Future-Ready Warehouses: European Green Logistics Space on ESG, Financial Returns, and Social Responsibility

Adam Hinds: Hello, hello, hello and welcome to the ESG In Property Podcast. You're here with Adam Hinds, the co-founder of LifeProven Real Estate Advisory, the global authority on delivering resilient future-proof real estate assets. And if you're new to the show, We give you insider access to the most innovative and ambitious real estate leaders. And it's really the people who are pioneering financial, social, or environmental impact through their day-to-day work. And we're trying to uncover how they think differently and most importantly, how they behave differently to deliver superior outcomes. you can learn from the very, very best. And today. we have an incredible episode and we've been very, very excited to record this since we first met with Ian Warboys, who is the CEO and . EGLS is dedicated to transforming European logistics and property development by prioritizing sustainability to deliver the industrial buildings of the future. very, very apt strategy.

And to give you a little bit of a flavor as to what we're going to be diving into and exploring, and also the uniqueness of their approach and what stood out. I'd just like to read a few quick quotes from our sort of background research from their content. the first one is sustainability is not just about building logistics centres with solar panels and green facades. is about placing these buildings in a wider context. Developments of the future should also consider how the buildings will affect the landscape, the livelihoods and the living standards of the people in the surrounding villages and towns. And the second point is I want people to come home from work happy in the afternoon because then they'll be nicer to their family. to their neighbors, to the strangers they meet along the way, they'll have a sense of wellbeing that will spread. those are very, very powerful quotes that we're gonna dive into in a minute.

So Ian, a very, very warm welcome to the show.Ian Worboys: Thank you very muchAdam Hinds: Delighted, delighted. we like to do our first question for all of our guests is we really like to rewind the clock back to understand you individually as to how you first became passionate about real estate, whether it was a first interaction, a memory, someone in your family or friends was init and they sort of encouraged you down that path and you became really, really passionate. But what we find is people that are super, super successful in this space usually have a defining memory or moment that then that inspired them to sort of dedicate their professional life to exploring this. So Ian, over to you.Ian Worboys: I was very fortunate. And he was an architect. And in those days, all drawings were hand drawn and he had an office attached to ourhouse. from as early as I can remember, I grew up understanding how to read plans of houses and offices and hotels.

And then my big brother, Jeff Warboys, went into the industry and he was workingat Savills when I was deciding what to do for the future. And I saw that. I hadn'trealized I knew as much about real estate as I did at that point. I unfollowed his footsteps and sixyears after him, I went into Strutton Parker as an industrial shedhead.

Adam Hinds: and then the rest is history. yeah, Ian, I'd like to sort of transition into an introduction to EGLSand sort of the founding of the business. Now, what I would like to explore is you obviously hadquite an extensive career in industrial warehouses, logistics space. What was the sort of pain pointor the opportunity through your career experiences that made you then decide to found this businessand specifically what made you found it with a core sustainability focus.

Ian Worboys: I'm very fortunate that I've had some amazing leaders in the business that have inspired me over theyears.

I said I started at Strutton Parker and there I had a great boss, Nigel Aslin and James Donald and various other partners who taught me the value of teamwork and being in the industry and how communication is everything. The brokers in those days had to communicate face to face. not via text messages because we didn't have mobile phones. I then went to Gaisley where I had an inspirational leader called John Duggan and John was way ahead of his time, along with Prince Charles, where both were considered tree huggers but actually they had spotted that the world needed to change its course and that sustainability and being green was the future. if you imagine this was in the very early 2000s, maybe even the late 90s into 2000. And John Duggan made us far more aware and did a lot of work on Gaisley property warehouses that made them greener. were the first to putin, or one of first to put in wind turbines to create electricity.

They were the first to actually build a carbon-free warehouse, sorry, carbon-neutral warehouse. And when I set up EGLS, I've actually been able to use everything I've learned on the people side from Stratton Parker and fromGaisley and others. And then from the environmental side, understanding for the past 24 years how important it is. setting up EGLS, when you come to name a company, I did think of IW for industrial and warehouse, but someone pointed out it's my initials. made me sound a bit egoistic. actually what we did was I looked at the fact that I wanted to be pan-European. It was definitely in the warehouse space. And we wanted to be upfront, as you said in those quotes, that we're not shying away from green or trying to paint things green. By putting it our name, we need to be green. And the nameEGLS just popped up and it... It's not the most sexy name and there are other names to be considered, but actually it says on the can what we do.

