The real estate industry has been wrestling with its carbon footprint and how to reduce it for some time. However, until recently, the focus has been exclusively on emissions from building operations, such as lighting, heating and cooling.
But operational carbon emissions are only half the story. The construction of any building generates carbon. Making steel, glass and concrete results in carbon emissions. The transport of materials to and from a construction site and the work involved in erecting a building all involve emissions. It is estimated that 11% of total global carbon emissions come from building construction and materials.
Now the industry is beginning to look at the whole life cycle of a building to assess its emissions and it is driving changes in behaviour. Peter Epping, global head of ESG at Hines, says: “We need to be careful about which buildings we are knocking down and whether the benefit in terms of reducing operational carbon over time or other benefits are worth the embodied carbon of building new. No matter how green a building is touted to be, you still spend at least 30 years of operational carbon in its development.”
As building operations becomemore efficient, the embodied carbon in a building becomes more important. The longer a building can be preserved, the more the carbon involved in its creation can be ‘amortised’.
Billy Grayson, executive vice president, centres and initiatives, at the Urban Land Institute, says: “According to most estimates, embodied carbon accounts for as much as half of a buildings’ total carbon emissions over its lifetime. If we can develop strategies to use lower-carbon building materials and construction strategies, we can make significant progress in reducing overall emissions from the real estate sector.”
Projects that attempt to minimise embodied carbon can benefit from green building certification. Many of the major certification systems, including LEED, BREEAM and EDGE, consider embodied carbon.
Earlier this year, a pioneering low-carbon certification programme for real estate was launched in Europe, garnering support from real estate investors such as Ivanhoé Cambridge and Generali Real Estate, as well as the French BBCA association.
Like most exercises in making real estate more sustainable, measuring and assessing a building’s total carbon emissions over its projected life can help developers and investors judge its impact. A whole building life cycle analysis (WBLCA) attempts to account for all carbon sources present throughout a building’s life. Such analysis – while obviously requiring a certain amount of speculation – can give a more balanced picture of a project’s impact and might even sway decisions on whether to embark upon it.
To reduce embodied carbon, the real estate industry needs to embrace the four ‘Rs’: reduce, reuse, replace and recycle, says Grayson. Reducing the raw materials and energy used in the construction process will reduce embodied carbon. This might involve using modular construction to reduce waste and transport emissions, or producing materials on site. Of course, simply creating fewer buildings and instead refurbishing existing stock naturally reduces the use of materials.
Reuse could involve using the materials from the construction of one building for another, or they could be recycled. “Recycling all construction waste and using recycled materials for construction can also have a positive impact on reducing embodied carbon,” says Grayson. Developers are beginning to replace carbon-intensive building materials with lower- carbon or renewable materials, such as timber, lower-carbon concrete and recycled steel.
Such considerations are increasingly tipping real estate investors into refurbishing and improving existing buildings rather than demolishing them and building afresh. Grayson says: “Usually, refurbishment or repurposing of obsolete properties is better than redevelopment, from an embodied carbon perspective.”
However, refurbishment is not always the best option: it might be impossible for a building to be brought to the required specification, for example. As construction becomes lower- carbon, the balance may also swing back in favour of new buildings, especially if the building they replace can be recycled.
Using the four Rs to reduce embodied carbon should also not come at a cost; using less energy and materials in a project tends to mean lower costs. Furthermore, lower-carbon materials are often similar in cost to their standard equivalents, the ULI’s Embodied Carbon in Building Materials for Real Estate report argues. New technology is emerging to help the real estate industry reduce embodied carbon.
Epping says: “It is very encouraging to see considerable innovation in the field of low-carbon construction, whether that is low-carbon cement, low-carbon steel or other materials.”
For example, advances in structural timber are making it a practical solution for large scale commercial buildings, even lofty skyscrapers, while solutions are emerging for concrete which are not just lower-carbon but carbon negative, as the making of the concrete involves storing carbon dioxide.
Throughout a building, the choice of materials will affect its final embodied carbon footprint. “Everything down to the choice of carpets can make a difference. And that’s why we were pushing really to getting environmental product declarations (EPDs) for everything we use in a building, so we can have a ‘carbon P&L’,” says Epping. Environmental product declarations will allow purchasers to weigh up the environmental impact of a product.
