Sustainability and climate protection are playing an increasingly important role in the real estate industry. Demand for ESG-compliant properties is growing in the logistics sector as well. Because energy efficiency not only contributes to climate protection, but also reduces costs and enhances the value of properties in a long-term perspective.
Sustainable energy supply – logistics properties offer great potential
As a major consumer of energy and contributor to carbon emissions, the property sector has a key role to play in climate change mitigation. A sustainable construction and operation of buildings makes a major contribution to the reduction of carbon dioxide emissions and helps to drive forward the energy transition. Hence, developers, investors and users are equally responsible for improving and implementing sustainability standards in their buildings.
Heat pumps, LED lighting and photovoltaic (PV) systems are already a regular part of the fit-out of a modern logistics building. Photovoltaics are particularly important. The use of solar energy has proved to be the most effective measure in lowering CO2 emissions and reducing energy costs.
With their large roof areas, logistics buildings offer ideal conditions for installing photovoltaic systems. A total roof area of around 30 million square metres with the potential to accommodate PV panels was produced in Germany between 2012 and 2022 alone, according to the German logistics property expert Logivest. Up to 2.5 terawatt-hours of solar energy could be generated on an area of this size, which could avoid around 960,000 tonnes of carbon emissions per annum. For comparison, around 100,000 hectares of mixed forest would be necessary to sequester this quantity annually.
The operation of photovoltaic systems provides many benefits for users, too. The produced solar electricity can be used by the building itself. And this helps to lower energy costs. Using photovoltaics also reduces a building’s dependence on expensive mains power. Additionally, any energy not needed by the tenant can be fed into the local electricity grid. This could enable considerable cost savings to be made in the longer term. More importantly, by using climate-friendly solar energy, logistics service providers are able to improve their energy footprint and limit greenhouse gas emissions, so protecting the environment.
ESG-compliant logistics properties benefit from price premiums of 19 percent
The criteria influencing the value of logistics buildings have changed in recent years. Environmental, social and corporate governance (ESG) standards have become a central factor in calculating yields. More than 1,500 transactions have been analysed in a study carried out by Cushman & Wakefield during the past five years. According to this research, investors are willing to pay 19 percent more for sustainable European logistics real estate, and outside prime locations the premium rises to as much as 24 percent. With the growing importance of climate-friendly building operation, it is to be expected that certified buildings will continue to command higher prices than those without certification.
Sustainable logistics: the example of Emmerich II
The trend towards ESG-compliant properties is mainly being pushed by the new EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). Real I.S. has also taken a clear position on the subject of sustainability and climate change mitigation. Qualitative and ecological aspects have an impact on the portfolio construction and its management, among other factors. A study by the German logistics buildings initiative logix, entitled ‘ESG in Logistics Real Estate – Practical Guide & Recommendations’, offers a guide to the current ESG requirements for logistics buildings. The aim of the publication is to create an initial sustainable logistics building standard which will be supported throughout the sector:
ESG requirements for logistics real estate (non-exhaustive selection):
- life cycle: assessment of circularity (materials, decommissioning/demolition, reuse), avoidance of hazardous substances, design for adaptability/subsequent use;
- energy: forgoing fossil fuels, use of geothermal energy (where geological conditions allow) and photovoltaics (at least for own consumption, storage and feeding surplus energy into the grid), electric charging stations, energy monitoring, and smart metering;
- (sewage) water: design for rainwater, drinking water and process water systems, retention areas on the site (percolation, evaporation), reduction of drinking water consumption, use of process water, consumption data, and leakage monitoring;
- biodiversity: biodiversity design (including consideration of EU taxonomy requirements), flowering meadows, extensive greening, insect hotels, monitoring of flora and fauna;
- employee wellbeing: sufficient number of car and cycle parking places, charging infrastructure for staff members, adequate lighting for safety of traffic routes and comfortable conditions in work area (temperature, lightness, design, materials), staff restaurant, washing and shower facilities.
A recent example of the properties held in the portfolio of Real I.S. is the logistics centre Emmerich II. The built-to-suit property was developed by the logistics service provider Fiege and then acquired by Real I.S. for its Themenfonds Deutschland II in 2023. The property is situated in the north-east of the German federal state of North Rhine-Westphalia, close to the German-Dutch border. The logistics centre benefits from its central location in Western Europe and a large catchment area (see figure 1).
The Emmerich II logistics centre combines high quality fit-out and sustainable building standards. The modular construction method, with four separate building sections, allows for a high adaptability. Two high-powered PV systems of 2,000 kWp and 750 kWp respectively produce around 2.4 gWh of green electricity per year. This yield not only covers 44 percent of the annual electricity needs of the building, but also reduces its dependence on expensive mains electricity. Additionally, around 85 percent of the energy produced on the site is fed back into the local electricity grid – making the building into a small power station. The temperature of the building is controlled by means of 44 energy-efficient heat pumps in a variable refrigerant flow (VRF) heating system. Electronic charging stations for cars and cycles enable ‘green mobility’. To protect the surface water and the groundwater from contamination, the rainwater is treated by a sedimentation process (see figure 2). These measures have resulted in the German Sustainable Building Council (DGNB) awarding the building a ‘Certificate in Gold’ – currently the highest energy standard. A long-term tenancy agreement with the high-credit logistics service provider Fiege underlines the attractiveness of the building.
Conclusions and outlook
Despite the current challenges in the property market, logistics buildings continue to exhibit robust demand. The gap between the persistently high demand and low supply of modern, energy-efficient space is growing the pressure on rents. However, with increasing regulatory requirements there is also rising pressure on developers, users and investors to implement ESG standards in properties. Photovoltaics systems and heat pumps for sustainable energy are basic features of modern logistics real estate today. The initial outlay for the necessary technical building systems is high. However, recent analyses show that investing in energy efficiency pays dividends not only in terms of climate change mitigation, but also has a positive impact on operating costs and the performance of buildings in the long term. Experts believe that ESG criteria will in future influence the prices that can be obtained for logistics buildings. According to an analysis by Cushman & Wakefield, investments in green technologies will pay dividends after an average of 7.5 years.
Kind regards
The Real I.S. Research team
Your contact
Julian Truxa
Real I.S. AG
Research and Investment Strategy
julian.truxa@realisag.de