More than just the latest buzzwords in the real estate industry, sustainability and ESG have caused a shift – particularly in the Industrial and Logistics sectors. Sustainable real estate development could very well be the norm in the future, and the future is now.
Physical locations such as Shopping Malls are re-thinking their role and value proposition in the entire e-commerce chain — how then will this impact the logistics sector?
The Future of Logistics
This will nicely complement the logistics properties as they attract different businesses because of their different building specifications – for instance, logistics companies will need buildings that offer high floor to ceiling height, high floor loading, large areas, etc. for their distribution centres. Logistics companies occupying industrial spaces can also lower their costs by paying lower rents than occupying retail spaces.
As e-Commerce is here to stay, the demand for ‘last-mile’ industrial assets near dense housing estates will become more popular, and we expect strong demand in logistics and warehousing facilities. These properties present great opportunities for investors.
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“There is a real focus on three elements to sustainability, the 'triple bottom line': Environment, Social and Economical.”
The weight of Environment, Social and Governance (ESG)
Most investors believe ESG will be a strong factor in their investment decisions in 2021. Building owners have become gradually more mindful and have placed an increased focus on a holistic asset management approach to retain and attract tenants.
This shift has caused the real estate industry, including Industrial and Logistics, to review how the actual asset is now operated. There is a real focus on three elements to sustainability, the “triple bottom line”: Environment, Social and Economical. Those three pillars are all interrelated and are a key consideration for holistic asset management. All of which require measurement tools as there is a need to understand how a building operates before we can start addressing the actual problem and then create efficiencies.
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Building efficiency
Technology in real estate has come a long way, and the triple bottom line is no longer the domain of commercial buildings only. We see new industrial and logistics facilities such as “The Tube” in the Netherlands, setting new sustainable assets benchmarks. It is not just about retrofitting buildings anymore, but also designing new performant assets.
The introduction of brown water recycling, bio-walls and bio-roofing, smart windows and triple glazing, solar and photovoltaic cells, smart sensors and others enable us to measure, review and react. Proactive maintenance programmes are built from this data to ascertain where energy and other efficiencies are potentially being lost.
End-users: accelerating the trend
However, this can’t be all based on the sustainability of operations practice; the end-user also needs major consideration. Is the environment comfortable? What is the IAQ? Is the building security sufficient without being overbearing? Is there a requirement for the planning of end-of-trip facilities? What about other amenities such as downtime areas, gyms, fitness equipment, community gardens and active recovery spaces?
“(Google) values collaboration and building communities and is continually looking out to improve its employees’ well-being and morale. This translates to their criteria in the selection of real estate that they operate in.”
Take the Google securing 40,000sq ft space at Alexandra Techno Park case as an example of holistic campus-like working environment with a plethora of wellness features.
Outgrowing its premises in Mapletree Business City, Google needs to find more space. Alexandra Techno Park is naturally a good option in term of location. However, we should also look a bit deeper as they have consistently made it to the best companies to work for. The company values collaboration and building communities and is continually looking out to improve its employees’ well-being and morale. This translates to their criteria in the selection of real estate that they operate in.
The recent asset enhancement works in Alexandra Techno Park have created a holistic and collaborative working environment for occupiers, including a new building that offers dining options, exercise facilities, end-of-trip facilities, etc. These are most probably in line with what Google looks out for.
Moving forward, as building owners look into redeveloping, retrofitting or even repositioning their industrial buildings, they should consider offering some wellness features to their occupiers, as companies gradually recognise the importance of staff well-being.
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