Embodied carbon could be further reduced by employing circular economy techniques. The circular economy refers to the constant reuse and recycling of materials to reduce waste, carbon emissions and pollution. This might involve reuse of buildings or the recycling of existing materials into new buildings.
Grayson says: “Circularity teaches us [that] any industry’s waste products should be a feedstock for other industries’ processes, and that we should figure out ways to reduce lifecycle environmental impacts by efficiently integrating different industries in the efficient use, reuse, and recycling of materials.
“If buildings were built from rapidly renewable materials and designed for adaptive reuse and disassembly, it would significantly reduce their life cycle greenhouse gas impact and contribute to the circular use of materials as feedstocks for future buildings and other beneficial manufacturing processes.”
Part of the challenge of reducing embodied carbon is in persuading people to consider it, how to measure it and how to reduce it. “We have seen that introducing this topic into the conversations with architects, designers and contractors means people get up to speed quite fast and act smarter. If you had mentioned this topic two years ago to anyone, they would probably just have shrugged their shoulders and looked for someone else to work with,” says Epping.
Hines has contributed to the debate by publishing an Embodied Carbon Reduction guide, which explains the topic and gives some detail on how it might be addressed by the real estate industry.
And it must be addressed, not least due to the existing and future legislation which is expected for the sector. For example, the Netherlands’ commitment to economic circularity by 2050 involves a requirement that the building sector reduce its raw materials use by 50% by 2030. Since 2013, all new buildings have been required to conduct a whole building life cycle analysis.
As noted in Sustain’s May issue, a number of new-build projects in cities across the world have been rejected, due, in part or whole, to the carbon emissions associated with their construction.
The major push factor for the real estate industry, however, is likely to be the wider implementation and higher cost of carbon taxes. Some 40 countries and more than 20 cities, states and provinces already use carbon pricing mechanisms, with more planning to implement them in the future, in order to shift the burden of climate change onto those who are responsible for it.
For example, in April, Singapore announced it would be revising its carbon tax and raising it incrementally to change behaviour. From 2024, large emitters in Singapore will have to pay S$25 (US$18) for each tonne of carbon dioxide equivalent emitted, increasing to S$45 in 2026 and 2027, and eventually to between S$50 and S$80 by 2030.
Once carbon taxation expands to more countries, developers will have a strong financial incentive to take action and reduce embodied carbon.
Wood has been a primary material for construction for thousands of years and is still a popular building material, primarily for homes, in timber-rich nations such as the US, Canada and the Nordic countries.
However, it has had something of a renaissance in recent years, due to a greater appreciation of its environmental benefits and advances in technology which mean it can be used in larger buildings. Modern engineered timber products, such as cross- laminated timber, can be used in the construction of commercial properties, for everything apart from foundations.
Ascent, a 25-storey apartment block in Milwaukee, Wisconsin, in the US, recently topped out at 86.56m, making it the tallest timber building in the world, overtaking several recent projects in the US and Europe in the 80m range. However, Ascent is set to be overtaken in a few years by Rocket & Tigerli, a residential project in the Swiss city of Winterthur, which will have a 100m tower.
For a growing number of real estate investors, the use of timber is a way to reduce the embodied carbon of new developments. As Olli Haltia, senior partner and CEO at sustainable timber investment adviser Dasos Capital, says: “Wood is basically solid carbon.” The emissions from engineered timber construction are lower than from concrete and steel, furthermore, when timber is sourced from renewable forests, it is replaced with new growth which will absorb tons of carbon before it is harvested (see chart). Wood can also be recycled, to be used in construction again or as fuel.
Dasos has teamed up with Australia’s Cromwell Property Group to launch a €1 billion wooden buildings fund, which will invest in timber buildings across Europe. Pertti Vanhanen, managing director, Europe, for Cromwell, says: “Wooden construction reduces the embodied carbon in real estate and thus matches the objectives of institutional and other advanced real estate investors who are serious about carbon neutrality.”
The use of engineered timber products is growing by around 11% a year, says Haltia, and there is capacity to increase timber production all over the world, by allocating more land and using more efficient forestry methods.
