Situation

Orchard Street Investment Management is a leading commercial property investment manager, focused on the UK market and acting on behalf of institutional clients worldwide. It aims to meet the challenges of climate change head on by committing to a net zero carbon portfolio by 2030 and is making swift progress on that journey. Drivers for net zero include ensuring clients’ assets are resilient to future regulatory standards, futureproofed against the impacts of climate change and positioned favourably with prospective occupiers. 

Launched in October 2020, Communication Park in West London is a multi-let scheme providing five industrial / warehouse units close to Heathrow Airport. The site was previously home to a low quality 1930s brick-built estate, which had poor Energy Performance Certificate (EPC) ratings and had reached the end of its economic and operational life. The Asset Manager for Communication Park, who is a member of the company’s Responsible Investment Committee, recognised the potential for the project to test how low carbon could go on industrial redevelopments, proving the commercial case. The EPC ratings for all units is now A+, which is classified as ‘net zero carbon’.

Actions

Low carbon features include: 

• 212 kWp rooftop solar PV system. This should generate around 190,000 kWh annually, which is greater than the regulated load for all units. Orchard Street Investment Management is working with the property manager and occupiers to collect and monitor actual energy consumption data, analysing how much solar power is used on site, how much is fed back to the Grid and how much on-site consumption is fulfilled through the solar PV. Unit 5, which is a 1,866m2 standalone unit, was fitted with a 13 kWh Tesla power cell to store any excess energy generated by the PV for use at night or during lower generation periods. 
• Variable Refrigerant Flow (VRF) comfort heating and cooling, powered by air source heat pumps. These are 75% more efficient than conventional Heating Ventilation and Air Conditioning (HVAC) systems.
• Triple skin rooflights and double glazed windows with solar gain protection.
• High-performance insulation on walls and shutter doors.
• 12 charging points for electric vehicles and two e-bike charging points to encourage low carbon travel. 

Through energy efficiency measures and on-site renewable generation, the EPC assessments for each unit rate emissions as net zero CO2, as shown in the table below. 

Occupier wellbeing features designed into the scheme include:

• Views of green space, looking over a nature reserve in one direction and playing fields in another.
• Edible landscaping, with the planting of native fruit trees for occupiers to enjoy and to enhance site biodiversity. 
• High-performance windows and 10% roof lights for natural light indoors.
• 20 cycle spaces and e-bike charging points, to encourage active commutes.
• CO2-absorbing sedum roofs above the bike racks and recycling and waste areas, for air quality.

Financials and benefits

• Advancing towards net zero carbon: Communication Park has provided a pathfinder project for Orchard Street Investment Management’s net zero strategy and enhanced the company’s low carbon credentials. 
• Client returns: The 4% uplift in construction costs to go from EPC A to A+ was justified through anticipated green premiums and brown discounts in the market longer term, which will impact rental income and asset value. The Park fulfilled all investment criteria and leased ahead of market expectations, proving that the industrial real estate sector can pursue net zero carbon while delivering client returns.
• Market performance: Approximately 65% let within six months of completion. This is particularly strong in the context of a Heathrow market where the passenger side of airport-driven demand has been severely impacted during the global pandemic. 
• Environmental and cost savings: Occupiers are purchasing electricity generated from the rooftop solar PV at a 15% discount compared to rates available from main suppliers in the utility market, saving on energy bills and reducing environmental impacts. In the first five months, occupiers reported using virtually no Grid electricity, even though this was the darkest period of the year and they were using all their electric vehicle charging points. With greater solar generation during lighter months, occupiers will be able to gain additional income by returning surplus power to the Grid.
• Sustainability credentials boosting market appeal: As a result of the intense focus on occupier wellbeing and building environmental performance, Communication Park has achieved a BREEAM Excellent sustainability rating and A+ EPC ratings for all units, boosting market appeal. Occupier interest in sustainability credentials is only likely to increase, as awareness about the impacts of climate change continues to grow and industry practices change, with more companies advancing towards net zero, supported by organisations such as the Better Buildings Partnership and UK Green Building Council