Asia Pacific’s industrial real estate sector looks set to be the biggest winner in commercial real estate in 2022 as supply chain concerns remain at the fore. Across the region, we have seen how the sector has built on growth from 2021 thanks to rapid e-commerce adoption during the pandemic, in turn translating into logistics space demand from rapid expansion in e-commerce operations and omnichannel distribution.

Unsurprisingly, the sector emerged as real estate investors’ most preferred sector for a third year running in CBRE’s 2022 Investor Intentions Survey.

But with Asia Pacific logistics rents increasing by 33% since 2010, concerns are growing as to whether there can be room for further growth – logistics yields have rapidly narrowing the spread with office yields from 90 bps at end-2019 to just 40 bps at end-2021.

In response, investors seeking higher returns are turning to core-plus and value-added opportunities in logistics facilities that offer upgrading potential. The ongoing e-commerce boom and its emphasis on speed and efficiency of supply chain operations mean that occupiers are increasingly seeking automation and other technology enhancements in their logistics facilities; for example automated stacking systems, sufficient loading/unloading zones, and back-up power equipment for warehouse tech cold storage.

The future is green: Green warehouses

One emerging trend to note however, is the continued drive towards the construction of more green, safe and hygienic warehouses and industrial facilities. A CBRE survey of logistics occupiers found that more than two-thirds expect more sustainability or green features in their facilities within the next three years.

For warehouses, going green can not only significantly reduce running costs, it also provides clear environmental benefits. CBRE Global Supply Chain Advisory estimates transportation to make up 45-70% of logistics occupiers’ total costs. With escalating shipping rates as a result of supply chain disruption and rising fuel costs, green warehouses offers an opportunity for occupiers to optimise costs where it counts.

Little gains add up

Industrial occupiers have an array of options to choose from when it comes to implementing sustainability features in new or even existing logistics facilities. LED lighting is one popular upgrade for pre-existing industrial units which, when combined with smart systems with sensors can not only monitor lighting needs but also floor occupancy. The system and its network of sensors can be used for other types of resource management, like gas and water while submeters can monitor refrigeration units, machinery and other equipment for usage and energy savings.

Industrial developers who want to further improve sustainability within current facilities can conduct a thermographic inspection, using non-intrusive infrared imaging to identify uncontrolled heat gain or loss. Doors, walls and roof surfaces can be scanned to find possible improvements.

Roofs can also hold solar energy panels as a sustainable, alternative source of energy. They help to reduce the cost to the occupier or warehouse owner by supplying less expensive energy to use in the building.

On its own, these enhancements can seem piecemeal and insufficient, but when combined, can yield incremental gains in resource efficiency and cost savings. In Singapore, CBRE was appointed to work with a microscope manufacturing company on delivering a transformative industrial project – a fully air-conditioned (including warehousing and packing), high-tech manufacturing plant that will house optics, assembly, research and development, warehousing and corporate office functions in one place.

When it is ready in 2023, this technologically-driven industrial project, with Class 100k clean room manufacturing spaces, will incorporate many of the abovementioned energy efficient systems, fulfilling Green Mark Gold, FM Global requirements and implement smart technology in line with Singapore’s Industry 4.0 standards.

Focusing on worker well-being within green warehouses

Worker well-being is also another ESG issue that has gained prominence, especially in logistics where occupiers face labour shortages and escalating labour costs. Cumulative labour costs in Asia Pacific have grown 54% from 2009 to 2019, outpacing the 25% gain globally and 5% in Europe over the corresponding time period.

This is where green warehouses have a part to play in attracting and retaining talent. According to a Harvard School of Public Health study, workers in green building conditions performed better, with higher cognitive brain scores and improved performance,

Some features that occupiers can consider implementing within their projects to support and improve worker comfort include insulation, which can save energy and improve working conditions. Lower-polluting materials like specialised paints, adhesives, wood products, sealants and carpeting can improve the building’s air quality to ensure the long-term safety of workers in an otherwise hazardous or pollutive environment.

In warehouses where cooling and heating systems can be less efficient with their vast, open spaces, high volume low speed (HVLS) fans can prove efficient in moving cool or warm air around the facility, to keep workers comfortable while decreasing energy use. They can be helpful even in climates requiring air conditioning or heating.

CBRE has helped a leading Swiss instrumentation company’s industrial facility in Aurangabad, India, meet LEED Silver certification and FM Global standards. We installed water-efficient fixtures to reduce water consumption by up to 20%, sensor lights inside the shop floor and HVLS fans for comfort. To mitigate perennial high temperatures faced in the region, roofing and side wall insulation helped maintain a consistent and comfortable internal temperature. Additional wellness facilities for staff such as a creche, occupational health centre, a recreational area for staff to perform meditation and relax and a gym to unwind after a long day were also implemented in the utility building.

Conclusion

When one thinks of a “green building,” office buildings typically come to mind, given their ubiquity and established framework of green certifications to optimise office projects. In the midst of the green revolution, we must now recognise the value of sustainably designing a different kind of building: green warehouses.

Green certifications such as IGBC, LEED, GEM, etc have expanded their scope to include warehouses, giving a stamp of approval and assurance that industrial facilities have been designed and built to sustainable specifications.

Since warehouses and industrial facilities occupy such a substantial geographical and environmental footprint, the long-term benefits of constructing them in a sustainable way are manifold. Developing and managing sustainable industrial projects can help make companies more competitive and socially responsible while minimising any impact on the environment. With logistics demand showing no signs of abating, there has never been a more crucial time to apply project management initiatives that promote sustainability, as well as facility optimisation, including those dedicated to storage.

The writer is from CBRE, the world’s largest commercial real estate services and investment firm,Vikram Vidyala is Senior Executive Director for Project Management.