Industrial buildings that are not certified to withstand climate-related risks and cannot show that they are low or zero carbon, face being stranded, a new report says.

Industrial buildings worth billions face becoming stranded assets

Nila Sweeney|Aug 10, 2020

Billions of dollars worth of industrial buildings constructed over the next 10 years are at risk of becoming stranded and shunned by tenants or investors, unless they can show proof of low-carbon construction that will make them cheaper to run over the longer term, a new report says.

The Green Building Council of Australia chief executive Davina Rooney said a “minimal” 2 per cent upfront cost to support green design can result, on average, in a 20 per cent savings of total construction costs over the life of the building.

“Green Star-certified buildings cost less to operate, consuming 66 per cent less electricity and 51 per cent less water than the average Australian building,” Ms Rooney said.

“They send 96 per cent less waste to landfill during construction and produce 55 per cent fewer greenhouse gas emissions.”

Frasers Property Industrial general manager for northern region Ian Barter said Green Star industrial facilities saved tenants an average of $1.11 per square metre per year in operational costs when compared with non-certified warehouses.

“In a 20,000sq m warehouse, this is a saving of around $22,000 per year,” he said.

Ms Rooney said buildings will need to be designed to have exceptional resource efficiency, and be carbon positive to achieve the highest possible ratings.

“The science is clear, and there is growing financial pressure, political will, public demand and legislation driving us towards a zero carbon world,” she said.

Challenges avoided

“As this shift occurs, low and zero-carbon buildings are the only choice for investors that don’t want to be left with stranded assets.”

Industrial properties have largely avoided the challenges faced by malls, offices and hotels due to the pandemic.

Capital allocation to the industrial and logistics asset class has now surpassed the volumes recorded within the retail sector, demonstrating the shift in investor appetite with industrial & logistics as the preferred route to greater long-term value and growth,” said Sass J-Baleh, director of industrial research at commercial agents JLL.

Ms Rooney said the forecast growth in the industrial sector, driven largely by the expanding online retail market, had created a valuable opportunity to build better assets.

“The sheer size of industrial facilities means they can play a big role in increasing rooftop solar PV capacity,” she said.

“If we put solar panels on all industrial facilities in Australia, we could almost double our capacity – from the current 6500 Megawatts (MW), to 12,800MW.”