Well managed forests act as a carbon sink and soon regrow timber used in construction. For example, as revealed in Cromwell’s Timber buildings – Truly sustainable real estate report, a 2020 study estimated the wood required for a 5,000 sq m office building would be regrown by Austria’s timber forest in nine minutes.
One downside to timber construction is that it is more expensive than steel and concrete, although greater production will make it cheaper and a greater focus on the environmental cost of construction will make it more attractive. Timber is also suited to offsite modular construction, which can reduce costs.
Another barrier to growth is concern about the material’s safety, particularly with regard to fire and water damage. Engineered timber is no greater fire risk than other modern building materials and is accepted in markets such as the US and the Nordics. However, in markets such as the UK, where timber is little used, some scepticism remains, says Vanhanen. “UK building regulators are conservative, they still remember the great fire of 1666,” he says.
There are also benefits for occupiers from using timber. It is an effective insulator, so can improve building energy performance and some studies suggest wooden buildings improve wellbeing. Cromwell research suggests recently-let wooden buildings in Europe achieve a 9% premium to local prime office rents.
Timber commercial real estate is not limited to Europe and North America. In Singapore, famous for glass and steel skyscrapers, Nanyang Technical University is building a 40,000 sq m academic building. And in Tokyo, timber was used for architect Kengo Kuma’s Olympic stadium.
Also in Tokyo, Sumitomo Forestry has proposed a 350m, 70-storey skyscraper. The project is a long-term one, slated for the company’s 250th anniversary in 2041 and the current project cost is $5.6 billion, twice that of a concrete and steel equivalent.
The real estate industry’s recent focus on reducing embodied carbon is set to take wooden buildings to new heights and bringing new growth to a very traditional construction material.
Nordics investment manager NREP has hired Jesse Shapins as head of urban strategy and design, and as co-lead of its urban development team.
Shapins joins from Sidewalk Labs, an urban planning and infrastructure subsidiary of Google. During his five years at the company, he led multiple urban development projects and secured partnerships in cities across the US.
Prior to Sidewalk Labs, Shapin worked for online media company Buzzfeed, which had bought his GoPop app in 2014. He is also creator of the 'Yellow Arrow' public art project.
Based in Copenhagen, Shapins will oversee urban strategy and design for NREP, with a strong focus on the railway district project in the Danish capital. NREP plans to transform the site into "one of the world’s greenest and healthiest districts".
Claus Mathisen, CEO of NREP, said: “Jesse has achieved extraordinary success by combining his skills as an urban strategist with the creative use of media, public participation and storytelling, to create unique places with a strong sense of belonging.
“He is set to make a meaningful contribution to our mission to put environmental and social impact at the heart of value creation at NREP and to deliver on our commitment to being carbon neutral by 2028 without offsets."
Barings has made its first sustainability-linked real estate loans in Europe.
The investment manager has agreed two sustainability-linked loans against assets in the UK and the Netherlands, saying Europe was “a key area of growth for the portfolio”.
Barings provided a seven-year fixed-rate loan worth £48.6 million to finance the acquisition of The Brewery, a retail and leisure park in Romford, east London, by a joint venture between Schroders Capital UK Real Estate Fund and Immobilien Europa Direkt.
The loan was extended from Barings’ separate account with investor Phoenix Group, a UK long-term savings and retirement business, which invests in sustainability-linked debt.
The loan will be used to retrofit existing buildings to increase EPC ratings and investing in initiatives that enhance biodiversity net gain, health and wellbeing, and tenant and community engagement.
Barings has also provided a loan to a company managed by Round Hill Capital to finance the refurbishment of the Rembrandt Park One building in Amsterdam into a Grade A sustainable office building with two additional floors, an additional office pavilion and public realm connecting the park with the rest of the city.
Charles Weeks, head of European and APAC Real Estate at Barings, said: “Barings is increasingly seeking to apply strong ESG standards to our projects. While we’ve had many more opportunities to focus and shape our assets secured through equity up until now, we’ve been eager to find the right opportunities for sustainability-linked loans for some time. With a growing team, including new colleagues in real estate debt and ESG, we’re keen to explore further such loans across Europe.”
CBRE Investment Management has announced plans to develop solar projects across its global logistics portfolio.
