Six top tips to futureproof your Industrial and Logistics assets
Earlier this year, the World Economic Forum released its 19th Edition of The Global Risks Report. It showed that 5 out of 10 global risks in the next 10 years are expected to be climate related (up from 2 in the next 2 years) and illustrated that it is now more important than ever to safeguard assets against climate change.
Technological advancements and policy updates mean that sustainable solutions are constantly being developed. With this in mind, I have included our top tips to futureproof logistics assets and maximise long-term value.
1. Rethinking Renewables
The commercial real estate market is feeling the full effects of the energy crisis, primarily with challenges connecting to the grid and the impacts of increased energy costs for consumers. Considering renewable energy sources as an alternative to gas will reduce carbon emissions and safeguard assets against energy and legislative challenges.
One solution is installing PV panels. With a roof that is ready for solar, there are four options: rent the roof to a third-party solar provider, feed the kilowatts into the grid, use the power to supply the asset, or store the power onsite. Pairing PV panels with battery storage will ensure round the clock power and offers a solution to potential grid connectivity problems.
Battery technology is constantly improving and, as many occupiers are looking to electrify fleets and increase automation, power is becoming a key consideration that developers will need to address.
2. Backing Biodiversity
Perhaps one of the most significant changes to warehouse building design in recent years is how the local environment is considered. The new norm suggests that buildings make a minimal impact on their surroundings and biodiversity, yet it is increasingly a concern to local planning authorities and policymakers.
No two local environments are the same. The Environmental Impact Assessment (EIA) is a useful tool for helping to navigate environmental needs and to assess the impact of a development project. By improving local biodiversity, there is an opportunity to accelerate planning processes and improve your license to operate.
3. Data, Data, Data
Data is king! Any landlords, tenants, asset managers or developers reading this will have experienced the headache of data collection, particularly when it comes to resource consumption. It’s not an easy process.
As it stands, occupiers are not incentivised to provide consumption data and, in some cases, it simply isn’t available. With the technological advancements of smart meters and the growing popularity of green leases, data management is improving. However, many are still sceptical about the accuracy of the data and often the information received is highly technical and challenging to interpret.
Consumption data is fundamental for understanding the energy performance of an asset and managing portfolio risks. A reputable collection system, providing accurate data, will help comply with regulations, influence asset management decisions and reduce a building’s carbon footprint.
4. Finding Value in HVAC
Asset electrification is necessary not only to achieve Net Zero and decarbonise assets, but also to comply with imminent UK and EU regulations. The Energy Performance of Buildings Directive (EPBD) aims to phase out all fossil fuel heating by 2040, and for new buildings by 2030 (2028 in Germany). We expect clearer guidance from the UK Green Building Council's forthcoming Net Zero Carbon Building Standard, which is due to be published later this year, but both will provide asset-level performance requirements covering embodied carbon, operational energy, and several other Net Zero Carbon related metrics.
Installing zero-emissions electric heat pumps instead of natural gas-powered climate control systems in warehouse units will not only ensure the building is compliant, but it is necessary for achieving prime rents, EPC accreditations and maximal long-term asset value.
5. Constructing The Future
To achieve Net Zero emissions and decarbonise the sector by 2050, embodied carbon needs to be reduced by 40% before 2030. The World Green Building Council suggests ‘buildings are currently responsible for 39% of global energy related carbon emissions: 28% from operational emissions… and the remaining 11% from materials and construction’. It is, therefore, no surprise that companies are endeavouring to find more sustainable alternatives to traditional build design and materials.
The use of modern materials and construction techniques is expected to increase the life of a logistics asset from circa 25 years to 50+ years and dramatically reduce carbon emitted into the atmosphere. This can be achieved by using easily separable structures which can be replaced, materials that have a longer technical service life, reused or recycled materials, or materials that naturally absorb CO2. Modern technology makes new construction simple.
6. Higher Rents: Certified
There are many sustainable building certifications which provide a useful foundation for measuring sustainability. However, questions have been raised about their relevance for warehouse assets, with growing dissatisfaction around cost and the lack of correlation between certification and a building’s energy performance. These concerns are driving a shift away from current certifications in the wider real estate market, but they will no doubt be replaced by something else.
There is growing evidence, particularly in the UK, that higher EPC ratings achieve higher rents, shorter void periods and attract superior tenants. Today, MEES regulations require all non-domestic buildings within the UK to achieve an EPC rating of at least an ‘E’. Proposed legislation suggests that, from April 2027, all non-domestic buildings must achieve an EPC rating of at least a ‘C’, and a ‘B’ rating from April 2030.
EU regulations are a little more ambiguous. The EPBD requires renovation of the 16% worst performing assets to be renovated by 2030 and the worst 26% by 2033. Member states will impose country specific legislation, and we will know more by the end of 2025 when we expect to see the same rental premium evidence emerge for assets with high EPC ratings across Europe.
The extent of the ‘green premium’ within real estate is a debate that rumbles on, with few brave enough to quantify it. However, as the Paris Agreement aims to limit global warming to 1.5°, time is running out. Legislation within the UK and EU represents this urgency and assets are at risk of stranding – sustainability considerations have become a necessity.
Not only does a greener building potentially present a rent and yield premium maximising investor returns, but it will extend the asset life by reducing stranding and compliance risk, therefore futureproofing the investment.
