The industrial sector is considered a laggard in incorporating sustainability compared to other real estate types. 

For example, in Australia, industrial assets accounted for only 16% of Green Star certificates awarded in the year to June 2022 compared to 43% for offices and 26% for retail, according to the Green Building Council of Australia.

However, there are signs it is moving apace.

One in five industrial occupiers indicated in a JLL survey that energy efficiency is at the top of their agenda. And increasingly, investors and developers are responding with strategies –such as energy creation, drought-resistant gardens, and electric vehicle fleet charging – to take advantage of potential green premiums, experts say.

“Sustainable buildings lead to less vacancies, maximised rental returns and less maintenance, all of which contribute to higher asset values,” says Ben Hegerty head of logistics and industrial, capital markets, JLL. “They are the hallmarks of a futureproofed industrial building.”

Cost and climate savings

Meanwhile tenants are racing towards their net zero carbon goals. This has significant implications for real estate given that it is responsible for ‘scope 1’ emissions, which are the carbon emissions occurring in assets owned or leased by an organisation.

Nine of Australia’s largest 100 industrial occupiers aim to be net zero carbon by 2025 or 2030, while over 90 per cent of the floorspace they occupy is subject to lease expiries prior to 2030, according to the JLL report Accelerating Logistics and Industrial Sector Sustainability.

These companies’ renewal or relocation decisions are expected to be heavily influenced by the sustainability of their real estate.

Urging developers and investors to take note, the JLL report takes construction and design strategies – some already being used, and some recommended – aimed at reducing carbon output as well as boosting buildings’ energy ratings.

The strategies are listed into three groups: those that address operational carbon, those that limit embodied carbon, and features related to biodiversity and occupier health. This includes rainwater harvesting for use in toilets, drought-hardy gardens, or end-of-trip facilities to enhance employee comfort and health.

Operational carbon refers to the amount of carbon emitted during the use, management, and maintenance of a building. Mitigating strategies include double-glazed windows; solar panels to power a warehouse as well as to generate surplus energy for electric vehicle charging, or to feed back into the grid; and a location close to train stations.

JLL estimates emissions savings of up to 80% for some locations with access to rail.

Automated warehouse storage and retrieval systems can also be key, says Richard Phillips, head of supply chain, Australia, JLL.

“They reduce the amount of space required to deliver a solution to the customer, but also improve the energy usage within the solution,” he says. 

Another major operational feature is the use of electric vehicles for business fleets, says Renae Gasmier, head of sustainability consulting, Australia, JLL.

“Fleets make up 17 per cent of total vehicles in Australia but they’re responsible for 42 per cent of emissions. So, if fleets make the first move to decarbonise, the effect is significant,” she says.

Embodied Carbon

Reducing embodied carbon is a major goal of sustainable businesses and therefore and essential consideration for futureproofing industrial real estate. 

Embodied carbon describes the carbon emitted during the construction of a building – from materials choices to the transportation of building supplies and demolition of existing structures.

Recycling materials or selecting low-carbon options such as geopolymer concrete and organic paints are considerations outlined in the JLL report. However, engineering must be factored into these decisions as well, and so high strength roofing to allow for the expansion of solar panels is an example where design and cost must find a balance.

Industrial real estate owners can’t afford to ignore sustainability, Hegerty says.

“Owners that address the sustainability aspects of their assets will put these assets ahead of the pack in an environment of increasing climate related financial disclosure legislation, both in Australia and overseas,” he says.

Green building occupants also attract key talent. According to Gasmier, one in two potential employees say they favour a more sustainable organisation as an employer.

“I’d say the penny is starting to drop. They’ve set their ambition and now they’re now looking for the plan to get them to net zero,” Gasmier says.