MHD sits down with industrial property experts at Colliers to find out how implementing cost-effective sustainability strategies will future proof industrial property.
The core objective of supply chain is to take products from their raw material to the consumer. “All the logistic activities that occur between any given point A and point B are being closely tracked and monitored. Governments, private agencies and consumers are pushing for, and demanding that environmentally friendly supply chain practices or sustainable solutions to be incorporated,” Tim Edwards, National Director in Colliers’ Project Leaders team says.
In the age of the conscientious consumer, sustainability is key. Signs of ‘going green’ are prevalent throughout the local supply chain. Consumers are more aware of environmental issues than ever before and Australia Institute’s Climate of the Nation 2020 report, which has been tracking Australian attitudes to climate change since 2007, found that 80 per cent of Australians think we are already experiencing problems caused by climate change.
Nine in 10 Australian consumers are more likely to purchase ethical and sustainable products according to new research from Couriers Please, with the survey also revealing that 85 per cent of consumers want retailers and brands to be more transparent about their sustainability practices.
Conversations around producing more sustainable products and ethical supply chains have circulated across most industries for some time now, but not everyone has taken it seriously and it has often been an afterthought for not only consumers, but also major companies.
Now it’s clear that attitudes are shifting to focus on more environmentally and socially ethical practices, what does this mean for the world of industrial property?
According to Tim, it’s important for companies to embark on sustainable initiatives within their own operations and supply chains. “Big players to the micros, this is the time to think more about sustainability, commit to being green and think about taking the lead to help consumers make better choices.”
Green star focus
The word “sustainable” has been a heightened buzzword as the nation moves towards creating a circular economy. Following the release of the 2020-21 Federal Budget late last year, Trevor Evans, Assistant Waste Reduction and Environmental Management Minister said the Government is turbocharging Australia’s waste and recycling capacity.
“There are many reasons why our government is the first Federal Government in Australia’s history to step so heavily into waste and recycling policy,” Trevor stated in December. With Federal and state Governments investing in green initiatives for the economy, local supply chains are following the lead with investments into sustainable practices across an organisation’s suppliers, logistics providers and eventually the end consumer.
Kate Slattery, Head of Engineering, Facilities and Sustainability at Colliers says businesses are increasingly expected to seek out opportunities to improve the sustainability of the supply chain. “This starts from the first investment in the building they develop, construct and operate in, down to their own business practices,” she says.
With significant reduction in waste and consumption, industrial operators in Green Star As-built and Performance Certified buildings are poised to make considerable savings on utilities, on top of having solid green credentials. Kate says the consideration of sustainability in industrial property depends on the perspective of a landlord and tenant. “Both landlords and tenants have adopted unique strategies that allow them to work together towards a greener occupancy and reducing emissions in the overall supply chain.”
Kate notes that industrial landlords should first consider their energy consumption and spend profile of base building services that can be optimised successfully by tenants.
“Having energy efficient and sustainable measures in place is of high interest to tenants. We see this prioritised by tenants, particularly by large logistic companies,” she says.
Logistic operations are large occupiers in the industrial space and therefore have a higher social responsibility to evaluate and improve their supply chain in a sustainable manner. Kate highlights that there are many sustainable certifications a company can put in place across its industrial asset class that will improve their maturity and credibility.
“This would include the Green Star Performance rating, whether that be an individual or portfolio rating. It really is the key benchmark tool when demonstrating energy efficiency in the industrial asset class,” she says.
Green Star Performance is the leading framework that groups together a number of key strategies into one certification.
“From operational practices, energy, water efficiency, to carbon emissions – Green Star Performance is the only certification of its kind to comprehensively target sustainable initiatives in an industrial asset. We’re seeing a significant uptake in Green Star Performance and it’s an advantageous strategy for landlords in this sector,” Kate says.
Applying sustainable strategies
Becoming greener doesn’t have to affect the hip pocket. Kate says that approaching sustainable measures in a cost-effective manner is achievable. “You can successfully achieve sustainability by looking at all aspects of your industrial property. Much of your savings will come from finding ways to reduce waste and energy,” she says.
Alongside built-in management strategies, being environmentally conscious doesn’t mean breaking the bank. Operational focus is heading towards employing renewable energy generations, such as solar systems. “These energy efficiency initiatives can increase a green star rating from four to five stars, but tenants should also be aware that they too can increase their sustainable engagement as an occupier and reduce their operational costs,” Kate says.
However, it’s important to consider sustainability as an ongoing strategy.
“Greener initiatives will be a work in progress that won’t happen overnight to establish value for both tenants and landlords, but they must be thought about,” Kate says.
She encourages developing a robust business case for a specific site. “This can be by demonstrating potential value through leasing incentives offered to tenants or shared savings models funded by the landlord for example. But what is really required is the development of a specific solution that will benefit all parties.”
Ultimately, a positive cash flow can be reached through the adoption of renewables and other sustainable investments. Kate says the industrial sector definitely sees most sustainability initiatives being tenant led. “This is particularly seen from large logistic occupiers like DHL, Woolworths and Australia Post due to driving their own company sustainability targets and agenda,” she says.
“We also see leaders in sustainability on the landlord side too. LOGOS, a Colliers client, has a strong commitment to elevate the market through adopting and embedding greener strategies as their core principle within their organisation,” she says.
In pursuit of growth in sustainability targets, Kate says actioning targets should be the key priority and both tenants and landlords can play their part to contribute to Australia’s circular economy.
Powering towards green
Developers are pushing the envelope to upgrade their buildings to future proof developments. According to Luke Crawford, Director of Research at Colliers Australia, off-shore and domestic investors in industrial buildings recognise that if we are to future-proof this sector and achieve its carbon-reduction potential we must deliver buildings that are sustainable.
E-commerce continues to drive occupier and investor demand for the sector, specifically amongst e-commerce and 3PL providers as they leverage the rapid growth of online consumer spending. Australia’s industrial and logistics market outperformed in 2020. The forecast growth in the industrial sector, largely driven by the expanding e-commerce market, has created a valuable opportunity to build better assets.
“We’re getting a lot more enquiries from solar farm operators and groups wanting to put plant equipment on the roofs of these developments. There is a lot of opportunity to capture solar and redistribute that back to the occupier, we predict this to be the most in demand energy source across the sector this year,” he says.
In terms of the circular economy, Luke says the adoption of sustainability across the industrial sector seems to be spearheaded by all occupiers across the nation. “Most developers are national based, and international occupiers are bringing their specifications to Australia,” he says.
Tim Edwards, National Director in Colliers’ Project Leaders team, says 2021 will be the year of growth.
“Opportunities to be greener in the industrial sector are only increasing. Western Sydney is becoming more attractive to capture the benefits of solar and renewable energy,” he says.
“To cater for the future growth of the sector, upgrading lighting, water harvesting systems and sustainable technology, should be considered and form part of your core sustainability strategies.”
David Hall, National Director Industrial, says the spotlight is on supply chain logistics and the main challenge for the sector is achieving sustainability goals through heightened operations. “Efficiency and maturity in implementing sustainable initiatives begins with the location of the logistics facility. Reducing transport costs will reduce carbon footprint and realising real estate solutions that will match growing operations is a huge trend at current,” he says.
David highlights the gap that Colliers bridges between knowledge, understanding, technology, implementation and construction. “Whether an occupier has a specification they require, we source the solution. We assist from end to end, the same way sustainability should be considered,” he says.
“Sustainability is not the first priority that gets ticked off but in supply chain logistics, it’s become a core strategy in its own right that needs to be addressed.”