Is the industrial and logistics real estate sector doing enough in terms of sustainability?
When I first thought about it…I thought surely not… Industrial and logistics real estate has historically been a ''grey'' area in terms of sustainability. Known for using up large amounts of land and often hidden away from the view of the public. It turns out, however, the answer is yes and no.
The growth of industrial
The Dutch logistics real estate market is experiencing its heyday and the stock of modern logistics is increasing rapidly. The Netherlands has historically been a logistical hub due to its geographical location within Europe. Furthermore, the growth of e-commerce is increasing the demand of urban logistics real estate. It is no surprise that investors continue to be drawn to logistics. At the end of 2020, there was 2.4 million sqm. of logistics real estate newly constructed, thus increasing the total by 6%, to 41 million sqm.
How much of it is sustainable?
To investigate how much of this logistics real estate is sustainable, we can look at BREEAM certifications, which represent an independent seal of approval, targeting a defined set of goals. In total, there are 2,480 BREEAM-NL registered and certified projects in the Netherlands. Of these, 816 belong to the industrial real estate sector, making up a sizable 33% of the total.
If we dig a little deeper, 653 of the 816 (80%) industrial projects are New Construction projects - with around 200 of those receiving “Excellent” and “Outstanding” levels, the highest ratings available. It is clear that newly built logistics projects have proven their high potential to be sustainable!
This leaves us with only 163 of the 816 (20%) industrial BREEAM In-Use projects, i.e. the existing logistics stock. A considerably low amount in my opinion, looking at the total existing stock. Why are we not doing enough with the existing stock? Due to a lack of land for new developments, interest in brownfields is growing. How can investors owning and acquiring those kind of properties include sustainable elements within their developments so that it can be beneficial to all parties included and not only for profitability?
What can an owner of an existing building do?
The most evident attribute of logistics is the large roof space and “big-box” character of the building. Here a few important sustainability-related features to consider:
- Use the roof — a perfect place for Solar PV, these larges roofs can be the energy suppliers of the future, feeding the surroundings and the electric vehicle transport sector. If not, at least paint the roof white and consider sedum roofs.
- Slow down stormwater — large roof areas also means increased rainwater runoff which increases the risk of localised flooding and pollution of waterways. Delay the discharge of rainwater. Think: storage ponds, permeable paving, green roofs, gravel roofs, oil separators and rainwater harvesting systems.
- Location and transport — more travel means more carbon emissions. Developments should offer the shortest possible travel distances and provide sustainable modes of transportation (public, electric) with high accessibility.
- Health and Well-Being — employees are often the number one asset of a business. Looking after the talent can enhance the “S” within ESG. Most industrial projects are designed for trucks, boxes and machinery with little human-centered features - but wellness opportunities do exist, both inside and outside a building. The WELL building certification offers good guidance here.
- Interior Design — continuing from health and well-being, the interior design can contribute significantly. Think: indoor plants, ergonomic desks, natural day lighting, eco paint, signage, artwork, relaxing areas, exercise equipment and more.
- Management — a sustainable building can only be as sustainable as well as it is managed. With a life expectancy of at least 50 years there are ample opportunities for control point optimisation, periodic energy audits, BMS inspections, green cleaning and preventative maintenance.
- Ecology — with humanity expanding its physical footprint rapidly, a harmonious relationship with plants and animals must be nurtured. Think: bird houses, insect hotels, bee hives, green walls and roofs, trees, hedges and low maintenance native landscaping.
An example of existing logistics with potential for more sustainable features, as mentioned above. The roof space will allow the asset to become an energy producer instead of energy consumer.
So now what?
By 2030, the Netherlands must emit 49% less greenhouse gases than in 1990. As we get closer to the deadline, sustainability becomes more important, and logistics continues to grow. In the last years we have seen many new construction BREEAM-NL “Outstanding” industrial buildings, this is great news and I hope the trend continues. However, still not enough is being done with the existing stock of industrial real estate. This article has outlined some key sustainable inventions that investors could look at. In addition to their intrinsic worth, sustainable solutions enhance the appeal of a building, making it a favourable prospect for leases and sales in the long term. There is large scope of the logistics real estate market to adopt sustainability within their practices making it not only profitable for them in the long run but also making an direct impact on their environmental footprint.
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