The economic feasibility of sustainable logistic real estate

Bart De SmedtRoel Gevaers

Department of Transport and Regional EconomicsUniversity of Antwerp

ERES Conference 2009 – June 26th - Stockholm Royal institute of Technology

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Introduction

BUILDINGS: 40% of energy consumption and CO²-emissions

COMMERCIAL REAL ESTATE:• RETAIL 43%• OFFICES 34%• LOGISTICS 23%

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Introduction

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Introduction

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Research questions

• How does a green warehouse differ from a traditional warehouse?

• What are the difficulties in the financial valuation process of green warehouses?

• Can a certificate facilitate the appraisal of green logistic warehouses?

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How do green warehouses differ from traditional ones?

• Traditional warehouse Old warehouse

• Green warehouse: - high-performance- reduce impact on environment and health

Achieve through: Location, design, material selection, construction, operation, maintenance, removal and possible re-use

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Location

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Physical characteristicsExample: $2 billion restoration of Ford’s 400 ha Rouge River manufacturing complex (Dearborn, MI, USA)

Points of attention:• Stormwater• Green roofs• Soil remediation• Natural Lighting• Workers safety• Flexibility

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Physical characteristicsExample: Klavertje 4 ‘Greenport’, Province of Limburg (NL)

Points of attention• Rely on renewable forms of energy • Maximize water reuse• Minimize reliance on potable water• Building orientation • Daylighting and envelope design as active strategies (geothermal systems, adiabatic cooling and natural ventilation)

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Physical characteristics

Park Blue Planet, Chatterley Valley, UK(Gazeley)

Magna Park Rhein, Main, Germany (Gazeley)

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Financial valuation

Necessary in order to move forward, overcome lack of hard data that quantify costs and benefits of individual environmental green features.

Based on a good model trade offs can be done by the sector.

In the end, no logistic development can be truly sustainable unless it remains economically viable and continues to deliver a strong return to investors. This idea is sometimes lost in the debates and should not be forgotten.

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Difficulties in financial valuation

• Position in the appraisal process developer or user

• Paradox: sustainability - long term vision financial valuation - short term view• Lack of real life cases in Belgium• A lot of qualitative benefits

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Certificate as a way to facilitate appraisal

What should be incorporated in a certificate?- Sectorspecific certificate with only logistic building

aspects- Overall building certificate with subdimensions for

different sectors (offices, logistics, retail)- Total supply chain certificate

The lack of common legislation has created a variety of certificates with different parameters (LEED, BREEAM, Green Star, DGNB, EEWH, Casbee,…).

15Countries Measurement

parameters

Types of buildings

LEED US

Argentina

Brazil

Canada

India

Sustainable sites

Water efficiency

Materials & resources

Indoor environmental

quality

Innovation & design

processes

New buildings

Existing buildings

Commercial interiors

“Core & sells”

School buildings

Retail

Rest homes

Houses

Neighbourhood

development

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Breeam UK

The Netherlands

Management

Health

Energy

Transport

Water

Materials

Waste

Land use & ecology

Pollution

Offices

Retail

School buildings

Prisons

Court buildings

Rest homes

Industrial buildings

Eco-homes

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Green Star Australia

New-Sealand

South-Africa

Space use

Spatial

differentiation

Conditional

requirements:

equal to Breeam

Timing of the

certification

School buildings

Rest homes

Industrial buildings

Mixed use

Multi unit

residential

Offices

Office interiors

Retail

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German Sustainable

Building Certificate

Germany Ecological quality

Economical quality

Socio-cultural

quality

Technical quality

Quality of the

building process

Quality of the

location

All types of buildings

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EEWH Taiwan Equal to LEED Equal to LEED

Casbee Japan Energy

Resource efficiency

Local environment

Indoor environment

Pre-design

New construction

Existing buildings

Renovation

Furthermore, the following countries have also their specific certificates: Mexico, France, Finland, China, Italy, Portugal, Singapore and Spain.

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Certificate as a way to facilitate appraisal

One clear, standard and transparant certificate is needed for the real estate market that is dominated by international operations.

This would facilitate comparability and would facilitate therefore the appraisal process.

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Conclusion

Building green warehouses? All the stakeholders are willing but without certainty about the economic feasibility it stays problematic.

First movers are already on the market but it is to early (data is not yet available) to make strong predictions on the evaluation.

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Thank you for your attention