With "everybody's bills going up", Alex Reynolds, development director at industrial property specialist Citivale, says the success of its UK logistics platform, Greenbox, will come down to delivering lower operating costs for tenants.
Reynolds was appointed by Citivale just under two and a half years ago to lead Greenbox, its joint venture with Swiss-based private equity firm Partners Group, which focuses on delivering speculatively developed, big-box units with "market-leading environmental credentials".
Speaking to CoStar News, Reynolds says the platform, which bought its first site in 2023 at Greenbox Thirsk in the North East, is looking to attract tenants by "matching their ESG ambitions", with all buildings built to BREEAM Excellent and EPC A minimum.
He says this approach has already paid dividends at its other site, Greenbox Darlington, where it signed plumbing, heating and cooling company Wolseley to a 107,775-square-foot unit in July, having completed the scheme four months earlier.
Reynolds discusses what he sees as the platform's unique selling point compared with rivals, its ambition to become a UK-wide developer and why "political rhetoric" is not affecting its focus on building sustainable warehouses.
Can you explain Greenbox and the purpose of the platform for anyone who may not have heard of it?
Greenbox is a UK industrial and logistics development platform established to deliver high-quality, future-ready assets, with market-leading environmental credentials, delivering [assets] to a minimum of BREEAM 'Excellent', EPC A and to Net Zero Carbon in Construction.
"Partners Group was keen to have that collated into a single portfolio of units and sites all over the country. That is their aspiration and we are working towards that.
"The portfolio's focus, at the moment, is the larger boxes, the 100,000-square-foot-plus [warehouses], but we shall see whether that evolves.
"The platform aims to create resilient income and protect asset values and support occupiers in meeting their own ESG commitments.
Can you give us a flavour of your day-to-day role and how that overlaps with your Citivale responsibilities?
The role is all-encompassing really, it's to lead the development strategy for the whole Greenbox platform and for Citivale.
Greenbox is one part of what I do and the other part is [arranging] deals and working with other funders and operators that have invested, who are keen to work with us on opportunities that don't necessarily work metric-wise for Greenbox.
For Greenbox, I'm in charge of overseeing the site selection, delivering the planning, the design work, predicting work, the delivery and then the leasing strategy as well.
So it includes working closely with the investors, the consultants, the local authorities and the occupiers, which is all sort of cradle-to-grave stuff.
I also ensure that each scheme aligns with the Greenbox sustainability objectives, while remaining commercially robust.
It is making sure across the platform that we are embedding in consistency, from design standards, the look and feel of the buildings, as well as the ESG reporting so Greenbox is recognised as a coherent, high-quality proposition in the market rather than a collection of standalone schemes.
What kind of businesses are you looking to attract at your schemes and how would you sum up the big-box leasing market at present?
Greenbox attracts interest from quite a broad range at the moment in terms of the amount of occupiers that we put Requests For Proposal to.
At the back end of last year, post-Budget, I think people started to look again [after they] understood what the direction of travel in the economy was.
So we have been looking at the [third party logistics] market, certainly up in Darlington, while the manufacturers and trade-focused businesses are very much looking on a regional basis and a national basis at where they need to focus.
There is also quite a lot of consolidation of business space... those are quite lease event-driven sometimes, but I think those are the key businesses that we seem to attract. Wolseley, who we have at Darlington for example, they did exactly that.
There was a new strand to its business that was focusing more on the ESG side of the products it sells, like air source heat pumps and things like that and it wanted to consolidate into a unit that would actively be storing those type of products... [and that] aligned with our buildings being equally as ESG efficient.
Is the platform working towards a golden number of units or a minimum size of portfolio?
I think that has evolved a little bit within the market the way it is at the moment, so I don't think that's something we've got right now.
We obviously get presented a number of opportunities and we go through those and we do them plot-by-plot, as it were, just to see where we go.
But, when we do see something we like, we tend to spec and tend to deliver wherever it is, as opposed to sitting on our hands and waiting for it.
I think Greenbox Thirsk is one of those where, it is a location that's quite prelet driven, those are big boxes, the smallest one on site is 182,000 square feet, the biggest one being 365,000 square feet.
