Publications

- March 1, 2021: Vol. 8, Number 3

Here come the drones and a revolution in transportation

by Mike Consol

Name a new and emerging technology that has more uses than drones. One would be hard pressed.

CB Insights did a report that illustrated 38 different ways drones would impact business and society. Dronegnuity came up with a list of 128 commercial uses for drones. Impressive but unwieldy.

Even though drones were used during the Vietnam War, most people learned of their existence when the media started reporting about the U.S. military’s use of unmanned aerial vehicles (UAVs) to surveil enemy forces. They crisscrossed the skies over Iraq during the Gulf War one and two. The military quickly expanded their capability to serve as attack vehicles as well, in some cases carrying powerful hellfire missiles. The smallest military drones (so-called nano drones) are the size of insects and can be mistaken for one by casual observers. This allows the military to penetrate deeply behind enemy lines and often unnoticed.

The Black Hornet Nano is a military micro-drone developed by Prox Dynamics AS of Norway, and in use by armed forces in the United States, France, Germany, the United Kingdom and several other nations. Nano drones, though becoming a major military tool, also have obvious commercial application.

Like the internet, another U.S. Department of Defense project designed to help the country survive a nuclear war, drones migrated from military use to private-sector commercial use. There are about 1.3 million registered drones in the United States and more than 116,000 registered drone operators. U.S. officials estimate there are also hundreds of thousands of unregistered drones. The number of drones owned by hobbyists is around 490,000, according to the Federal Aviation Administration, while the number of commercially registered drones is about 380,000.

The U.S. drone market was valued at $13.5 billion for 2020 and is expected to balloon to $129.2 billion by 2025, and more than $43 billion globally. While the growth rate in the number of drones owned by hobbyists has slowed, commercial drone sales have accelerated.

One of the most exciting and talked about commercial uses for drones is for transportation, which, as the technology advances, could create nothing short of a transportation revolution. That would include delivery of products to consumers. Commercial drones are being considered by companies that have last-mile delivery needs, companies such as Amazon, UPS and Walmart among them. Drones will help reduce cost-per-delivery and delivery time, increasing profits, which will in turn increase the growth of the commercial drones’ market. A report from McKinsey calculated that if companies save 40 percent of their delivery costs using drones, they will boost profit margins by 15 percent to 20 percent, while decreasing their product or service costs by similar percentages.

Eliminating the need for short-route drivers to deliver packages, as well as circumventing lost time and productivity caused by street congestion, is a tempting equation for companies seeking more dependability and a streamlined cost structure.

As excited as the automated delivery of packages might be, there is a farther, more personal horizon that is creating excitement in the transportation business: the delivery of people from one location to another. While companies such as Uber and Lyft are excited by the prospect of driverless vehicles ferrying their customers to their destinations (and lowering costs by eliminating human drivers), autonomous vehicles still must contend with traffic congestion and delays. The prospect of larger-scale drones to pick up and deliver people to their destinations aerially, is a bold new opportunity.

Obviously, one setback is the drones of that size would need to have designated pickup and drop off points, erasing some of the convenience that ground-based taxis and Lyft and Uber vehicles currently provide. But the speed and excitement of that kind of transportation UAV could offset those drawbacks for many people. What’s more, the bigger prize might be drones that are larger still and serve as airbuses caring perhaps a dozen commuters to and from designated pickup and drop-off points for swifter commutes to and from the office. (For commercial real estate investors, particularly those committed to the office space sector, that kind of ease and speed of commuting for people who might otherwise telecommute could be a godsend.)

Let’s stipulate that a drone is a battery-powered vehicle, perhaps eventually a hydrogen-powered one. Anything so large that it requires a conventional combustion motor and pilot and we have veered into the domain of helicopters. It is the battery storage and power required to lift larger payloads that is yet to be fully developed.

Still, if you imagine human transportation via drone to be far-fetched, reconsider. Already, companies ranging from Bell Helicopter and Lilium Jet to Uber Elevate and Volocopter are working on air taxis and buses to move people place to place. Dubai, a Middle Eastern metropolis aiming to become the world’s pre-eminent “smart city,” has already embarked on a plan to create a drone-based air taxi service.

A 2019 report from San Antonio-based research and consulting firm Frost & Sullivan found that around 50 cities worldwide are evaluating the viability of “urban air mobility,” motivated primarily by traffic congestion that is overburdening road infrastructure. The report forecasts the air taxi market will see a compound annual growth rate of 45.9 percent between 2022 and 2040. The sector is expected to be initially dominated by hybrid, piloted vehicles, with electric air taxis making their debut after 2025, followed by autonomous aerial vehicles in 2030.

Another consulting firm, Germany-based Roland Berger, concluded in 2020 that it expects 160,000 passenger drones to be in operation by 2050.

Exciting flight patterns ahead, but more immediately, drones are currently being used in scores of business-related ways. In the real estate space, companies such as Drone Base offer on-demand aerial photography for a number of different industries, including residential and commercial real estate. Property developers have learned drones can be a useful tool for understanding how to better outfit a property with views, amenities and features. UAVs also provide construction teams with an overhead view of jobsites, materials, machinery and people, reports Construction Dive. Contractors are using the autonomous flying machines to record images and videos that help optimize everything from grading plans and operations to identifying differences between as-designed and as-built site plans.

DJI Enterprise, a China-based drone manufacturer, has a UAV that uses collected data to create accurate 2D and 3D models helpful to urban planners by integrating with local geographic information systems and helping planning teams visualize results.

On the infrastructure front, drones are playing an increasingly important role in improving the reliability of the water, energy and transportation systems, according to Roads & Bridges. Because drones enable infrastructure managers both to inspect more frequently and to obtain better data, they provide more timely understanding of what needs attention.

Consider the impact drones can have on agriculture. UAVs can be used to collect data related to crop yields, livestock health, soil quality, nutrient measurements, weather and rainfall, and other activities. Once ag products are brought to retailers, drones are expected to play a key role in providing security, checking stock and even observing consumer behavior.

Drone technology, already used in other countries, can make farmers more efficient by helping them locate problem spots in vast fields or ranchlands. Increased efficiency could mean lower costs for consumers and less impact on the environment if farmers used fewer chemicals because drones identified exactly where to spray, according to reporting by The Associated Press. UAVs can even be used to do the spraying. They can also be used to spot stray cattle and bring them back onto the property.

Healthcare organizations are using drones to serve remote and underserved communities by decreasing lab testing turnaround times, enabling just-in-time lifesaving medical supplies and reducing costs of routine prescription care in rural areas.

The telecommunications business, according to RCR Wireless News, is using UAVs to conduct tower inspections, capturing pictures, video and data about telecom towers, and automatically sending it to the carrier network, saving time and money when compared with manual inspections, as well as sparing a physical risk to human inspectors.

All industries require security of some type, and UAVs are lowering that cost as well through the integration of lightweight video cameras and state-of-the-art stabilization technology — used in video surveillance. In the case of an intrusion, a geospatially-enabled video management system can automatically inform the drone of the type of event (such as a human intrusion) and location via GPS coordinates, reports SecurityInfoWatch. The drone can immediately dispatch and fly to the exact location, examine the scene, lock the camera on the intended target and await further instructions.

At base, drones are flying robots whose capabilities are sure to continue advancing rapidly as they become more high-powered and technologically adept. That’s an eventuality that will serve business interests of almost all types very nicely.

 

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.

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