Targeting net zero carbon in urban logistics: challenges and opportunities

Cathy Myatt Head of ESG
Read time: 4 mins
Category: Innovate

In late 2023, Chancerygate appointed Cathy Myatt as its first ever head of ESG (environmental, social and governance) to support the business’s sustainable UK and European growth plans.

Here, she examines the importance of net zero, Chancerygate’s current activity and the key challenges on the road ahead:

 Why is net zero carbon on the property sector’s radar?

The built environment is a significant contributor to carbon emissions, accounting for nearly 40 per cent of global emissions. One of the most pressing topics facing the property sector is navigating a pathway to reduce these emissions and achieve net zero.

As a society, we need to accomplish this before 2050 to limit global temperature rises to 1.5 degrees Celsius which will prevent the worst impacts from climate change.

Climate change has a long term societal and environmental impact, and our efforts to reduce emissions now will help address wider future issues. However, last December’s COP28 conference highlighted that we are not on track.

Within urban logistics, the drive towards net zero comes primarily from investors. Increasing disclosure and financial transparency requirements covering the UK and EU markets are increasing the focus on buildings’ ESG credentials. In addition, asset managers are starting to set their own net zero targets, and there are more disclosure requirements in the pipeline.

Whilst corporate tenants already consider sustainability when making rental decisions, similar priorities amongst SME occupiers are not as widespread.

Consequently, our focus at Chancerygate is on properties that are energy efficient for occupiers, delivering them cost savings.

Compared to one of our newly built units, an equivalent unit, built in the 1990s, that had not undergone any refurbishment would cost over 15 times more to run and a unit dating from 2009 would cost over 5 times more.

This focus on reducing energy use and carbon emissions also helps to preserve the value of the asset and means we are ready to meet the needs of future occupiers and investors which are drawn to sustainable properties.

How we are addressing carbon emissions with…

Our developments

Carbon emissions come in two forms: operational emissions, which is the energy needed to heat, cool and power the building, and embodied emissions which come from the materials and energy utilised in the construction process.

To reduce operational carbon emissions, our standard is to first make the units as energy efficient as possible. We do this by using high-quality insulative materials, controlling air tightness to reduce air leakage and providing natural daylight. The use of air source heat pumps means that there is no fossil fuel needed to power the building.

This is carried out alongside providing solar panels as a source of renewable energy.

All of our units target EPC A ratings for energy efficiency. For our new developments, we are starting to calculate the future energy needs for both the building and the future tenants and to design our units to provide sufficient solar panels to meet all those needs where we can. This will take our buildings to EPC A+ and beyond to net zero in operation.

With embodied carbon, we are looking closely at the materials that go into construction to measure and understand their carbon footprint and consider alternatives that might reduce carbon emissions.

Our managed assets

Since 80 per cent of buildings which will be occupied in 2050 already exist, decarbonising existing stock is a significant priority.

For our current funds, our approach is to take stock which has poor ESG credentials and to retrofit low carbon solutions. Presently, the MEES regulations require commercial properties to meet an EPC E rating. By 2027, properties will need to be at least a C and a B by 2030.

We target achieving at least an EPC B rating when we refurbish assets, futureproofing them and helping occupiers by allowing significantly better energy efficiency.

As we bring newer stock into management, the focus will shift more towards monitoring performance and engaging with tenants to improve energy efficiency.

Navigating key challenges on the road to net zero

Targeting net zero requires a significant amount of effort to stay ahead of emerging and evolving challenges.

Several different definitions for net zero carbon buildings exist, and guidance is being updated continually, for example, the net zero standard for buildings which is coming out this year. It’s important to stay up to date and to be clear on what is being delivered to avoid greenwashing risks.

In tandem, technologies are also evolving such as solutions for the provision, storage and management of energy.

In the current economic climate, and with rental values not yet fully reflecting sustainability credentials, there is also the challenge of making the business case for investing in net zero. This applies across both the specification of new developments and in the refurbishment of managed assets.

With managed assets, there is an added challenge of gathering data to understand a building’s operational sustainability.

Data is needed to provide performance visibility and unlock the insights needed to tackle carbon emissions for both owners and tenants. This is particularly challenging in the multi-let use class where there can be challenges in engaging meaningfully with tenants.

A clear opportunity for ESG in urban logistics

We anticipate both occupiers and investors increasingly prioritising sustainability, increasing the pull towards net zero.

Chancerygate’s focus on developments and assets targeting net zero needs to balance economic viability alongside our sustainability ambitions.

Prioritising how to achieve net zero on an economically viable basis now will ensure we stay ahead of the curve rather than await, and address retrospectively, significant market shifts around sustainability.

Chancerygate offers urban logistics units freehold or leasehold in strategic locations across the UK and will soon also do so in Spain and Portugal. To view our latest developments, click here. To learn more about our asset management work, click here.

© Chancerygate 2024 | Chancerygate Limited is a limited company registered in England and Wales with registered number 03699100 and VAT registered number 123 3289 34. Our registered office is at 12A Upper Berkeley St, Marylebone, London W1H 7QE
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