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News release

Survey finds a clear majority of industrial investors not taking sustainability initiatives into account when investing in or developing industrial property

42 investors surveyed, controlling almost 750 industrial assets across Australia

AUSTRALIA, 9 NOVEMBER 2011 – Only one-third of industrial investors in Australia have reported considering the green credentials of industrial buildings when making decisions on their investment strategies.
According to Jones Lang LaSalle’s Industrial Investor Survey 2011, only 38% of respondents reported that sustainability initiatives were part of their investment strategy, which leaves the clear majority (62%) not taking sustainability into account when investing in or developing property.
The Survey was conducted during May and June and involved responses from 42 industrial investors from a broad mix of listed funds, unlisted funds, private investors, syndicates and developers, controlling almost 750 industrial assets in Australia.
Australian Head of Industrial at Jones Lang LaSalle, Michael Fenton said the take-up of sustainability initiatives in industrial property development in Australia had been markedly slower in comparison with the office sector.
“This is likely the result of the maturity of the office rating tools due to the fact that the pilot programs were initially in the office sector.  We also believe that the onset of the GFC slowed down sustainability initiatives in the industrial sector.
“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.
“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,” said Mr Fenton.
The Survey found that cost reduction was the main reason for those investors and developers that consider sustainability issues when making an investment.  30% said it was the most important factor, followed by Legislative or industry changes (17%) and 11% reported the most important factor for them was achieving NABERS or Green Star ratings.
Director, National Industrial Research at Jones Lang LaSalle, Nick Crothers said the 2011 Survey results compared to a sustainability survey of the industrial sector in 2008 confirm momentum has slowed with regard to sustainability initiatives.

“Only 29% of respondents to the 2011 Survey reported that tenants are requesting information on sustainability initiatives for industrial assets.
“In contrast, a similar survey conducted by Jones Lang LaSalle in 2008 showed that 52% of industrial occupiers were willing to pay a 1% to 10% 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,” said Mr Crothers.
Director of Sustainability at Jones Lang LaSalle, Joel Quintal said the Survey 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% 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,” said Mr Quintal.