15 Dec 2022
As part of our recent episode of the PAT Podcast, George Hickman, CFO at KSP and Luke Le Brun, Director at PATRIZIA discussed their views on how profitable sustainability is a viable strategy within the logistics sector.
Luke Le Brun
Is there a trade-off between sustainability and profitability? Are investors going to withdraw capital expenditure on sustainable projects in order to keep the cash in their pockets or to cut costs?
I don't see the two in opposition at all. The more sustainable a building is, the more of a long-term future that building has and the more desirable it is to a wider section of the market and therefore, by definition, the more profitable it will be because it's a better product. We are trying to create not ultra-sustainable buildings for the sake of being ultra-sustainable. We're trying to create ultra-sustainable buildings because that's what a best-in-class logistics facility is today. Therefore, investor's money, if it is withdrawn from sustainable initiatives, would be shooting themselves in the foot in many ways. I'd try to see profitability and sustainability as supporting each other, rather than in opposition to each other.
Sustainability by definition is you're looking longer term. You have to future proof the assets and create best in class, prime assets. Even in times of market downturns, prime is what people want.
Luke Le Brun
If you were sat down with your cost consultant in a meeting and said, ‘we're not going to build this with a roof, that's going to save us a ton of money’ you would disagree as a building needs a roof. We try and think about it in the same way with PV panels and with our sustainable specification, it's just part of the building. It's not something that can be value engineered out. It's part of what makes the building what it is.
We're lucky in that we are building from the ground up, this is the time to do it. If you try and retrofit it in 10- or 15-years’ time, which you're going to have to do whether it's by regulation or because the market demands it, it's only going to cost you more. It wouldn't make sense to cut back now.
Luke Le Brun
We always have to make a very clear business case for spending our investors' money. That's what being a good steward of their capital is. But I would say our investors are 100% with us on prioritising sustainable specifications for our buildings. It's an argument that feels like has been won. We are all on the same page, and increasingly so with our tenants now as well, which is fantastic to see.