Stringent environmental rules having an impact on logistics

Uncertainty over environmental regulations is having a big impact on the industrial and logistics sector, experts agreed at Real Asset Media’s Trends 2024: the European Logistics Real Estate Census 2024, an event which was held at Savills’ offices in London recently.

“ESG is having a huge impact on the sector, as is automation,” said Kyle Streitburger, head of investments, Sunrise Real Estate. “Environmental concerns are at the forefront of decisions.”

There is uncertainty about how stringent ESG rules will be and ongoing confusion about inconsistency in the way they are applied in different countries and even within countries, as in Germany.

“The inconsistency makes it difficult to compare across markets,” said Henry Stratton, head of research, Tritax Management. “Companies have to focus on efficiency, they want to shift the dial with actionable capex spend that will deliver for them, but deciding what is actionable is not easy.”

Different regulations complicate matters even when it comes to something as wide-spread as solar panels, which can be owned or rented, while access to the power grid and power availability vary greatly from region to region.

But the shift to ESG-compliance is underway, driven by legislation but also by peer pressure, tenant demand and increased awareness of the issues at stake.

“We want to be carbon neutral by 2050, so we are making a difficult shift and no longer take leases in buildings that are not ESG-compliant,” said Peter Schuijlenburg, head of real estate solutions EMEA, DHL Supply Chain. “We’re also investing in buildings to upgrade them, together with landlords who are keen to do the work because they want to keep us as a tenant.”

One-third of DHL’s assets globally are now carbon neutral and the company is also developing new ESG-compliant warehouses.

“It is not just about putting solar panels on the roof,” Schuijlenburg said. “The social element is crucial: we need to create a positive environment and promote wellbeing. The S of ESG is becoming increasingly important.”

The extent of environment – the E of ESG – is also becoming broader, with more attention paid to the context the asset is in.

“We know biodiversity is in serious decline and this has to be addressed in every new development,” said Streitburger.  “In the UK we are adding not just green spaces but also things like bird houses, bee hives and insect hotels to new projects.”

Countries with a strong logistics market and an equally strong track record in ESG, like the Netherlands, lead the field in Europe. But sometimes less established markets can have the advantage, because by coming late to the party they can benefit from other countries’ experience and choose the best materials and construction methods, thereby future-proofing their assets.

“Some of the best logistics assets being built now are in Italy,” said Stratton. “E-commerce is growing fast there, and companies are looking at the best examples from other countries and go for quality.”