Sustainability makes good business sense

However, occupiers and investors will have no choice but to meet the demands of London Zero 2030, including the unavoidable financial costs of decarbonisation regulations, the conversion to all-electric operations and scrutiny of ESG policies. Rapid urbanisation means that London is becoming more densely populated, putting huge pressure on infrastructure. Sustainable urban logistics are vital to ensuring London is an attractive place to live, work and invest, with cleaner, quieter, greener streets.

Recognising this challenge and seeing it as an opportunity, the GLi platform, a joint venture between PATRIZIA, a leading partner for global real assets, and London-based developer and asset manager KSP, was created to deliver the most sustainable logistics units in the sector – sophisticated, future-proofed buildings to create operational efficiencies for their occupiers, not just for the next five years but the next 30.

GLi’s first development, PR1 in Park Royal, West London, is nearing completion. It uses entirely electric energy and 100% of its parking spaces are equipped with electric vehicle (EV) fleet charge points. It also features an optimum array of rooftop solar PV, battery storage to capture power from the sun during the day and cheaper electricity at night. There is incredible pressure on the electricity grid and this step allows occupiers to be more self-sufficient and offers substantial savings in terms of energy costs.

The offices are designed to West End standards, to attract and retain employees, with air conditioning, controlled natural light, showers, breakout areas and secure electric bike charging.

This approach seems to be paying off. PR1 has been pre-let to Classic Fine Foods (part of the Metro group) and also won ‘Deal of the Year’ at this year’s Industrial Agents Society Awards. GLi’s second Park Royal development, PR2, is designed to identical specifications, and is already attracting significant occupier interest.

The platform’s core strategy is to redevelop dated properties or underused sites within the M25 from the ground up, delivering grade-A standard accommodation that reflects the highest sustainability credentials. For example, facilities in the GLi portfolio are characterised by their energy efficiency and use 100% electric power, built on a net zero carbon basis and rated BREEAM ‘Excellent’ as a minimum.

The sites also address the challenge that occupiers face due to the expansion of London’s Ultra Low Emission Zone (ULEZ). Regulation is an important consideration, but GLi doesn’t just build to the regulations; it builds best-in-class properties that will be fit for purpose in 30 years’ time and beyond, in an attempt to guarantee operational security and efficiencies for occupiers.

For example, all developments in Park Royal provide 100% EV charging points for cars and vans, easing occupier transition to fully electric delivery fleets. Units are conceived with customer and employee wellbeing considerations, including good daylight and air conditioning, plus bicycle storage. Finally, GLi properties are designed to make a positive contribution to urban regeneration and enrich local communities.

This is all good news for the environment, but it also makes solid business sense. In recent years, there has been a real focus on quality in the London logistics market, with occupiers increasingly demanding higher standards for their buildings, businesses and employees. And it is also evident that sustainability is a key component of that quality as far as occupiers are concerned, and with good reason.

Energy efficiency ultimately saves occupiers money and makes them more efficient, too. Following Russia’s invasion of Ukraine last year, energy prices rose dramatically. To an extent, the situation has calmed down now, but energy markets are still volatile and costs still prohibitive. For the sake of the bottom line as well as the environment, utilising as much renewable energy as possible is critical for the business.

But sustainability is also critical for employee retention. The jobs market remains incredibly tight, which means talented workers have a genuine choice about where they work and many people increasingly care deeply about sustainability in general and about how sustainable their employer is specifically.

That is true of the general population, but is overwhelmingly the case with young people. It is not just that climate change has been a big part of their education; they can also see the impact of climate change all around them. Not a week goes by without another grim headline about a climate change-induced disaster, from wildfires in Greece to devastating floods in Pakistan. This is the world that young people will inherit and they want something better to pass on to their children.

Sustainability standards

Higher occupier sustainability standards are driven by a broad mix of stakeholders, including their investors, employees and customers, as well as regulatory requirements. Most of the big banks, to take just one example, have sustainability criteria in their lending policies, especially when it comes to real estate. In short, it is becoming ever more difficult to attract investment without a good story to tell on sustainability.

For these reasons, today’s occupiers want to move into the best-quality, most sustainable properties. After all, the built environment accounts for around 40% of carbon emissions globally, according to the World Green Building Council. No business’s sustainability strategy can be considered credible if it does not take account of the real estate that business occupies. An energy-efficient building is, therefore, hugely attractive to investors, employees and, of course, customers.

In recent years, there has been a real focus on quality in the London logistics market, with occupiers increasingly demanding higher standards for their buildings, businesses and employees

But sustainability is about more than energy-efficient buildings. Increasingly, central government and local authority climate initiatives are addressing issues such as air quality. London’s ULEZ is a prime example. The mayoral policy hit the headlines nationally due to its apparent impact on the Uxbridge and South Ruislip by-election result, but its real impact goes well beyond politics.

Now, it is prohibitively expensive to drive an older, more polluting vehicle anywhere in Greater London, with the charge coming in at £12.50 a day. That is a real problem for many individual citizens but it is also a problem for businesses that need to operate multiple vehicles as part of their day-to-day activities.

One of GLi’s core target groups, last-mile logistics operators, is a case in point. Their very business is to move goods around in vehicles, which is why providing high-quality EV charging points as standard is crucial. Increasingly, customers will be switching to all electric fleets if they have not already done so. Providing those facilities as standard is essential for occupiers and helps future-proof their businesses against any changes to the regulations in the future.

When it comes to delivering truly sustainable logistics assets, there is no one-size-fits-all approach. In some cases, particularly in the office sector, the more sustainable option is to retain existing structures and embark on retrofit projects due to the embedded carbon in both the existing and new materials. This is the approach GLi is looking at for a potential future investment in Park Royal.

But retrofitting is not always the best route to decarbonisation in logistics. GLi is investing in key industrial locations within the M25 and while the locations of its sites are second to none, the existing property on these industrial estates is almost always poor. Often, it is not possible to retrofit such properties and achieve the high levels of sustainability that customers deserve and demand.

Clearly, GLI is doing something right. Classic Fine Foods will take up occupation of PR1 towards the end of the year, with planning permission obtained for three additional sites: PR2, plus CR1 and CR2 in Croydon. Plans are also progressing on sites in Mitcham and a further site in Park Royal. Work has already begun on PR2 and will start on site at CR1 and CR2 imminently, with the buildings predicted to be completed in 2024.

So, in a relatively short period of time – especially given the disruption provided by the pandemic – GLi has moved from concept to execution. The conviction that sustainability makes commercial common sense is proving to be eminently justified.