The manager has joined forces with Altus Power, a clean electrification company, in the US and Europe to establish solutions focused on decarbonization and resiliency, including the development and installation of solar power generation, battery storage and electric vehicle charging systems.
CBRE IM has a logistics portfolio spanning 17 countries worldwide, with more than 600 assets totalling 200 million sq ft.
“We are focused on deploying onsite solar projects across our logistics assets where viable in order to advance our sustainability goals and support the transition to clean energy,” said Chuck Leitner, CEO of CBRE IM.
“We look forward to expanding our relationship with Altus Power across core markets in the US and Europe as we scale to make our portfolio more resilient, profitable and sustainable.”
Earlier this year, CBRE IM announced its first agreement with Altus Power to build and operate a portfolio of rooftop community solar projects on logistics facilities in Maryland, US.
Earlier this year, Trammell Crow Company, another CBRE subsidiary, announced a strategic partnership to bring Altus Power’s clean energy solutions to 35 million sqft of industrial assets in the company’s U.S. real estate development pipeline.
In the run up to the pandemic many enlightened landlords and developers were starting to pay greater attention to the impact their buildings had on people. In particular, they were exploring whether or not buildings could be designed, built out and operated in a way that optimised the health and wellbeing of the people who worked in the space.
Now, as the world emerges from the pandemic and employers investigate new ways of attracting their employees back to the workplace, landlords and developers are embarking on a new space race, rushing to retrofit existing buildings with all manner of features and working up plans for a new generation of buildings that promote health and wellbeing.
But can the health and wellbeing of people truly be affected by the buildings they work in, and if it can, is there an opportunity for landlords and developers to charge a ‘wellness premium’ for healthier workspace? Industry experts are in no doubt about the important role commercial real estate can play in delivering space which supports employee wellbeing.
“This is probably best demonstrated by the increased awareness of the role indoor air quality plays; from how it impacts our health and our productivity to helping control the spread of viral infections,” says Donna Rourke, head of ESG at BNP Paribas Real Estate.
“Poor air quality contributes to one in five deaths globally, so the critical role of healthy indoor air has risen fast on the workplace agenda.”
In addition to helping prevent illnesses and even deaths, research suggests that better air quality in buildings can significantly enhance the performance of employees. Maria Garcia, principal sustainability consultant within the sustainability team at Savills, cites a Harvard study that found better indoor air quality improved workplace productivity and cognitive function by 8%-11%.
“Similar studies show that getting air quality and ventilation rates right can lead, on average, to an 8% improvement in staff performance and up to a 35% reduction in absenteeism. Getting thermal comfort conditions wrong can mean employee performance dropping by between 4% and 6% due to the fact that they’re too hot or too cold,” she says.
Ilyas Aslam, chief operating officer at global real estate investor and developer Quadrum, agrees with Rourke and Garcia’s assessment that real estate can positively influence people’s health and wellbeing. “Whether that’s through ensuring environmental comfort, good air quality, daylight, access to nourishing food and water, or spaces that create community or provide relaxation,” he says.
He cites his company’s new net-zero office development at 11 Belgrave Road in London as one with wellbeing at its heart. It features strategic planting on the building’s terraces to absorb pollutants, has a ground floor garden of 2,600 sq ft for outdoor working and has been pre-certified WELL ‘Platinum’ for health and wellbeing.
For James Neville, a partner in the City leasing and development team at property adviser Allsop, the concept of health and wellness in commercial real estate is evolving thanks to new development projects like 11 Belgrave Road and The Bindery office building in Farringdon, developed by Dorrington, which enlisted the help of Dr Jeanette Hennigan of mental health and wellbeing consultancy Help Your Head, to create a workplace that supports and enriches the wellbeing of everyone who uses the space.
Neville says developers and landlords started out offering physical amenities like gyms for tenants, but their approach is now much more design and service- led. For instance, The Bindery features artistic murals on the staircase to ‘activate’ the space and encourage people to use the stairs rather than the lift.
“What’s underpinning it is the sheer quality of the space, creating an environment you want to be in and making it feel like your home away from home,” says Neville. “It’s a recognition that the physical environments around us have a significant impact on our wellbeing by virtue of the time we spend in them, and that therefore they need to, at an absolute minimum, maintain our quality of life.”
