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Focus on COP26: Logistics - future proofing or obsolescence

Net zero targets now cover in excess of two thirds of global GDP and over a fifth of the world's largest public companies, according to the latest report published by the Energy and Climate Intelligence Unit and Oxford Net Zero.

This global shift towards net zero has reshaped the development landscape with demand for sustainable buildings being driven not only by regulators, but by investors and occupiers. This demand for net zero is not only in respect of the building itself (sustainable construction and energy efficiency measures), but the whole life cycle of buildings and the connected supply chains.

The UK Green Building Council, gives an expansive definition of "net zero":

"When the amount of carbon emissions associated with a building’s embodied and operational impacts over the life of the building, including its disposal, are zero or negative"

Corporate occupiers will expand that definition out further to include the carbon footprint of running its operations from a location. For logistic and distribution hubs, this creates an added complexity given their impact on and involvement in the supply chain.

Taking this into account, the challenge for logistics may be quite starkly stated by comparing the UK Government’s 2050 net zero target and OECD’s estimate that by 2050 the demand for freight movement is predicted to increase from 122 trillion tonne kilometres to 329 trillion.

Developers therefore need to consider not only the whole life cycle of the building at the design and build stage, but also how to provide solutions to occupiers to decarbonise their operations from the building, as this will impact on the sustainability evaluation of a site.

Off-taking renewable electricity from the grid under a corporate power purchase agreement may be a solution that an occupier can find itself, but the dilemma of decarbonisation has always been in terms of heat and transport. Consideration should therefore be given to the source or potential sources of renewable heat and power, especially in respect of biofuels, such as biomethane, or green hydrogen for fleet vehicles and HGVs etc.

Hydrogen also offers potential for a distributed supply within an industrial estate for heat and to fuel HGVs, but incorporating this into a large industrial estate, or having the flexibility to incorporate it in the future, needs a developer to take it into account at an early stage.

However, delivering solutions beyond a net zero building will require greater cross industry collaboration amongst stakeholders in considering how transport and energy infrastructure may be incorporated into a development scheme. This collaboration is necessary as technological advancements in terms of decarbonising heat and transport will impact how occupiers operate and the type of heat and power supplies they need at a location.

From a developer’s point of view, it is important to make provision for “future proofing” by retaining sufficient rights, land and flexibility in any disposal document, and also to take this into account at the acquisition stage, as these considerations will have implications on site assembly and determining key land. For instance, developers will need to reserve more extensive rights than a tenant may expect to see in a logistics park to provide the ability to install distributed heat networks/charging points for hydrogen powered HGVs and ensuring that there is sufficient land to construct associated infrastructure. Taking these steps can add contingent value to sites by preserving future development value.

This collaboration and foresight may just be the difference between future proofing and obsolescence.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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