It pays to be green…

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Warehouses have not only been getting bigger, but also greener. Liza Helps asks if it is it still worth being green or is it just marketing?

Mention rainwater harvesting, translucent roof lights, solar arrays or even optimal orientation of a warehouse 15 years ago, and you’d be considered just a tad ‘too right on’; fast forward to 2018 and no one blinks an eye. Summing up attitudes to ‘green’ sheds nowadays John Clements of Verdion says: “Conventional eco-friendly initiatives for warehouse buildings should really be incorporated as standard as part of any modern development – and certainly shouldn’t be disregarded at the cost of pushing forward with rapid delivery programmes because of the general lack of stock currently available in the market. “Developers, funders and occupiers all have a moral responsibility to minimise their carbon footprint, and LED lighting and solar panels, for example, go some way in helping to do this.” Eco friendly specification has become so commonplace it is institutionalised. A building, for example, without 15 per cent roof lights, some form of LED lighting, and rainwater harvesting or the like will positively struggle to secure investment in most cases. In 2004 Gazeley embarked on an ambitious programme to actively incorporate the findings of a £650,000 two-year study looking at emerging green technology. The idea, many thought, being that this would create a USP for its product making the company the first port of call for clients in the logistics industry. But it was not just a marketing ploy indeed the extra build cost – 50 p per sq ft at the time – was considered madness especially as Gazeley decided not to pass the cost onto clients. If that were not enough the company also shared its findings with competitors. In its note on sustainability on its web site today, Gazeley says: “[we]launched [our]first ‘Eco Template’ in 2004 based on a growing consciousness that we must take measures to mitigate and eventually reverse the environmental impact of our activities. “This work provided a framework for incrementally improving the environmental attributes of our developments and was shared with competitors and customers alike. “We are continuing on this route and remain conscious that we must provide thought and practice leadership to advance our industry position in relation to environmental impact. “We see our initiatives as essential to our duty to the next generations and not a competitive issue, leading us to share with competitors as well as our customers and the industry in general.” Speculative The first building developed on the Eco Template was a 450,000 sq ft speculative facility at Gazeley’s G.Park Bedford, which was let within weeks of completion to Woolworths. Within a year the property had sold to L&G for some £44 million at a record breaking yield. While Woolworths no longer graces our high streets, the building at G.Park Bedford remains, let to Sainsbury’s, on a 20 year lease in 2010. Each one of the Eco Template buildings secured Very Good or Excellent BREEAM rating and finally in 2009, just after the crash, Gazeley’s industrial development, Chatterley Valley Blue Planet in Staffordshire was awarded BREEAM Outstanding. Dubbed ‘one of the greenest distribution buildings in the world’, the development, designed by Chetwoods Architects, was the first ever project to receive this highest possible BREEAM 2008 rating. The main warehouse and office accommodation is shrouded by a vast low-pitched roof, from which rainwater drains directly into ponds and streams on the landscaped site. Additionally, a 20,000 litre tank stores some of the rainwater for flushing WCs. Providing 385,000 sq ft of storage space, the steel framed warehouse is clad in insulated composite panels and features ETFE roof lights with inbuilt photo voltaic cells. Its south wall is designed as a solar attractor. Dark in colour, it absorbs the warmth of the sun, which is then fed into a plenum and redistributed throughout the interior as free heating. The offices are over-clad with FSC approved Western Red Cedar. On site power sources include the solar technology embedded and installed onto the warehouse, as well as new kinetic plates built into in the access road that generate energy via hydraulics as vehicles drive over them. Power savings In 2009, when the property was built it was designed to achieve lighting and power savings of 49 per cent when compared to a conventional distribution building; heating energy savings of 68 per cent; and water savings of 60 per cent (some 726,000 litres per annum). The property was finally let to JCB in 2013. That is not to say that Gazeley was the only developer at the time to be promoting and incorporating green technology into its buildings, Prologis was also in on the act pushing forward its own green/sustainable agenda. In 2006 it secured a 64-acre former Stoke colliery site from Advantage West Midlands for £10m with the intention of using the site as a test bed for green initiatives in warehouse development. At the time Jeff Schwartz, the then chief executive of Prologis, said: “Sustainability is becoming a business imperative in our industry. In a future of heightened scrutiny and more stringent standards, companies will need a core competency in sustainable development.” In 2018 this mantra is still a core tenet at Prologis. Simon Cox, first vice president project management and UK sustainability officer, says: “Demand for sustainability features has continued to grow, to the extent that this is now a routine part of customer requirements. We routinely build solar arrays, rainwater harvesting and the latest LED lighting into every speculative building we develop. “When it comes to sustainability, we’ve been quietly getting on with it for the past ten years and we’re always looking for new ways to innovate and drive our sustainability offering forward.” It is interesting to note how much of that cutting edge Eco Template and other green initiatives have been incorporated across the industrial warehouse landscape, not just in the UK but the world over. The reason it is so commonplace now is that operationally it saved money without costing tenants one penny extra on the rent. Gazeley’s first unit at G.Park Bedford saved Woolworths an estimated £14,000 a year on operational costs cutting water wastage alone by 45 per cent – and that was then. In terms of occupier expectation in 2018 it would be a foolish developer who did not incorporate the basic green initiatives as a standard specification across its whole portfolio. Orbit Developments has just completed the first phase of its Academy Business Park in Knowsley. The speculatively built distribution centre has been completed to shell consisting of 100,000 sq ft warehousing space and 10,000 sq ft of ground and first floor office accommodation. The facility has a host of green initiatives enabling it to garner BREEAM Very Good. It has rainwater harvesting and 15 per cent roof lights as part of the standard specification. The joint agents for the scheme are CBRE and B8 Real Estate. BREEAM certification helps developers deliver and validate the sustainability value of their assets cost effectively and to an internationally recognised and robust standard, tried and tested since it was first launched in 1990. There are a number of different BREEAM Ratings from Good, Very Good, Excellent and Outstanding. The majority of UK industrial facilities these days are built to a Very Good or Excellent rating. The reason for this? It is to be expected – not just from the occupiers but also the investors. Inherently ungreen Luke Tillison of Kirkby Diamond says: “The inherent nature of logistics is ungreen. Around 80 per cent of people are not really looking at renewables etc but that the bottom line being sustainable/green is a great spin off but most importantly is saves on operational costs.” Len Rosso of Colliers adds: “Occupiers generally want it but do not want to pay for