And that was really important and it's how we live.Adam Hinds: And Ian, just dissecting that a little bit further, it's sort of how, what were the sort of keyexperiences and were there any key experiences through that journey that shaped your understandingof how sustainability ESG green was now materially linked to long-term financial performance? habecause it's, very obvious going through your website and your content that you're producing. Thisisn't a bolt-on to your strategy. This is ingrained in everything that you're doing.

Ian Worboys: Yes, I think that's very important. In fact, we've got training coming up the next few days in Poland and that's all part of the heart of what we're doing. For me, it was going back to those Gaisly days when we looked at the environmental impact that our parks had, not only on the amount of power we're using, but also its effect on the local people. the first big project I worked on was Magna Park.

in Lutterworth, a great guy called Pat McGillicuddy who was the construction guy and I say with John Duggan we looked at how much power we're using and could we reduce the amount of power we're using, could we reduce the impact we are having across the world and I remember one of the great things that Gaisley did was to put a team together of non-related people, one of them was aFormula One designer One was an office architect, a different sort of people and a sports guy, allsorts of people, and then talk about warehouses of the future. And it was that sort of thing that made me realize that actually, although warehouses are big and ugly, they don't have to be. And if you went to the very basics, Gaisley used the lovely faded blue, which GLP still use today. And I was thinking, why don't more people actually... use of visually change their warehouses.

And then you realize that with solar panels, which were coming in in those days, you could actually save your occupiers money if they could use that power, which wasn't possible because in those days power had to go through to the grid. And then you got a discount and you put it back. But if you take all of those, that was the impact that I felt we could do more. These buildings are going to be here along time. There are warehouses in central London, central Amsterdam, which are 150 years old, they're still there. And actually, there is no reason why the warehouses we built today shouldn't still be there in 75 years time. the opportunity was to use solar panel to create electricity, wind turbine to create electricity. And that was the day before we had sophisticated building management systems.But we actually felt we could make a difference. And we then looked at how panels are manufactured and where they're manufactured.

steel made in India in some pretty horrible conditions being brought to UK and then turned into our panels was not as green as panels being made, say, with British steeland with less carbon footprint. And it was that understanding put together. To me, it was a bit of a bright spark in my head. But this, we have to do that.

Adam Hinds: And within that, just out of curiosity, through the setting up of EGLS and then obviously the operation and running of it, you're engaging with a lot of different stakeholders and over a lot of different regions, being pan-European. out of curiosity, the initial setup and where you are today,has the EGLS proposition been well received by your sort of investment stakeholders and people that you've been having initial conversations with, or have you had challenges around the value proposition of ESG or sustainability led assets?

And if the latter, has that then resulted in you having to sort of shape your messaging to help educate people on the key benefits, depending on whoyou're speaking with and potentially where they're based?
Ian Worboys: Yeah, I mean, I think there's two or three things to that. think firstly, the investment market now realizes that there's a value difference if you have a green warehouse to a non-green warehouse. AndI've been pushing that for, well, for the 20 years, that there should be a difference, but value hasfound it very hard to value it differently. Secondly, banks will give green bonds and lend

Adam Hinds: Mmm.

Ian Worboys: more on green warehouses than on non-green warehouses. you've got the investor understanding that the value can be improved, banks showing that you can get less interest rate if you're green,occupiers such as DHL and lot of the big Ops, Amazons, et cetera, realizing you have to be green because of their carbon footprint on the world. And you put that together.

And actually the sales proposition has been very good. We've spoken to some very big LPs who have specifically said what welike is the fact that you're being upfront about being green. Where we hit some issues on being green sometimes is in places like Poland and some of the more central and eastern European countries where occupiers haven't quite worked out the value of being green. our job is to sell to occupiers and to investors that being green has a value impact and we say in our company that to be green the numbers have to be green. Yeah and our ESG champion is Stefan Wolvius and he very much pushes it forward and we have to promote ourselves to the CFO as much as to the real estate team and if we can win that battle then we're there.

Adam Hinds: Mm- Mm- Couldn't agree more. I love that a big element of your work isn't purely just the realestate element. It's an educational piece for all the different stakeholders you're engaging with aswell.

Cause that, that in itself will have generational impact by you engaging with investors whoobviously will be investing and funding things outside of your schemes and you educating them tothat, that I suppose the future of buildings and a better way forward, hopefully then can makemeaningful steps towards transitioning that geographical region and the way that they understandsustainable investing and then lend or invest into those assets. And that then just createsgenerational ripples that move people forward. I really like and appreciate the challenge thatyou've taken on and the complexities of it and how seriously you're taking the educational elementbecause that obviously is fundamental to the material financial performance of you unlocking thoseregions as well. What I like about that is it's, obviously a inherent values connection and that has incredible depth and strength to the entire value proposition.

