. Robot data: IFR (International Federation of Robotics)
Records annual sales of robots to each company (industry) in each country since 1993 (EU), 2004 (US).
No data on where the Robot is installed (that’s proprietary data of the purchaser). Actual installations are endogenous
Estimate Robots in each MSA based on company (industry) adoption of Robots and industry (company) mix in the MSA.
Calculate the ratio: Industrial Robots/total employment for each US MSA and then its growth over time
( to avoid financial crisis impacts).

5. where are the robots? Growth of robots/worker 1993-2007

6. Industrial Market data: (CBRE-COSTAR)
Quarterly data on all industrial buildings, with vacancy rates. Occupied space = (1-V) x stock.
Occupied stock is best measure of ex-post space demand or space “consumption”. First difference is “net absorption”
data on all CBRE brokered industrial lease transactions (15,000 yearly). Information on contract rent (NNN) each year of lease. Calculate “total consideration /sqft/term”.
With data estimate hedonic rent equation for each market that includes time fixed effects = a rent index
% yearly change in rent index (cpi adjusted)

7. Industrial Market data summary:

8. Statistical analysis
Does the degree of robot “adoption” in a market impact :
Cumulative Industrial rent growth (% )?
mean across MSA of -4%, SD 21% (CBRE, constant $ REnt)
Cumulative change in occupied industrial space (% )?
mean across msa of 33%, SD 18% (CBRE data)
Regression model results across 44 mSA:
increase of 1 more robot per 1000 workers (mean increase of 2.0, SD 1.4)
- lowers industrial rent growth by 7-8%
- lowers occupied stock growth by 6-7%
- estimates highly significant statistically

9. Regression results Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

10. Robustness checks
Could robot adoption over time simply be correlated with other factors , or other changes occurring in local economies over time that had negative space impacts?
- IT industrial transformation ( % workers with college education in 1990)
- Exposure of the local economy to Chinese, Mexican imports (based on industrial mix)
- Exposure of local economy to offshoring of jobs (based on industrial mix).
Adding these variables into the regression has virtually NO Economic impact on the previous results.

11. The future
Mirrors the impact of robot adoption on local labor markets estimated by: Restrepo and Acemoglu (MIT, 2017)
Their results: Robots lower both labor demand (Employment growth) and wages
However, difficult to extrapolate such results to the broader impact of robots on the general economy
There: making and servicing robots generates jobs and factory demand.
And Greater efficiency of Robots means increases in demand for other goods = increases in labor/space demand