it. “Every occupier has a sustainable mantra within their organisation and some follow that through to its logical conclusion but sustainability is generally considered an enhancement above a basic specification. “What we find is that 80 per cent of the time we would like a carbon neutral building that has BREEAM Excellent or Outstanding. As a rule of thumb the jump in construction costs to secure Outstanding is considerably more than for Very Good possibly as high as 25 per cent more expensive – and who is going to pay the occupier or the developer?” “The biggest problem with pushing for a higher specified scheme is that from an investment point of view there is no premium at present.” Simon Lloyd of Cushman & Wakefield says: “The environment and sustainability is up the agenda both politically and corporately with many companies looking to be carbon neutral but they will always look at profit and operational efficiencies first.” Basically, in the majority of cases, unless the occupier is willing to pay for an enhancement of the building, it does not get built. Lloyd notes: “There is currently no difference in rent levels for Very Good or Excellent buildings.” With that in mind, says Joel Duncan of JLL: “Investors will seek a BREEAM rating of Very Good and above but whether they are willing to pay a premium is difficult to say.” “The whole market is conscious of carbon footprints and sustainability but that is not deterring them from buying older and especially in London secondary industrial. “There is a lot of money chasing less good quality assets because there is more value or performance uplift to be had in those sectors. “Indeed across the whole industrial sector there is a huge weight of money seeking investment because the expected return of industrial property is set to considerably outstrip both office and retail.” The IPD total return for industrial property from January 2017 to December 2017 was 21.3 per cent, which as well a far surpassing retail and office property total returns outclassed even the FTSE 100 and snapped on the heels of UK 10 year Gilts over the same one year period. So why should developers, investor and more importantly occupiers continue to seek to push the sustainability envelope? Self-interest For Jonathan Fenton-Jones of Baytree the answer is simple “invested self interest”. Currently Baytree has set itself a goal of providing a 266,947 sq ft speculative warehouse targeting an EPC rating of A for energy efficiency as well as BREEAM Excellent certification all at no extra cost to any potential tenant and the way it is going about it is extremely ambitious. The facility in Dunstable, Bedfordshire which is currently under construction will boast 15m eaves, have 24 dock and three level access doors as well as a 50m yard – so far so ordinary. But it is the incorporation of WELL certification that helps the building stand out. The WELL building standard is the first building standard to focus on the health and wellness of the people in the buildings. It centres on seven concepts – air, water, nourishment, light, fitness, comfort and mind – and demonstrates the connection between buildings and the impact they have on people’s health and wellbeing. There is growing concern in the logistics industry regarding the ability to source and retain good employees. As the facilities themselves have got larger in many cases so too have the offices alongside – logistics is now employing a lot of people and these people need enhanced office environments. The Baytree Edge innovation, which secures the WELL certification, includes suite of offerings engaging the seven WELL concepts. These include solar photo voltaics linked to battery storage for clean power production, electric vehicle charging stations, air source heat pumps for efficient office environment conditioning, enhanced use of recycled and recyclable materials, prefabricated building elements, low energy LED lighting and a super airtight, insulated building envelope, all of which are constructed within an enhanced landscape environment. And it goes on to what some might argue is just ‘plain fluff’ and only there for the marketing – which it may well have been if the tenant was expected to pay for it. But Fenton-Jones says: “We are not expecting to a get a premium on the rent but obviously we believe we will lease our properties very well in terms of how quickly and in terms of lease length.” Fenton-Jones says the facilities offered as part of Baytree Edge at Dunstable will actually be incorporated as far as practically possible in the base build specification of all of its developments going forward – both speculative and build-to-suit – and all will be ‘within market rates’. The facilities will include a “Well Plaza” next to the attenuation lagoon where people can sit outside and enjoy the landscaped environment, which includes allotments and orchards. There will be areas for fitness activities too for walking and jogging. The fire track around the building has been designed to have a dual use as a running track to help encourage people to get fit. Helping to clear the air outside will be moss trees in the yard and on the bicycle shelters that help to filter particulates in the air produced by HGV and car traffic. Internally reindeer moss walls in the reception area will improve air quality and absorb noise “It may well be that some occupiers might not care about this but I believe on the they touch and feel it the benefits will be self evident.” As well as the Well certification and the incorporation of new tech to promote a better working environment Fenton-Jones goes on to expound how the company is looking at advances in technology to – in effect – ‘digitise’ the design and construction phase of the scheme and indeed those going forward. Even before construction has started a digital hub is set up to monitor and record every step of the design and construction phase of the development. The use of building information modelling and virtual reality software allows the company to look into the unknown before taking any risks – basically spotting design flaws before they are made and amending them or even changing the design for something better. The collaborative design process is continued into tender and construction using information sharing and industry leading collaborative software and hardware. All contractors are in communication regarding the development through a suite of technologies including drones and Skype meaning they don’t have to actually even be present on site to sort a problem for example. Everything that makes the building work and that will need maintenance in the future via facilities management will be managed through a sensor suite within the building. The operating and maintenance information will be provided to the building user on a Cloud database with RFID tags applied to all assets requiring planned maintenance or active attention. Sensors can also be installed to adjust the office heating and comfort cooling and to de-energise local lighting for lower occupancy levels or for when the offices are unoccupied. Scanning of the relevant asset will provide access to specifically relevant and accurate information without the need to search more traditional electronic manuals. Monitoring The monitoring and control technology can be accessible remotely so that performance, conditions, failures or usage can be recorded, modified or adjusted from anywhere in the world. It sounds expensive but Fenton-Jones says: “If the technology we are using isn’t saving us time and creating efficiencies then it is not doing its job. “We are just leveraging the technology and the supply chain already available.” James Kellway of Savills notes: “Sheds are a product type that lends itself to new technology and sustainability – its basically a box and it s a very good product to experiment leading technologies on – sometimes these are tokenistic but you have almost got to try it out to see if it works and what the appetite is like from occupiers and end users.”

