Industrial Goes Electric As Investors, Tenants Call For Sustainability
The nation’s largest commercial developer is attempting to decarbonize by adding on-site solar power to its industrial properties in a move some expect will swing the industry pendulum closer to sustainability.
Trammell Crow announced in late March that it will partner with Altus Power to bring solar panels, battery storage and electric charging stations to 35M SF worth of industrial assets in its pipeline. The move, which is expected to generate 300 megawatts of building-sited solar power over the next three to four years, is in line with Trammell Crow parent company CBRE’s commitment to achieve net-zero carbon emissions by 2040.
James Murray-Coleman, Trammell Crow’s recently appointed director of sustainability, said the initiative was driven by the growing impact of climate change as well as demand from investors and tenants, who are increasingly sensitive to Environmental, Social and Governance requirements.
“Let’s not fool around here — we are seeing the effects on climate,” he said. “There are some people who still don’t think climate change is real, but the fact is we have greenhouse gas effects in this country and on the planet, and we need to make a difference.”
The latest report from the Intergovernmental Panel on Climate Change says the speed of the shift to renewable energy must triple if the world hopes to achieve the goal set forth in the 2015 Paris Climate Agreement of limiting global temperature increases to 1.5 degrees Celsius. One essential step, the report said, is for buildings — both new and existing — to electrify.
Gary Chance is vice president of marketing and partnerships for New York-based Prescriptive Data, a company that uses technology to help owners of commercial real estate understand and control their emissions. While most of the company’s portfolio is made up of office properties, Chance said Prescriptive Data is currently in the testing phase for industrial.
“An office building is unique in that it’s transient — people go in and out throughout the day, which gives you opportunities to save energy when there aren’t people,” he said. “An industrial center may need to be kept … to a certain temperature at all times to protect the product, so it gets a little bit more difficult depending on the asset class, which just means that each asset class needs a more tailored solution.”
Prescriptive Data uses a building operating system called Nantum OS to connect to major data points in a building, including meters and HVAC systems, to calculate energy use and carbon emissions in real time. The technology also tracks building use, which plays into the equation of how much energy is needed at any given time.
“Those three data points allow our AI to run buildings as efficiently as possible, so that we use the least amount of energy possible to provide the maximum amount of interior comfort,” Chance said.
The cost of Nantum OS starts at a couple of cents per square foot and increases based on which capabilities are included. But the end result of reducing energy use, especially during periods of peak demand, leads to a savings of between 22 cents and 55 cents per square foot per year. This allows building owners to then invest in sustainable alternatives, Chance said.
“This gives the financial amplitude to invest in things like renewable energy or to procure renewable energy or to bring in battery storage,” he said. “The way we see the world is to use technology first, save as much money as you can, then identify the capital projects that are most important to you and use that money to upgrade.”
Trammell Crow’s industrial projects will use battery storage to save on electric costs during peak hours, Murray-Coleman said. There will be some infrastructure costs associated with adding solar panels to buildings; however, Altus plans to rent rooftop space from the building owners, which means Trammell Crow will actually make money off the deals.
“One of the reasons why we like this partnership is because Altus has their own sources of capital, so they’re going to finance the arrays, sign the power purchase agreement with the tenant … and they’re also going to pay the owners a roof lease,” Murray-Coleman said. “It’s kind of a win-win for us and our investors.”
There are some areas of the country where there is not enough sunshine to make solar viable. In the states where it is possible, though, Trammell Crow plans to invest. The initiative is applicable to between 25 and 30 states, Murray-Coleman said, and some of those areas are more amenable to solar power than others.
“We are trying not to be too selective because we’re going to push the envelope, and we want to try to do the difficult scenarios, too,” he said.
Trammell Crow has spent the last few years future-proofing parking lots at industrial properties for electric cars; however, one of the main reasons for including EV charging capabilities in its partnership with Altus is to prepare for electric trucks, Murray-Coleman said.
“Electric trucks are going to be here in the next 10-15 years,” he said, noting that electric trucks require a lot of power, so the presence of on-site solar is essential to enabling the use of that technology in the future. “Instead of ripping up a massive truck court to put these conduits in later, we are going to put those conduits in now.”
The reason why Trammell Crow chose industrial as the first asset class to go solar is simple — larger rooftops mean more panels can be bought and installed at a lower cost. Industrial buildings also tend to use more power than other types of properties, so it makes sense to try and reduce reliance on fossil fuels there first. Still, Murray-Coleman said Trammell Crow does eventually plan to roll the initiative out to its other asset classes, including multifamily.
“If we can find a place to push [air conditioner units] to one side of the roof and gain some economy of scale with larger roof areas, we think it would be great,” he said.
Electrification initiatives like Trammell Crow’s are going to be critical to metros like Dallas-Fort Worth as the industrial market continues to boom. The latest industrial report from JLL said record demand led by e-commerce and logistics tenants throughout 2021 set a new DFW annual record of 37.3M SF absorbed, a 53.4% increase from the prior record set in 2020. Speculative construction, along with total construction, reached an all-time high of 40M SF, the report said, marking the fourth consecutive quarter of at least 20M SF of development activity in the Metroplex.
This boom in activity presents an opportunity for developers and city officials to right the wrongs of the past. Residents of several neighborhoods in the Metroplex, specifically low-income communities of color, have suffered the health consequences of industrial emissions. This was the case in Joppa, a neighborhood south of Dallas where batch plants have caused alarming amounts of air pollution.
“What’s unique about Joppa is that it’s close to a shingle factory so they have some asphalt batch plants,” Texas A&M researcher and assistant professor of environmental health Natalie Johnson said. “The asphalt may emit both volatiles in addition to particles, which can then do some chemical reactions in the atmosphere to form additional particles, so that’s why asphalt plants can also be dangerous for health.”
Johnson and her colleague Ping Ma, also a researcher at Texas A&M, have partnered with a local organization Downwinders at Risk to not only measure air pollution in Joppa but to also gather information about the physical and mental effects of pollution on residents. The project, which involves between 700 and 1,000 households, seeks to arm residents with the data they need to advocate for themselves.
They also hope the study will influence the Forward Dallas initiative, the city’s comprehensive land use update that seeks to ensure policies are equitable and promote economic vitality and environmental sustainability.
“One of the aims is that we are providing information to the scientific literature that will inform the broader national and state policies,” Johnson said. “But then at the local level, we are really looking at how this may influence zoning.”
Studies show that the perception of air pollution alone can lead to negative health impacts, Johnson said, adding one way industrial developers can curb their impact is by making sure neighboring communities understand the project. Ultimately, Johnson said, it is up to policymakers to ensure developers are following the rules.
“We think about this in two ways: Some of the older established industries, if they are perhaps grandfathered in, are not meeting current regulatory standards, and we are concerned about that,” she said. “From a new industry development standpoint, we are concerned that history could repeat itself.”
Murray-Coleman said he hopes Trammell Crow’s commitment to going solar will inspire other developers to follow suit. Fred Ragsdale, an associate with JLL Dallas’ Industrial Services group, said the shift to electrification will rely entirely on demand from customers. In some cases, adding solar panels can disrupt the underwriting of a project, which Ragsdale said has historically discouraged developers from pursuing the investment.
"The industrial world as a whole is catering toward our users,” he said. “Until there is pushback from the users, until a developer misses out on a deal because another deal had solar power or wind power, you’re not losing business because of it.”