Many of the physical amenities landlords and developers started to include in new developments over the last five-to-10 years, such as gyms and cycle stores, have now become the norm and as we emerge from the pandemic landlords are trying to differentiate their space by offering unique and attractive environments to work in, according to Nisha Agrawal, director, sustainability, at global real estate investment, operating and development company QuadReal. However, this shift is not without its challenges.
“A main challenge between asset classes is the cost of adding in these healthy amenities and getting tenant support,” says Agrawal. “Currently there is more support for these amenities in the office sector compared with industrial, however, this is changing.”
Agrawal adds that in the industrial sector companies are increasingly building warehouses with natural light and access to fresh air. The trend is already fairly common in Europe, but he expects delivery of this type of building to start soon in North America as the logistics market in the US continues to boom. Meanwhile, in Japan, the severe labour shortage means that logistics developers need to make their facilities as staff- friendly as possible.
“In terms of retail, the amenities are quite different than what you see in the office and industrial sector,” says Agrawal. “In this space, we are seeing a push for more healthier food options, but ultimately this is driven by supply and demand.”
This push across all forms of commercial real estate is being driven by tenants, for a couple of different factors, explains Neville. “Following the pandemic, tenants are not only vying to encourage their employees back to the office, they’re also competing with each other to retain and attract talent,” he says. “An office that has wellbeing features incorporated, ranging from bicycle parking to relaxing rooftop gardens, is in much higher demand, and developers are acting accordingly.”
Across some global territories tenant demands are similar, but some countries have been quicker to adopt and embrace the new ways of working accelerated by the pandemic than others, which impacts on their real estate requirements.
“You’ve got markets that are more open to the adoption of the various different guises of hybrid working,” says Isobel McKenna, head of workplace solutions, EMEA, at Upflex, a provider of hybrid workspace solutions.
“I think the UK, Germany and Netherlands have led the way, whereas APAC and some other European countries are a little slower [to adopt to the new ways of working]. And then you’ve got markets like France where they’re definitely adopting hybrid working, but it takes a little longer in France because of the works councils.”
Due to these differences, in some territories landlords and developers are focusing their efforts on different health and wellbeing areas, says Agrawal. “At this point, North America and Europe have moved beyond the basics of clean air, water, etc, and are focusing on larger more robust healthy amenities,” he explains. “This contrasts with the Asian market where many are still focusing on clean air and combating toxic substances in construction, for example.”
Of course, it’s all well and good landlords and developers putting in place a host of measures in buildings that promote health and wellbeing, but they need to recoup this additional outlay by charging more rent for the space. So are tenants willing to pay a ‘wellness premium’? Quadrum’s Aslam believes they are.
“We have made a significant upfront investment at 11 Belgrave Road to closely link sustainability and wellbeing,” he says. “The building is one of only six to be design-certified WELL, targeting the highest ‘Platinum’ level. It’s also net zero, BREEAM ‘Outstanding’ and the first to achieve a design- reviewed NABERS UK 5.5 star rating. We’re already getting interest from prospective tenants that might not have looked in such locations before because employees and their wellbeing has become the priority in decision- making. They are prepared to pay for the best space.”
Allsop’s Neville agrees. He says at The Bindery offers are being received for the space that would set a new rental record for the area and those rents “are very clearly linked to the quality of the space and its focus on wellness”.
In addition to anecdotal evidence from agents and developers, which suggests building owners can command a premium and generate stronger returns on real estate that promotes health and wellbeing, there is a growing body of data to support this assertion.
The International WELL Building Institute’s (IWBI) 2021 paper Investing for Health: Examining the ROI of Healthy Buildings, outlines the business case for healthy buildings and argues there is a “5%-6% rent premium on properties with good daylight and a 5.6%- 7.8% premium on properties with street- front greenery [in New York City], a 1%-9% increase
in property values related to walkability scores and an MIT analysis of the Boston market showed 4.4%-7.7% rent premium for properties that had pursued a healthy building standard”.
