As Modern Warehouses' Energy Needs Grow, Owners And Developers Look To Solar
When it comes to industrial real estate, the “E” in ESG — environmental, social and governance — is often focused on air quality and emissions. But as automation and technology become more prominent parts of operating, the amount of power needed to run modern warehouses is growing, and energy and electricity are coming under the spotlight.
In some industrial buildings there is negligible energy use, but in others, such as modern e-commerce facilities, the amount of power required to operate is growing markedly, speakers at NAIOP’S I.CON West said last week.
“One of the things that we've been working on as a company is recognizing that continuous growth in electrical consumption and electrification,” Prologis U.S. West Region President Kim Snyder told Bisnow.
Sortation buildings, distribution centers and other high-throughput facilities, for example, rely on a network of computers to manage inventory and flow of goods into, within and out of the facility and also use automation to smooth and speed up that process.
From the devices that help track a product moving through a warehouse to the machines and conveyance systems that help goods make their way through sometimes million-square-foot facilities, all run on power, usually electricity. Some of the machines that are warehouse staples, like forklifts, are increasingly operating off electric batteries, and need to be charged on-site.
Larger buildings use more energy. In 2012, less than 1% of buildings across commercial property types were larger than 200K SF, but they accounted for about 26% of all commercial building energy consumption, according to the U.S. Energy Information Administration. At the same time, about 11% of commercial buildings measured from 25K SF to 200K SF, and they accounted for approximately 42% of all energy consumption in commercial buildings. The rise of e-commerce is spurring the construction of larger industrial facilities.
Panelists at the NAIOP event noted that in many locations, especially California, the large footprints of some of these warehouses make prime real estate for solar. A report from Environment America notes that the country has more than 100,000 big-box stores and similar retail operations, which translates into nearly 7.2B SF of rooftop space that could be used for solar panels and, if tapped, has the potential to generate enough power to keep the lights on in 8 million homes.
That prime roof square footage is an advantage that Prologis has taken advantage of as it works to address current and anticipated energy needs. Prologis ranked third in U.S. corporate on-site solar capacity in the 2019 Solar Energy Industries Association report and is eighth in terms of installed solar capacity according to SEIA.
It isn’t always that simple, though. Majestic Realty Senior Vice President Fran Inman told Bisnow it might not make sense to install solar in buildings with tenants on triple-net leases for shorter terms if the next tenants won't have similar needs.
As electrification and automation become a more prominent part of the work that goes on in industrial warehouses, energy needs will grow. That is especially true if electric big rigs become the ones picking up and dropping off goods at these warehouses and also need to charge there.
That's still up in the air, though, Inman noted. Whether all the trucks will be electrified or run on hydrogen fuel, and whether they'll need to refuel at warehouses — something that they do not currently do — remains to be seen.
Newmark Director of Industrial Research Lisa DeNight said the continued growth of energy demands in the industrial sector will play a role in decision-making in the future.
“Greater energy use brings a heightened focus to energy conservation, and the type of energy being consumed,” DeNight told Bisnow in an email. “The confluence of growing power requirements and accelerating adoption of renewable energy sources will shape industrial facility design, location selection and the deployment of capital.”