Powering operational excellence

After several years of unprecedented growth, owners, investors and occupiers are strategically reassessing assets and location strategies ahead of the next market cycle. At the same time, power availability and security are emerging as top priorities for many occupiers in the sector. Increased automation, fleet electrification, the surge in advanced manufacturing, and competition with data centers for limited energy resources are collectively reshaping market dynamics. Occupiers are prioritizing cost efficiencies and seeking innovative ways to elevate business practices, and owners are pre-emptively evaluating methods to remain competitive. At the nexus of this market shift are increasingly complex energy markets paired with growing pressures to materialize on carbon reduction goals.

Occupiers have typically focused on technical requirements (e.g., ceiling height, loading docks, etc.), but as they prioritize operational excellence, requirements are becoming increasingly specific and standard warehouses are no longer fit-for-purpose. Spaces that deliver broader solutions, especially around energy management, resilience and broader sustainability, will gain competitive advantage in the coming years.

Additionally, advanced manufacturing - the use of innovative technology to improve products or processes – is a rapidly growing segment in the industrial sector. Companies involved in battery, electric vehicles (EVs), renewables and climate tech are emerging as significant drivers of this growth and are especially hungry for spaces that align with their core business of sustainability and decarbonization.

Building owners willing to leverage sustainability could capitalize on this shifting demand to create economic value, while keeping up with tightening regulations and evolving stakeholder expectations. A strategic pivot towards energy management, sustainable building practices and comprehensive tenant engagement can transform leasing dynamics, ensuring that industrial spaces are fit for the future.

Action to decarbonize real estate is lagging significantly and, despite improvements in energy efficiency in some sectors, emissions from buildings remain high and are still in fact rising. The industrial sector itself has especially lagged in decarbonization and energy efficiency improvements and, without increased levels of retrofitting, owners will face acute challenges to meet the increasing demand for sustainable space. Across the 18 hubs researched in this study, 41% of projected demand for low carbon space will not be met by 2030, given the current quality of existing stock and construction estimates over the remainder of the decade. This study only considers the largest occupiers, representing 30% of leased area across the markets covered; it inherently underestimates the total demand for low carbon assets - the broader market for such assets is far greater.

The industrial sector is uniquely positioned to scale energy and sustainability solutions that can drive real progress in decarbonizing the built environment, as well as operational security and economic value for both owners and occupiers.

Delivering energy solutions

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Delivering resilience

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Protecting value

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Electricity use has grown at twice the pace of overall energy demand in the last decade according to a recent report by the IEA, and while global energy demand is expected to increase by 5% by 2030, electricity demand is projected to increase by 18%. This trend is acutely evident within the industrial sector as a growing number of warehouses rely on automation, robotics and electric fleets.

Given soaring energy prices and the transition to an electric future, occupiers are prioritizing energy-smart buildings to drive operational excellence, energy security and cost efficiencies. Retrofitting buildings with features like LED lighting and solar panels can achieve energy cost reductions of 10-35%. For a 100,000 square foot building (9,290 square meters), our estimates show that this would amount to average annual savings of US$22,000 to US$78,000 for warehouse and distribution properties and US$67,000 to US$234,000 for manufacturing sites. In the face of heightened apprehension around power, onsite energy installations paired with battery storage systems are also emerging as critical solutions.

It is also notable that sustainable practices in the sector influence more than solely environmental factors. For example, the warehouse industry experiences significantly higher employee turnover rates. Investing in sustainable building features that improve ventilation and indoor air quality, offer access to green spaces and comfortable temperatures and work environments can enhance employee retention for occupiers.