The benefits of delivering buildings that promote health, and wellbeing are becoming clearer to tenants and landlords/ developers alike, and Will Poole-Wilson, managing director at architect and interior designer Will + Partners, says it is exciting to finally see investors and landlords along with occupiers having the conversations that matter.
“It is no longer the realm of the lonely architect advocating wellness and sustainability,” adds Poole-Wilson. “Nevertheless, this needs to translate into action faster, and a focus on good design and due diligence is key. There are no silver bullets, but change is good. It stops you going rusty.”
Basil Demeroutis, managing partner at real estate investment firm FORE Partnership, agrees with Poole-Wilson that while major inroads have already been made by some developers and landlords, there is still room for improvement in the commercial real estate sector.
“I think we could do better at putting in place initiatives that actually enhance health and wellness – physical and mental – as opposed to being on the defensive,” says Demeroutis. “There are a tremendous number of positive benefits that our buildings now offer and we should be celebrating these. We’ve come at the topic historically from a ‘do less harm’ mentality – how do we reduce the harmful side-effects our buildings have on us? But like reducing the amount you smoke every day, this hardly serves to improve health, but just to the impact marginally less bad.”
He suggests a new approach is needed which places the emphasis on considering how commercial buildings can actually enhance health. “We think about how coming into one of our buildings is actually better health- wise than any alternative,” he says. “We do this by reducing the friction of making healthy lifestyle choices around exercise, food, hydration, and mental health. It’s a combination of the physical way we design our spaces – the hardware – with a significant contribution from the software and how we use those spaces.”
If landlords and developers can come up with a formula which enables them to optimise the health and wellbeing of people who work in their spaces, occupiers will benefit from a productivity boost and landlords should see the benefit on their own bottom line with a real ‘wellness premium’.
A UK developer has announced plans for an all-electric housing scheme for a former industrial site.
Blackstone Group-owned St Modwen plans to deliver up to 350 new all-electric homes at the Longridge site in Birmingham, a former car assembly plant.
The new homes will be powered by a smart grid to ensure the most efficient supply of electricity and will also use some of the techniques being trialled in St Modwen’s carbon-negative housing project, such as solar panels, heat pumps and efficient insulation.
Sarwjit Sambhi, CEO of St. Modwen, said: “Every organisation needs to be taking steps to deliver more sustainable products and services, but at St Modwen we have taken leaps by introducing carbon-negative homes and smart-grid powered developments. We’re proving that greener homes can be delivered at commercial scale, something which is not just the right thing for the environment but also allows us to meet the demand of our customers.”
Edge has announced plans to achieve absolute net zero by 2050.
The target means the Netherlands-based developer will reduce Scope 1, 2 and 3 emissions to zero for both operational and embodied carbon without using offsets.
In order to hit this target, all new projects going forward will be net zero carbon, with the first of these to be delivered as early as 2025. The first new zero project to be delivered will be Edge London Bridge in the UK (pictured above), to be delivered in 2025.
Coen van Oostrom, Founder and CEO at Edge and real estate industry co-chair at the World Economic Forum, said: “By thinking not just about how we build but also how our buildings are used and how we ourselves operate, we can commit to being one of the first property companies to reach Net Zero and present a clear timetable for achieving zero carbon emissions.
“We believe the real estate industry should be accountable for its actions. We call on our partners, collaborators and innovators in other industries to join us in taking action to build better, greener and for the future.”
Edge said it will work closely with partners in all active markets and continue to pioneer new building methods to reduce the reliance on offsetting to zero. These include using renewable materials such as timber, further developing its circular economy principles, materials reuse and recycling, and reliance on renewable energy.
Infinium Logistics claims it is creating a new sustainability-focused asset class, straddling infrastructure and real estate, with its ‘FleetHubs’, where logistics companies can park and recharge their electric fleets.
The company is responding to the challenge of decarbonising transport. In 2020, the global transport industry was responsible for around a fifth of all CO2 emissions and both nations and the logistics industry are committed to zero emissions by 2040.
Infinium is a relatively new venture, launched in 2019 by executive chairman James Lee and chief executive Paul McCormack: entrepreneurs with experience in the logistics and energy sectors. Last year, Phil Bayliss joined from Legal & General, where, as European chief executive, he had spent 14 years in real estate and private equity investing, .
