There is also now a big strive to achieve certain ESG credentials as part of any new industrial and logistics scheme.
This is not only becoming a more important part of the search criteria by occupiers, but also the attractiveness from investors for any onward sale.
As a result, we have experienced a huge swing in the market in the past 24 months, where there is now genuine appetite from developers to factor this into their new build schemes to ensure they have a “best in class” product.
Depending on the size of the scheme, developers will still need to strike a balance between green credentials to future proof the building but mindful not to go too overboard, whereby the capital expenditure is not repaid within the letting or onward investment sale.
As a minimum, we recommend that developers consider factoring the following aspects into the specification:
- Electric Vehicle charging for domestic vehicles, and ducting incorporated for future charging points
- Solar panels
- Green/landscaped areas, outdoor seating
- Cladding U-Values
- LED and lighting sensors
- Cycle shelters and wider cycle pavements
- Targeting BREEAM Excellent rating
- Targeting A EPC rating
- Contractors to have a sustainability or environmental policy
- Preference for contractors to be part of Considerate Constructors Scheme
- Reduce development embodied carbon through material selection
- Minimise construction impact and manage waste generation
Whilst there is an appetite for change, it still needs to be justified by a return on your investment.
You can of course go down the route of including battery storage solutions within any build specification to further improve your ESG credentials, however it depends on the size of the scheme, because whilst there is an appetite for change, it still needs to be justified by a return on your investment.
Mountpark are one of the leaders in the field for designing logistics facilities that are well ahead of the curve, and their new Bristol 360 building in Avonmouth is a testament to this. They have gone above and beyond the standard specification you would normally expect of a big box. They have factored in a office roof terrace, water fountains within the warehouse, passive roof ventilation (improving temperature control and air quality), floor to ceiling glazing to improve natural light to the warehouse and offices. In addition they have PV and battery storage and enhanced cladding that provides an incredibly low U-Value, which minimises heat loss/gain for enhanced thermal performance. All of these additional items have been well received by occupiers, and the building provides them with an opportunity to show their customers that they take sustainability seriously within their portfolio of assets.
It’s important to note that ESG does not simply mean green solutions but it also relates to the working environment, which has become equally as important to occupiers. Every business will have experienced staffing issues at one stage or another, and more recently staff retention has been a hot topic within the industrial and logistics market, so it’s equally as important to design a scheme that can also deliver on a wellness front for these
Some key examples being the amphitheatre that Trebor Developments has designed into the new R&D facility they are building for Oxford Instruments in Avonmouth, which provides an incredible outdoor seating area for the staff to enjoy on their lunchbreaks.
Elsewhere, Bridgwater Gateway at Junction 24 (M5) have provided a scheme that factors in work-life balance, where a generous allowance has been made for landscaped areas to rest play and picnic, and staff can enjoy walks, cycles or runs around the footpaths and cycle ways of the park. Furthermore, they have parcel collection points and an allocation for a childcare nursery, coffee shop and sandwich bar, to create that community feel for the occupiers established within the business park.
These are only but a few examples of how the industrial and logistics market is evolving and adapting to not only the needs of occupiers, but also the political pressures to become a greener sector.
There has always been a debate as to whether the cost for these enhanced ESG credentials can get repaid through lettings or onward investment sales. In our experience, we are finding that occupiers are now actively searching for buildings with these green credentials for their own CSR reasons and comfortable to pay a premium rent in order to achieve it. The main funds and propcos now also have reasonably strict investment criteria revolving around ESG, where a premium yield could also be paid for best-in-class accommodation.
About the author
Tom Watkins is Head of the South West Industrial & Logistics team based out of our Bristol office. He specialises in the disposal and acquisition of industrial premises in the South West and South Wales regions, as well as providing specialist advice on industrial/warehouse development.
To contact Tom, email firstname.lastname@example.org