And we're going to come back to that, that that'll actually be one of our last questions is looking at thegovernance infrastructure of the company because it is no fluke setting up a pan European businessfrom scratch overnight. we're going to come to that in a minute. But . And you can talk about thisfrom a UK perspective or wider experiences with the wider investments as well. But you're obviouslyproviding warehouses, logistics centers, data centers as part of the core real estate offering.within that, who are your typical customers, just generically? Who are they, usually? Mmm. Yeah.Yeah. And then back to Ian's point at the beginning, you still got another 75 plus years of thatbuilding being there in operation. just to dial that in a little bit further. As a result, you typically seeing more excitement from your partner's customers or more demand or them seeking longertendencies? Has that started to funnel through in different sort of lettings outcomes out ofcuriosity?

Go in, please.

Ian Worboys: And I think the other thing that a big part of our business is by existing income producing warehouses, which may have been around the 2000 in that sort of period, or even some of them evenolder. And it's then what can we do to existing buildings to bring them up to some sort of green standard? That means maybe increasing their rating on power use. It might mean putting in some solar panels if the roof can take it. It may be something as simple as working with a local the local people or the environment of the building to try and bring it up to some sort of standard.everything we touch, we want to make slightly better or better. And it comes back to, to be green, the figures have to be green. We understand that buying a warehouse for an investor is a financial investment for them where we have to protect their return. But we believe that sometimes without too much money, you can actually bring about improvements.

And we would suggest that by being, but if we can prove to both the investor and the tenant that we can help them, then that will work. mean, the most basic is LED lights, which I don't even take as green anymore. I think they're standard, but there are still some older buildings that don't have them and the payback on that is18 months. it's an easy win. But there are other things you can do, making sure some of the warehouse doors aren't as,

Adam Hinds: Mmm.

Ian Worboys: air or more air sealed than they currently are, there are little things that can be done when you refurbish a building and obviously rather than knocking a building down by reusing it, that is one of the most green things you can do. it's not only new buildings which is much easier to achieve your your brim excellent and all sorts of lovely features, it's the I think

Adam Hinds: Mmm.

Ian Worboys: One of the bases we add value is to standing investments.

And I think that's again why LPs areinterested in working with us as we go forward.

Adam Hinds: Yeah, I got a feel. And how are you finding it with supply chain partners? Are you seeing with the wider, whether that's design teams, contractor teams, or operating partners, are they typically really aligned with your methodology and approach? Or is there an educational piece with the extension as well that you're doing like you had to do in Poland with investors?Ian Worboys: I think, think for, it depends on who our supply chain partners are. They're already there and trying to learn from us on future, et cetera.

Adam Hinds: Mmm.

Ian Worboys: Investors are pretty well educated these days and understand what they need. It's the smaller occupiers, the more regional ones, where we have more issues.

And our supply chain for construction and for renovation of older buildings is already, we've chosen only people who are aligned with us.We're not always driven by price, although we're obviously always trying to get the best value.

Adam Hinds: Sure.

Ian Worboys: But we do, I mean, we work with a company called B Design in the UK who help us across Europe. And they've been very good, the two partners there, Anna and Stephen, in making sure that you can do, asI say, the smallest things can make quite a big difference. The supply chain has to understand that that's our goal if they want to work with us. And I believe they choose us because of it.

Adam Hinds: Mmm. Mmm. Yeah. I have a question here and I'm really curious to know how you structure this layer of curiosity to think it's really underscored by a point you made earlier in that you said we are actively looking to make everything better. And I think this resonates really nicely with the points that you just made.

And there's an inherent curiosity for your own learning. how much of this learnings for improving the environmental social performance of the buildings is done in house. Do you have an R and D team? it just individuals go and do it themselves or is, you pushing this, these questions and working on like a project by project basis with different designers and design teams and contractors? How, how are you pushing this curiosity and educational piece to inform your decisions?

Ian Worboys: I think we, when we started, we worked, as say, with B Design, we then took on ESG lead, Stefan Wolvius. And then on each, if it's a new project, then our architects tend, the ones we use tend tobe already thinking ahead on what we need to do. Now, sometimes that means we have to actually tie them, to bring, them in a bit, because at the end of the day, we have to be able to show returns to the investors, we can't have everything. It's a bit like a Christmas list.

