Trends 2025: ESG and height the winning factors in logistics
In an increasingly polarised market, height and sustainability are the winning factors, delegates heard at Trends 2025: Logistics investment opportunities in CEE, organised by Real Asset Media, Savills and MDC2, which took place at Savills’ headquarters in London recently.
“There is a shift to buildings with 12-metre height,” said Predrag Markovic, Senior Vice-President, J.P. Morgan. “At present only 12% of the market is at that height, but we are likely to see more polarisation between future-proof assets and potentially redundant assets.”
The market is transitioning to 12m-high buildings that are more efficient because they can store 20% more pallets, which means that suddenly 10m buildings are at risk of being redundant.
“Our recent Logistics survey shows that occupiers really want height”, said Andrew Blennerhassett, European Industrial & Logistics research analyst, Savills. “This will make a massive difference, because the 10m assets will not be in demand. Like in the UK, grade C stock will stay vacant for a long time.”
Assets close to the city will still be valuable, but the ones in logistics locations are likely to see a lot less demand.
Aside from height, ESG-compliance has also become a must.
“We only develop sustainable stock”, said Hadley Dean, Founder, MDC2. “It is pretty simple: if you build ESG-focused assets with lower energy consumption you will attract the right tenants, who really care about lower emissions as well as the 50% reduction in energy bills and they can share that with their teams and stakeholders.”
Gdansk, for example, is attracting interest because of the strong long-term fundamentals of the market, Dean said, but also because it has an added attraction: a huge amount of wind power.
Sustainability gives a fair competitive advantage, because it is not just about doing the right thing but also about keeping tenants happy. Aside from green energy, this also means amenities and parks and green spaces.
“You can generate returns from ESG”, said Blennerhassett. “Occupiers want to automate and integrate AI in their buildings, but the energy requirements are huge. Look at the advantages France has had with its supply of cheap reliable nuclear energy, compared to Germany. This factor will set the market apart for the next 10 or 20 years.”
Sustainability means cheaper energy and happier tenants, but tt also makes getting financing easier. “Banks are giving better lending rates to people who are developing ESG-compliant assets”, said Mark Richardson, Head of Investment Poland, Savills.
