Logistics real estate investors are willing to pay nearly a fifth more (19%) for European warehouses with high sustainability credentials (BREEAM Very Good or above) over assets rated below that benchmark, according to Cushman & Wakefield.
The global real estate services firm analysed a sample of over 1,500 transactions relating to more than 1,800 buildings of 10,000 m2 or more over the five years since 2019, the period over which a difference in pricing has emerged. The price differential was even more evident for assets outside ‘super prime’ locations where the premium rises to 24%.
This implies investors place even greater value on green credentials in locations where the quality of the asset has a stronger influence on its ability to attract and retain tenants, income and value.
In its Sustainable Logistics – Navigating Change in European Logistics Real Estate report, Cushman & Wakefield explores the push and pull factors behind the investment value premium, and how sustainability is impacting every aspect of the sector from the design of buildings and supply chains to financing. The firm’s analysis also reveals that current rental levels for well-rated logistics buildings across Europe are 10-30% higher than lower-quality assets.
James Chapman, head of EMEA Capital Markets, Cushman & Wakefield, said: 'For many investors the sustainability credentials of an asset under consideration top the list of pre-acquisition assessment criteria. Highly-certified assets are considered more likely to secure tenants now and in the future, provide higher rental income, minimise the risk of void periods, and retain value as a result. By revealing how this emphasis on credentials is playing out in pricing and rental terms, the ‘flight to quality’ in logistics is clear. We believe this marker of quality will persist and mature as pressure mounts to ensure assets remain tradable from both a letting and investment perspective.'
While the increasing importance of environmental credentials is positive for owners of highly-rated assets, owners of legacy or unrated buildings will be wary of falling behind market expectations and at risk of their assets becoming ‘stranded’ and exposed to write downs.
Tim Crighton, head of EMEA Logistics & Industrial, Cushman & Wakefield, added: 'The challenge for investors and asset managers is how to improve existing buildings’ sustainability credentials in an increasingly complex landscape. It is crucial to understand the return that components can deliver not just in terms of reduced carbon emissions and energy use, but also in terms of asset value and income and critically understanding how these assets support the decarbonisation of the businesses that occupy them.'