Infinium is headquartered in the UK and has a presence in Germany, Spain, France, Italy, Poland, and North America. It is focused on supporting the electrification of logistics, particularly in the middle and last mile. Logistics companies such as Amazon and DHL are electrifying their fleet in advance of expected bans on sales of vehicles powered by fossil fuels. Amazon’s first electric van hit the road in 2020 and it has committed to buying hundreds of thousands more.
In the UK, six million fleet vehicles do the bulk of the miles covered by the nation’s vehicles. Most cars are unused 90% of the time, while delivery vans are on the go most of the day. The situation is similar in the other global markets being targeted.
Delivery van fleets need parking areas when they are unused at night and electric vehicles need this time for recharging as well. It means electric fleets are charging while the nation sleeps, using the cheapest electricity.
“FleetHubs offer a purpose-built parking and charging solutionfor electric van fleets. We are looking at sites which can house 100 to 800 vans and charge them with renewable grid energy, supported by PV panels and batteries. They will also have charging forecourts for the public,” says Bayliss.
“The future of transportation is zero emissions. We are repurposing existing real estate to enable zero carbon, technology-enabled, modern logistics facilities that allow e-commerce operators to reach customers faster in a cleaner and greener, more efficient way.”
In May, Infinium launched its first property fund, which raised £200 million ($245 million) in initial equity commitments, giving £500 million of firepower with gearing. The capital will be used to develop a network of FleetHubs across Europe.
The fund has already secured one site in Swindon, UK, and has six more under offer. It is targeting brownfield sites across Europe of over 1.5 acres and close to logistics hubs. Bayliss says sites will typically cost £5 million to £20 million, while development and infrastructure will add £5 million to £10 million in costs. A large part of this will be to upgrade the power supply and ensure access to renewable energy. FleetHubs will use a lot of electricity compared with many land uses, but far less than data centres, for example.
New real estate, technology and sustainability-focused private equity group GreenPoint Partners has invested in the fund, its first real estate investment, and in the Infinium platform.
The FleetHubs model is being refined on the go, as Infinium takes on new sites and customers. As well as new- build sites, it could refit existing car parking to serve logistics.
In the future, the concept may be adapted for heavy goods vehicles, but at present there is no real consensus about the ideal sustainable fuel for HGVs: it may be electric, compressed natural gas or hydrogen fuel cells. There is also potential to work with logistics developers to help them use their yard space and offer their customers a parking and charging solution.
Notwithstanding talk of a new asset class, Bayliss is confident the FleetHub model will be attractive to real estate investors. Certain aspects of the sector are operationally complex, such as securing of renewable power to the sites, however, similar complexities exist in the data centre market, in which real estate investors are keen to participate.
“The bones of it, though, is a lease,” says Bayliss. “So it isn’t too sophisticated for real estate investors. Once the concept is stabilised and there is more depth in the market, I believe it will be attractive.”
Initially at least, Infinium is the only company ploughing this particular furrow. Bayliss says: “Our investor base is global pension funds and sovereign wealth capital and they tell me there is no one else doing this globally. Actually, I get no comfort in being the trailblazer, what we want is a healthy market with sophisticated competition.”
AXA IM Alts has announced plans for a £1 billion ($1.3 billion) City of London office tower, which will be net zero carbon in operations.
The investment manager has exchanged contracts to acquire a long leasehold of 50 Fenchurch Street in the City of London from The Clothworkers’ Company, a 500 year-old livery company, and will build a 36-storey 650,000 sq ft office tower on the site.
AXA said sustainability and wellbeing would be key to the “people-centric” building, which will incorporate vertical greening designed to mitigate air and noise pollution and improve biodiversity, enabling the scheme to target BREEAM Outstanding and net zero in operation.
The plans include the retention of the Tower of All Hallows Staining and Lambe’s Chapel Crypt, two historic listed buildings currently on the site, which will form part of new public open space with retail and dining at ground level, while a new Livery Hall will also be delivered for The Clothworkers’ Company as part of the development.
Isabelle Scemama, global head of AXA IM Alts, and CEO AXA IM Real Assets, said: “Since the pandemic there has been a pronounced increase in demand from occupiers for high quality, sustainable and wellness-focussed offices.”