Over 50 per cent of Australia’s top 100 industrial and logistics occupiers have set net zero targets, with nine of them aiming to achieve Net Zero Carbon by 2030 or earlier.
Among the strategies prioritised by these occupiers are enhancing energy efficiency (82 per cent), implementing green/renewable energy generation like rooftop solar panels (64 per cent), and reducing the overall carbon emissions produced over the building’s lifespan (39 per cent).
JLL’s research report, “Accelerating Logistics and Industrial Sector Sustainability,” indicates that sustainability-related financial disclosure requirements, stricter regulatory pressures, and growing expectations from consumers and stakeholders are all driving the industry to reduce its carbon footprint more urgently.
JLL Head of Strategic Research – Australia Annabel McFarlane said investors and developers have enjoyed the extraordinary performance of their assets in recent years but are now taking a proactive approach to sustainability to gain from potential green premiums.
“Though operational cost savings also can justify the investment, to date there has been limited evidence of a rental premium for sustainable assets,” she said.
“It’s very hard to prove the implications of demand for sustainable assets from an occupier point of view while vacancy in most Australian industrial markets is so low. However, this is likely to be a changing thematic.
“As developers respond to strong occupancy drivers and more supply comes on stream, new assets with built-in sought-after sustainability features – or repositioned existing assets – are likely to lease faster and with higher rents to tenants with environmental targets.
“From a capital value perspective, terminal yields will be sharper, debt costs lower and pricing differentials will start to emerge reflecting lower re-leasing and capex risk attached to sustainable assets.
“More importantly, they are mitigating ESG risk that will become amplified in coming decades as Australia’s property industry transitions to Net Zero Carbon,” Ms McFarlane said.
Renae Gasmier, JLL’s Head of Sustainability Consulting in Australia said the penny has begun to drop for organisations with Scope 3 in their net zero targets, which sees collaboration across supply chains like never before.
“At the nexus of renewables, ‘electrify everything’ and improving building performance, this creates both sustainable and commercial value for all parties,” she said.
“In the last six months, we have seen a visible shift in our smart industrial occupiers and landlords, who are looking to leverage this value. As a result, our Sustainability Consulting services have been in unprecedented demand.”
According to the report, a significant majority of industrial and logistics occupiers in Australia prioritize energy efficiency, with 82 per cent of respondents indicating that it is a high priority.
Real estate is responsible for Scope 1 emissions, which are the carbon emissions occurring in assets owned or leased by an organization. Hence, occupying a net zero building is crucial in aiding corporations to attain their net zero goals.
“For an occupier, sustainable real estate can enable reduced operational costs through improved energy efficiency of the building coupled with generating and storing green energy onsite,” the JLL Report notes.
“For an occupier with a large vehicle fleet, the consideration of fuel switching to a renewable source is now coming into play and, therefore, identifying if existing real estate will be able to cope with the complexity of requirements.
“These net zero value drivers will see landlords and occupiers increasingly needing to work in partnership choosing the route between extending leases on existing assets that have a net zero retrofit plan or moving to new net zero builds.”
The report also notes that owners of industrial real estate could entice tenants with net zero ambitions by generating onsite renewable energy with battery storage via PV roof-top solar panels so as to run facility operations and fast onsite electric vehicle (EV) charging stations, among other green initiatives.
“The findings in our latest report are supported by JLL’s Global Future of Logistics survey completed in 2021, which asked JLL logistics and industrial experts globally to respond on behalf all tenants and occupiers,” Ms McFarlane said.
“Whilst globally 53 per cent found that occupiers are taking at least limited sustainability action, in Australia this figure is 67 per cent, which indicates that Australian occupiers are more climate conscious than their APAC and Americas peers and only slightly behind the responses from EMEA,” she said.