9 November 2011 – The Metcash NSW Distribution Centre at Eastern Creek being developed by Goodman Group is  aiming for a four star Green Star Industrial Design & Build v1.

That ambition puts both tenant and developer way out in front of much of the industrial property sector, according to a new survey from Jones Lang LaSalle.

The Industrial Investor Survey 2011 has found the industrial sector in Australia badly lags the office sector in terms of sustainability and the signs are not good for rapid improvement; in fact the sentiment is going backwards.

Only 38 per cent of investors prioritise green credentials in industrial buildings. Partly the poor results are blamed on the global financial crisis.

Among tenants, the results are worse.  Director, national industrial research Nick Crothers said that only 29 per cent of respondents to the 2011 survey reported that tenants requested information on sustainability initiatives for industrial assets.

This compared to a figure of 52 per cent in 2008 in a similar survey which showed that tenants were willing to to pay 1 per cent to 10 per cent cost premium in order to occupy a sustainable building in the long term.

“This research, conducted prior to the onset of the GFC, confirmed that the sustainability movement within the industrial sectors was gaining momentum at the time, but this has clearly been disrupted by the GFC,”  Mr Crothers said.

The survey canvassed the views of 42 respondents from “a broad mix of listed funds, unlisted funds, private investors, syndicates and developers, controlling almost 750 industrial assets in Australia,” did not prioritise sustainability in their investment choices.

Australian head of industrial at Jones Lang LaSalle, Michael Fenton said the results were likely the result of greater maturity of the office rating tools and the impact of the GFC.

“As a result of the GFC, industrial development was constrained by the cost of and access to debt finance and also by weaker demand from industrial occupiers for new space,” Mr Fenton said.

“Even as conditions have improved, the continuing focus on cost containment by many tenants and developers may have impacted the importance now placed on sustainability considerations.  But on the flip side, the survey found that one third of respondents cited cost reductions as the main reason for considering sustainability issues in the first place, so it is double-edge sword.”

Director of sustainability at Jones Lang LaSalle Joel Quintal said the results show that tenants will be key to driving sustainable development and investment in the industrial sector.

“A change in tenant demand for industrial properties with green credentials would provide a catalyst for investors and landlords to act.

“The Survey results also showed that only 26 per cent of the respondents believed that green initiatives in industrial property would deliver enhanced returns. However we have seen from recent evidence in the offices sector that buildings with higher environmental ratings deliver higher annualised returns than low and non-rated assets.

“There are a number of areas where quick wins in sustainable building design can be included as part of a standard construction brief without incurring excessive cost.  Some of these include ventilation rates in accordance with or exceeding Australian Standards, the provision of breakout areas for employees, inclusion of storage space that facilitates the recycling of resources used within industrial premises to reduce waste going to landfill and efficient and sustainable use of steel and timber as building material,” Mr Quintal said.

The Metcash Building at Eastern Creek, northwest of Sydney, is registered for Green Star Industrial Design & Build v1, targeting four green stars.

According to the Jones Lang LSalle survey report, developer Goodman Group plans to have the majority of the 96,015 square metre project finished by 2012.

An area of 14,000 sq m will be retained for expansion by Metcash.

“Key sustainable design features will include improved daylight to the warehouse with up to 12 per cent of the roof built as skylight, high efficiency glazing and shading and recycled water for all WC flushing,” the report said.

“T5 fluorescent lighting will be used in the main warehouse area with daylight sensors to control dimming. LED lighting will be used in the fresh/perishables warehouse, car park and awning areas.

“Facilities will be available for irrigation and truck wash, provision of a high level of cycle facilities for staff including showers, changing rooms and a dedicated cycle way from the main entrance to the changing facilities. Ridge vents will be used for comfort cooling in the ambient warehouse. About 80 per cent of waste will be recycled during construction.

“Further, the project will incorporate strategies such as energy monitoring and annual reviews of energy.”