How insulation choice can improve returns on warehouse investments

4 November 2019 Kingspan Insulation UK
Real Value of Space_Cardiff
Our shopping habits have changed dramatically over the past decade thanks to the internet. Online sales of non-food items have more than doubled from 11.6% to 24.1% of the total market between 2012 and 2017. This change has not only posed challenges for high street shops, but has also led to significant demand for so called ‘Big Shed’ distribution centres. Over 1.5million m2 of new warehouse floor space was delivered in 2018 and yet just 6.62% of warehouse space is currently available. It is therefore vital for developers to maximise the useable floorspace within new warehouse buildings. Research from Currie & Brown has shown that one way to extract more space (and therefore a greater return) from these buildings is by installing slimmer, more thermally efficient insulation within the wall constructions.

Continued growth in warehousing demand

A recent report from the British Property Federation highlighted the strength of demand for new warehousing floorspace and the relationship it has with new housing. At present, there is 6.4 m2 of warehouse floor space per home in England. To maintain this level whilst keeping pace with the Government’s target of 300,000 new homes per year, it would be necessary to create an additional 2 million m2 per year — the equivalent of 280 football pitches.
Looking longer-term, the continued rise of e-commerce activity and demand for ‘last-minute delivery’ means that this ratio of warehouse space to homes is only likely to increase in the future.

Futureproofing buildings

When looking to meet this demand, developers must also be mindful of the wider context. In the face of the climate crisis, the Government has now committed the UK to achieving net zero greenhouse gas emissions by 2050. This will require significant improvements in energy performance requirements for both new and existing buildings. The introduction of the Minimum Energy Efficiency Standards (MEES) in 2017 provide an indication of how this may be enforced on existing buildings.
MEES apply to all private rented residential and non-domestic properties which currently require an Energy Performance Certificate (EPC). Under MEES, landlords of any private property in England and Wales are prevented from granting tenancy if its EPC rating is lower than an E (subject to certain exemptions). MEES will become compulsory for all privately rented properties from 2023.
Landlords who do not comply with MEES can face significant fines, whilst the retrofit work bringing a property up to standard can be costly and may mean the property has to go unoccupied for a period of time. In addition, as the Government gets serious about its commitment to a net zero economy, the MEES EPC targets can be expected to be tightened further over time. For these reasons, it makes sense to ensure any new projects achieve excellent energy performance. One of the simplest ways to do this is by insulating the outer envelope to a high standard.

Insulating warehouse walls

Ventilated rainscreen facades are a popular choice for the walls of warehouse buildings and a wide range of insulation options are available for these constructions. More thermally efficient insulation, such as our Kingspan Kooltherm K15 Rainscreen Board, can allow a desired U-value to be met with a much slimmer construction than lower performing options. As such, whilst these premium products have a higher upfront cost than alternatives such as rock mineral fibre insulation, they can also allow leasable space within a warehouse to be maximised within a given building footprint.
Currie & Brown has now conducted research looking at what returns can be achieved on the extra investment in these premium insulation options through the value of the extra floor space they provide. The research included modelled analysis of 10 real life case studies with external wall constructions which were designed to achieve a U-value of 0.22 W/m²K and differed solely in insulation specification. One of the buildings they assessed was a distribution centre in Cardiff.

Distribution centre case study

The big shed warehouse had a development cost of £18.01 million and comprised 90% distribution unit and 10% office. A rainscreen ventilated warm wall construction was chosen for the external walls of the building. Currie & Brown considered two insulation options for use within this system: Kingspan Kooltherm K15 Rainscreen Board and rock mineral fibre insulation.
A 200 mm thickness of rock mineral fibre insulation was required to achieve the target U-value of 0.22 W/m²K, leading to an overall external wall depth of 388 mm. When this construction was used, the total lettable floor area of the building was 35,800 m2.
In comparison, by using Kingspan Kooltherm K15 Rainscreen Board, the same thermal performance could be achieved with an insulation thickness of just 120 mm – reducing the total wall depth by 80 mm. This saving created an additional 79.2 m2 of lettable space within the warehouse with an annual rental value of £65.91/m2. As such, whilst the Kingspan Kooltherm K15 specification cost an additional £14,528, the value of the annual rental income from the space alone was estimated at £5,220 and its capitalised value was £110,240.00. This represents an astonishing 659% return on the additional investment.
You can read more about the Currie & Brown research which covers a wide range of building types and applications in the Real Value of Space section of our Knowledge Base.

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