"We are waiting for something to come along on that one, but [we are] doing well with where we have speculatively [developed], such as Darlington."
How is the speculative development market feeling at the beginning of this year?
That is still a tough question. With the returns that investors are expecting, I think that's a tough question...you're a brave person to speculatively develop something in this market, I think you have got to be confident in the fundamentals.
Prelet one, build one, that was always the notion in the industrial and logistics market and I think that still remains for people. So I think it will happen, if you can get an early steer on somebody wanting some sort of prelet space.
But, saying that, prelets are probably at their lowest numbers for a while because I think occupiers leave it quite late, or perhaps sometimes too late, to actually do that now.
So, I think it is important for us to have that in our mind or maybe not spec the whole scheme, I think it is very important to look at the site range's availability.
You have stressed that Greenbox is a UK platform, where is it looking to expand outside the North East where it launched?
We've got opportunities all over the UK that we are looking at and we get presented with.
We are primarily established in emerging logistics corridors, where supply of modern, especially sustainable space, remains constrained. That includes parts of North England, the Midlands and selected locations in the South, where infrastructure, labour and occupier demand align.
The focus is less on the headline geography and more about the fundamentals of connectivity, power, availability and planning, and longer-term occupier demand as those evolve with the occupiers that we deal with.
Recently we have seen a bit of a focus on labour, especially for the type of operators and occupiers that we are looking at [who] are really struggling with that, I think the infrastructure piece [is important] too... power is a real challenge... as well as planning deliverability."
What is on the horizon for this year at Greenbox and how do you think your assets are likely to perform?
Last year was pretty tumultuous generally for developers across the board. There wasn't very much speculative product out there, that is for sure.
I think we were one of the only schemes, certainly in the North East, that completed during last year or at least in terms of anything speculative that went up.
I also think the market is likely to remain selective in the near term but, I think with occupiers still focused on value efficiency and that flexibility, we have got some well-located, high-quality assets that continue to perform strongly.
I think secondary stock faces increasing pressures, albeit that some of those can undercut you, so that is a challenge for us.
I think for developers and investors, hav[ing] disciplined site selection and being focused on the long-term fundamentals will be key.
There might not be a lot of deals coming through but, if you are doing them in the right places and being selective, you will do well.
"We are primarily established in emerging logistics corridors, where supply of modern, especially sustainable space, remains constrained."
How has the platform responded to some governments paring back their ESG agendas?
Quite frankly, political rhetoric sort of fluctuates, doesn't it? It's buzzwords essentially for them. I don't think that is right.
"We have got the Net Zero Carbon Building Standards coming out very soon... [and this] is going to be something that has to be met, it's not going away in our business. I think it's the right thing to do for [us].
So, while that rhetoric might fluctuate, occupier behaviour is remaining broadly kindly of consistent.
Many businesses are driven by internal ESG commitments and I think investors' expectations are going that way and [towards] energy costs.
[There is also focus on] base costs, a lot of businesses are looking at that as their costs are going up for other reasons, such as rates and so forth, they are looking to make savings where they can.
If we can make those buildings cost-efficient for them... I think we are doing the right thing.
And finally, how do you see the platform evolving over the next five years and could it operate outside the multilet space?
I think Greenbox’s aim is to be recognised as a leading platform. For us, it is all about the sustainability piece, industrial and logistics is not changing.
We want to make sure that we are delivering on resilient, adaptable assets that are aligned with the long-term needs of occupiers. These leases are 10, 15, sometimes, if you are lucky 20 years, so you have got to have that product.
We are not considering at present secondary assets, I think we are looking still at the new-build deliverability under the Greenbox banner and making sure those work for those occupiers.
It’s about building that investment value [because] market fundamentals are saying that you are still doing the right thing.
I think there are more people looking at [multilet], certainly there seems to be an amount of investors starting to look into those markets and Partners Group has equally asked us that question, whether anything will come of that, we are yet to decide on that.
But Partners Group is a private equity group, they look at assets as standing investments as well as new-build developments, Greenbox is focused on that, but that is not to say it won't shift at some point soon.