Sustainable Logistics

Key Insights:

• The much larger impact of transportation compared with real estate means that optimising location of logistics buildings can make a huge difference to the overall environmental impact of logistics operations. Careful modelling of supply chains and their emissions – transport as well as buildings – will help to guide decision-making for occupiers.
• C&W-modelled scenarios show that optimising logistics building location can significantly reduce overall mileage of transportation – particularly road transport. Even in scenarios where logistics buildings are less energy efficient, their optimal location can still mean occupiers are in a better position than if they were to relocate and increase their transportation mileage and emissions.
• Emerging improvements in transportation technologies and business practices will influence locational choice in the future. These, as well as improvements to logistics buildings, will all contribute to the wider environmental impact of logistics and supply chains. This section underscores the importance of a holistic approach to location strategy, considering not just the immediate operational needs but also long-term sustainability goals.

Key Insights:

• Developers are leading the way in addressing sustainability in logistics buildings Considering how to reduce strong>environmental impact by viewing assets’ whole life carbon impact, developers are considering how to minimise embodied carbon (notably through exploring new building materials, design features and construction practices) and operational carbon (including features that improve energy efficiency of buildings) as well as end-of-life strategies.
• Enhancing social impact is now a key part of logistics developments. Developers are integrating more, higher-quality spaces for people in logistics buildings and parks which helps improve staff wellbeing, an increasingly significant factor for occupiers for worker recruitment, retention and performance. Developers are also focusing on ways in which their buildings and schemes can better integrate with communities and environments within which they are located.
• Improving adaptability of logistics buildings is emerging as a key factor in new development. Future adaptability includes reusing building elements (such as frames and slabs), recycling components (such as panels and racking) minimising demolition through strategic improvements only and anticipating future requirements to include flexibility during initial construction.

By focusing on sustainable development, this section provides a blueprint for creating logistics facilities that are not only fit for today’s needs but are also equipped to meet the challenges of tomorrow.

Key Insights:

• Understanding the opportunities and challenges related to sustainability is crucial to asset management strategies of existing assets. Mapping asset management strategies start with understanding what assets are now (especially in terms of their energy use intensity, carbon emissions and certifications), what they could be and how to achieve this and what are risks of not doing enough or anything at all.
• C&W’s analysis of a portfolio of over 90 hypothetical buildings shows how specific asset improvements make a difference to emissions of logistics buildings. Retrofitting solar photovoltaic panels is one of the most significant ways that carbon emissions can be reduced. Other strategies such as replacing lighting and heating systems with less impactful technologies as well as installing energy management and control systems also make a difference.
• As well as improving energy efficiency and operating carbon, asset improvement strategies also need to consider their impact on embodied carbon, including calculating not only the financial payback period but the ecological breakeven point.
• Landlords and occupiers have the opportunity to work together on asset management strategies to improve buildings’ sustainability. Understanding what occupiers want from their buildings and their real estate partners (including landlords and asset managers) will ensure that building improvements add value to all stakeholders.

This section provides a comprehensive guide to retrofitting and managing existing logistics assets, helping asset managers navigate the complexities of sustainability in today’s market.

Key Insights:

• Sustainability certification has become a far greater consideration for investors when consider the value of real estate assets. Investors are focusing on sustainability certification as a hallmark of asset quality, particularly in terms of future asset attractiveness to tenants, void periods, rental levels and value retention.
• C&W’s analysis of over 1,400 transactions shows that investors are putting an average pricing premium of 19% on well-rated assets. This increases to 24% when excluding super-prime locations; this implies that investors are placing even higher value on green credentials in locations where the quality of the asset will have a greater impact on its ability to attract and retain tenants, income and value.
• ‘Greener’ assets are expected to outperform less well-credentialed assets on the basis that these buildings will be more likely to secure tenants now and in the future (minimising void periods), be more likely to command higher rents (as a result of securing tenants at higher rental levels) and be more likely to retain value (as they prove more attractive to investors). C&W analysis shows that currently ERVs for well-rated logistics buildings are at levels typically 5-20% higher than poorer quality assets.
• Investors are also looking beyond certification to understand how assets need to be improved to optimise performance and avoid being stranded, particularly as trading rules, market expectations (notably around EU Taxonomy-compliant investment) and financing options become more focused on sustainability measures.

By focusing on sustainability, investors can unlock new opportunities in the logistics sector, ensuring their portfolios are resilient, profitable, and aligned with the future direction of the market.