DTRE’s 5Cs of Sustainability

2024 was a transformative year for sustainability.

The introduction of Biodiversity Net Gain, the launch of the first agreed methodology for net zero buildings under the UK Net Zero Carbon Buildings Standard, and the pre-release of BREEAM New Construction Version 7, slated for formal launch in Q1 2025. 

There were also significant revisions to the Energy Performance of Buildings Directive, together with potentially transformative elections in the UK, US and elsewhere.

Our full report explores the key sustainability trends that shaped industrial and logistics transactions in 2024 and offers predictions for what lies ahead in 2025. A full copy is available on request but you can find our headlines below.

Contact Amelia for full report

Sustainability within real estate begins with addressing effective operational carbon, and this is only achievable through collaboration. A stronger covenant emerges from improved asset quality, and our data analysis demonstrates a strong correlation between certification and rent achieved. When these elements align successfully, they contribute to a favourable capital receipt for investors.

1. Carbon – Enhanced sustainability due diligence is now likely to be the key metric for a typical Investment Committee approval. This is now reflected in marketing materials, which feature a stronger emphasis on sustainability. Solar installations for example, while essential for decarbonisation, come with inherent complexities. Moreover, asset owners are increasingly advocating for the distinct valuation of photovoltaic (PV) income, which typically carries an implied capitalisation rate of 8–10%.
2. Collaboration – The biggest obstacle to UK decarbonisation is the 15+ year Full Repairing and Insuring leases, which limit landlords’ ability to make improvements. Decarbonisation demands a fundamental shift in how landlords, tenants, and advisors interact. The era of isolated responsibilities is over, requiring a collaborative approach with open communication, data transparency, and shared financial responsibilities to overcome barriers such as long FRI leases, achieve sustainability goals, and meet the broader commitments of the Paris Agreement.
3. Covenant – The prime and secondary markets are growing apart. Our data shows that Grade B buildings attracted weaker covenants in 2024 but are still performing well, with rent sensitive third-party logistics operators and retailers propping up the secondary market. Meanwhile, the data shows that high performing assets have shorter void periods, reduced rent-free periods and longer leases. 
4. Certification – The UK logistics market has showed a clear preference for BREEAM certifications, with limited consideration for alternative standards. EPC A rated buildings continue to dominate Big Box take-up and these energy-efficient assets consistently command higher rental values.
5. Capital Receipt – Value-add opportunities dominated the UK logistics market in 2024, which usually require sustainable upgrades. While these upgrades can be costly, they offer strong returns for assets with good fundamentals. In contrast, we are seeing liquidity issues in the market for assets with high energy consumption and unverified BREEAM certificates, while Biodiversity Net Gain (BNG) regulations are negatively impacting land values. Inefficient assets continue to lag behind their efficient counterparts in both total returns and capital growth, highlighting the importance of sustainable technology and retrofitting strategies.