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Sustainability is increasingly becoming a key factor in the valuation of logistics real estate. As investors increasingly focus on ESG goals, the demand for certified logistics real estate continues to grow. Recent research shows that these sustainable assets can command price premiums of up to 24% higher and rental values of up to 30% higher than non-certified real estate.
Our continued focus on sustainability within the real estate sector is once again reflected in this article, where new research shows that sustainability certification has a significant impact on property valuation within the European logistics real estate sector.
New market research from Cushman & Wakefield shows that logistics real estate with high sustainability credentials are valued 19-24% higher than their non-certified counterparts. Specifically, real estate in prime locations see a 19% price premium, while those outside prime locations see a 24% increase in value. This trend shows that investors are placing greater emphasis on sustainability certification, especially in less desirable and competitive areas (outside prime locations).
We are also seeing that sustainability credentials are not only reflected in property prices but are also influencing rental valuations. Logistics companies are increasingly willing to pay higher rents for sustainable real estate that aligns with and supports their own ESG objectives. Cushman & Wakefield’s report highlights this trend, stating that sustainable real estate can achieve estimated rental values that are 10-30% higher than those of non-sustainable assets.
In today’s lending landscape, sustainability has transitioned from an optional consideration to an essential requirement.
Lenders are increasingly prioritising sustainability in their financing decisions and treating it as a critical factor in their credit risk assessments. Real estate that meets established environmental standards is seen as a lower-risk investment, making it more attractive for financing. As a result, these properties are more likely to receive favourable lending terms, such as lower interest rates and higher borrowing limits.
This shift has led to a significant reduction in the number of lenders willing to finance non-sustainable projects, reflecting the growing recognition and importance of sustainability across the financial sector.
While there is currently insufficient data to reliably predict the future performance of sustainable logistics real estate – largely due to the newness of this sector – emerging market trends point to a promising future. Sustainability-certified logistics real estate is expected to deliver significant financial and environmental returns over time, outperforming its non-certified counterparts.
The attractiveness of sustainable assets to investors is already evident at the acquisition stage, where property valuations reflect price premiums associated with these credentials. This trend is driven by a growing awareness of the long-term financial benefits associated with sustainable properties, including increased tenant demand and higher estimated rental values. We only expect this trend to continue as a growing number of logistics companies actively seek green solutions that align with their sustainability goals, further increasing interest in certified logistics properties.
In a rapidly evolving real estate landscape, securing a competitive advantage by investing in sustainable assets is essential. As financial institutions increasingly prioritise sustainability in their lending practices, investors can benefit from more favourable financing terms when investing in certified logistics real estate.
As interest in sustainability certification within the logistics real estate sector is growing, Gorrissen Federspiel will be closely monitoring this trend.
Read the Cushman & Wakefield report – Sustainable Logistics: Navigating Change in European Logistics Real Estate here