Dive Brief:

• Chinese retailers are starting to reap the benefits of smart warehouses — facilities equipped for robots and enabling more automation — with the latest in a string of opening announcements coming today from Hong Kong’s first fully automated and unmanned warehouse service.
• To be sure, the conversion is slow everywhere. But investors are starting to circle in anticipation of a surge in value and have acquired more warehouse space in China than ever in 2017. The end result could be a completely different economic equation for warehouse owners, according to The Wall Street Journal. 
• In the U.S., it's still unclear how upgrades to smart warehouses will happen because owners and renters disagree over who should pay for upgrades, which can cost $150-$200 per sq. ft. compared to $10 in ongoing expense per sq. ft. for traditional space. 

Dive Insight:

Smart warehouses aren't just about the technology they contain. The buildings themselves often require structural upgrades to accommodate new equipment, higher ceilings and stronger air conditioning (robots like it cool), and all those upgrades can send the cost of interior work soaring. 

Though in China, the low cost of labor is the primary hurdle to the growth of smart warehouse space since the marginal gains in switching to tech is smaller. Eric Frankel, senior analyst at Green Street Advisors, told Supply Chain Dive that cost is indeed the biggest hurdle to adoption in the U.S., but it's not the only one. 

"Who pays is probably the biggest hurdle, but it’s also the nature of logistics companies, which generally have poor credit quality and value flexibility as their contracts with customers only span a few years," said Frankel in an email.

The major Chinese retailers including JD.com and Alibaba are investing in smart warehouse technology, which makes tech decisions and upgrades fairly straightforward, but for warehouse operators and landlords, how to configure a warehouse to best fit all comers is a tough needle to thread. 

"Any new customer would likely need a different set / layout of equipment / robotics / machinery within a distribution center," explained Frankel.