Key issues such as labour and power bring different innovations to the fore and says Graeme Munro of Gazeley, it is up to the developer to ensure that the building product being developed is as flexible as possible to cater for change. “Everything is moving so fast and trying to keep ahead of the curve is challenging.” Munro says Gazeley is pushing to secure BREEAM Excellent across its new schemes and putting in place innovations to anticipate change such as ducting for cables for increasing the number of electric charging bays for car and indeed HGVs and vans; ensuring that all roofs have suitable purlins to take photo voltaic panels and so on. Its current flagship Altitude, a 574,000 sq ft speculative mega shed at its Magna Park Milton Keynes scheme has been designed to be flexible sustainable and technologically enabled. It has enhanced mezzanine capacity and an increased number of pallet positions – at no extra cost to the customer. It also has double deck loading doors in every position, at a ratio of one door per 4,500 sq ft – reducing time as well as financial and environmental operating costs for occupiers. With power a growing issue the building already has a power load provision of up to 4 MVA to cater for the evolving needs of customers as well as strengthened steel to incorporate Solar PV across the whole roof which allows a customer to save up to 1,300,000 kg of CO2 a year. The warehouse also includes a host of state of the art sustainability features such as LED lighting, solar thermal heating, rainwater harvesting, power charging stations for electric vehicles and is designed to the WELL Ready Standard certification, making the building a healthier and more productive space for its occupants. “Developers are trying to lead the way in terms of sustainability because customers are demanding it both occupiers and investors. Cox agrees. He says: “It’s not surprising that investors are taking sustainability seriously when you consider that a company’s environmental performance can have a direct impact on its long-term financial success. “It’s certainly our experience that investors take sustainability seriously and in recognition of this, Prologis European Logistics Fund issued a €300 million green bond in March—the first ever by an industrial/logistics company. “The bond proceeds will go toward new construction aligned with top sustainability certification standards, renewable energy and storage projects, and the refurbishment of existing buildings.”


This feature first appeared in the July issue of Logistics Manager.

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