Shedding Its Image: Logistics Sector Seeks to Deliver Sustainability
In Short
The Situation: Regulatory changes and rising occupier expectations are reshaping the UK logistics market just as e‑commerce and on‑shoring keep demand high.
The Result: Developers are using multistorey formats, lower‑carbon materials, and better on‑site amenities to secure planning, meet net‑zero goals, and attract tenants.
Looking Ahead: With Minimum Energy Efficiency Standards expected to tighten to EPC "B" by 2030 and Biodiversity Net Gain now in force, investors need to future‑proof portfolios to avoid costly retrofits and stranded assets.Introduction
The UK logistics sector is at a turning point. Demand from online retail and the movement to bring production and distribution closer to end customers is meeting a stricter policy and reporting environment. Requirements such as Biodiversity Net Gain, an anticipated EPC "B" threshold for commercial assets by 2030, evolving sustainability reporting requirements, and an increased demand from investors and tenants for sustainable, resilient buildings, are all changing how logistics sheds are designed, built, and operated.
In response, new schemes are moving to energy efficient designs, lower‑carbon materials, multistorey layouts and increased automation, and tenant‑friendly amenities. As such, the performance gap between sustainable and outdated stock is widening, with clear implications for pricing, liquidity, and risk, whilst also presenting a value-add opportunity with the retrofitting of older assets.
New Regulations
The UK's net‑zero commitment is pushing logistics towards lower operational and embodied carbon. Biodiversity Net Gain now applies to most new developments, making environmental considerations and ecological enhancements a core part of scheme design. Minimum Energy Efficiency Standards currently prevent letting sub‑"E" properties and are widely expected to tighten to "B" by 2030, which would force upgrades to older buildings.
Building regulations have already raised the bar: new non‑domestic buildings must cut carbon emissions versus previous standards. Sustainability-related disclosures are also moving up the agenda, with the UK Sustainability Disclosure Requirements increasing scrutiny of asset manager's sustainability claims and risk management. Transport policy is shifting too, with phase‑out timelines for new non‑zero‑emission heavy goods vehicles set for the mid‑2030s onward, accelerating demand logistics sites with robust grid connections and EV-charging capabilities.
Investor And Tenant Demands
Capital is following sustainability. Assets with strong energy performance, on‑site renewables, EV charging, and credible decarbonisation plans are achieving sharper pricing and better lending terms. Conversely, non‑compliant or hard‑to‑upgrade stock faces higher financing costs and weaker liquidity.
Occupiers want lower energy bills, reliable power, and future‑proofed space. Common requests include rooftop solar, LED lighting, air‑tight envelopes, heat pumps, and ample EV infrastructure. Automation and robotics are also driving requirements for higher floor loadings, taller clear heights, and robust power capacity that can support batteries and fleet charging. For many tenants, a high‑specification space also helps attract and retain labour.
For investors, it is clear that underwriting must now weigh planning deliverability, energy efficiency, sustainability credentials, and adaptability to new technology alongside location and tenant demand. Institutional owners are tilting portfolios to schemes that can reach ratings such as BREEAM "Excellent" and support whole‑life‑carbon reporting.
Implications
The implications are clear. Acquisition and development appraisals should stress‑test for increased regulations, energy efficiency, and meeting the demands of future tenants. Forward‑thinking sponsors are locking in green power purchase agreements, using modular construction, and adopting circular economy principles in construction to reduce the environmental impact. These moves can lower voids, support rental premiums, and protect exit value—linking sustainability directly to performance.
For existing assets, early action matters. Assets should be assessed for their ability to be retrofitted to achieve EPC "B", to install EV charging points, and increase biodiversity. For new builds, these aspects are likely to be a condition of securing planning permission.Three Key Takeaways
- Stronger rules are coming: MEES moving to EPC "B," Biodiversity Net Gain, and tighter building standards are raising the bar for logistics assets and increasing the cost of inaction.
- Demand favours green, flexible space: Tenants and lenders prefer energy efficient, power resilient sheds with EV and renewable capacity, supporting higher rents and better financing.
- Act now to protect value: Plan capex to meet EPC "B," design for adaptability, and use tools like PPAs to reduce operating costs and safeguard exits.
