UK warehousing needs energy efficiency upgrade

Over half of UK warehouse space faces obsolescence by 2030, Knight Frank claims.

The real estate broker says around 18% of warehouse space in units exceeding 50,000 sq ft, a total of 128 million sq ft of logistics space, is set to fail to meet the minimum EPC grade C by 2027.

Almost 60% of UK warehouse space risks becoming unlettable by 2030, by which time it will be required to reach EPC Grade B. This means more than 400 million sq ft of logistics space is at risk of obsolescence within a decade. 

The preponderance of older, underperforming stock and its potential for obsolescence could further exacerbate the ongoing undersupply of logistics space, with development activity slowing and large multinational occupiers increasingly seeking more modern, energy-efficient facilities, Knight Frank said.

Charles Binks, head of logistics and industrial at Knight Frank, said: “Occupier demand is becoming increasingly focused on high-quality facilities that can offer ESG credentials. Operators are increasingly discounting facilities that do not fit with their, or their customers’, sustainability strategies. 

“While newly constructed warehouses generally meet top sustainability standards, 82% of the UK’s existing stock built before the year 2000, does not meet minimum EPC requirements. Significant capital expenditure is required to retrofit these warehouses and mitigate obsolescence risk.

“The prospects for rental growth should offer incentive. However, investors must accelerate the rate at which older facilities are upgraded or they will become unlettable.”