You write to Santa and you wish for everything and hopefully you just get a few of the things on that list. in this instance, Santa is the investor and we're trying to give the occupier, we're like the middle man,we're the elf in the middle giving the next man the kiddie presents. we work with teams who know what we're about and they add value. Stefan is always looking at how do we push the boundaries of what we understand.

Adam Hinds: No Mm-

Ian Worboys: we're looking at the moment at how does hydrogen power, how can that be used? What are the new ways?We all understand that there's a shortage of electricity. That's causing problems all over the place. we go to places like Holland where a great company called Interspace have actually created warehouse parks that are off the grid. They still have a connection to the grid, but something like 99 % of the time, they do not use any electricity from the grid. Now to me, they're ahead of a lot of the market.

And that's been driven by the fact there's no power in the Netherlands. the need to have power increased the speed of green development for warehouses. I think that's inspirational tome.

Adam Hinds: Wow. They were forced, yeah. Yeah.

Ian Worboys: And we want to create that sort of inspiration across Europe.

Adam Hinds: Mm. Yeah, I love this. Yeah, couldn't agree more. And I think the other benefits you've got is bymaking it better and the evolution when you're taking a long-term viewpoint over your 75 yearperiod, that just compounds. And if you're making yourself better each day, each month, eachproject, the evolution of that and the business and the assets, and then the impacts and benefits ofthat will just... continue getting better and better and better through time. I really, reallyappreciate that cultural approach. And that's no fluke that that is happening. That is purely bydesign of your governance infrastructure, which we'll come onto in a bit.

Ian, I'd like to talk about the social element. We've sort of touched on it earlier in the podcast around the impact on occupiers, their employees within the building and also wider communities. And I read two sort of really interesting, unique quotes out at the beginning that have an interesting angle on how your assets influence communities and the buildings of the future. I'll just, I'll summarize them very quickly for the listeners perspective. was buildings of the future should also consider how they affect the livelihoods and the living standards of people in the surrounding villages and towns. as well as wanting people to come home happy from work and of the obvious downstream benefits that that happiness will deliver to society over time. I'm curious to understand from a corporate level andalso an asset level, how are you actually approaching your social strategy and social outcomes to people?

Ian Worboys: I think there's various things.

I've believed, and it goes back to my similar days through Strutton Parker and Gaisley, that if you have happy people at work, and that quote you said, they go home ina happy mood. They say hello nicely to the wife. They don't kick the dog. They're great with their children. They don't scream at them. the wife and the husband or wife or whoever around it is, and have a lovely dinner, go to bed, and in the morning they wake up with a smile on their face and theygo to work. And they're actually very nice to the people they meet on the way to work in the cake shop, whatever it is. It sounds a bit sort of fairy tale, but actually happy workers create a happy atmosphere. And the converse of that is if you do go home and kick the dog. You then end up arguing with the wife. You end up shouting at the kids. You go to bed in a grump. You get up in the morning and you shout at anyone you can because just frustrated and angry. that's the sort of basis of the thesis when I started.

If you then take that into the workplace, the environment in the workplace can affect how people are. I, as a youngster at 17 and 18, worked in a, actually worked in an aluminium smelting factory. where we were ladling aluminium by hand to make the casts for redland roof tiles and it was an absolutely archaic evil place but as a student I was earning more money than most people at work, know was a few hundred pounds a week I was one of the well-off people that even bought myself a car but taking that into today's workplace if you provide better cleaning facilities, the very basic showers in an environment that actually they feel like they can go home as a fresh person or at their lunchtime they don't have to sit in a small box with a sandwich they can actually get outside and sit somewhere and actually feel a bit of sunshine on them. That effectis magnified for the company. It can be already proved that if you have a warehouse with

Adam Hinds: Mmm. Mmm.

Ian Worboys: better air quality than another, the absenteeism is less. This comes back to us convincing the finance director that having a building with a better air handling system will produce, and it's empirical, you can't argue all the studies show it, less absenteeism. That immediately is a financial benefit to the company. you get happy people, you get a financial benefit. If people see flowers on the way to work, it sounds silly. There's proof that it puts them in a better spirit.providing that people laugh that you put bike sheds in, which is basic. It should be a standard. It shouldn't be a green feature. However, where it's used, those people are happier and fitter. You get less absenteeism. the sort of circle of life of of value and being green really comes together and the people is the basis of every building. We can make a functional building but if the people in it aren't working, if the people aren't happy then it doesn't work as an overall offering.

Adam Hinds: Go for it.

That is powerful. That's very powerful. And interestingly from our perspective, one of the things that we do is we measure the, well, the full ESG performance over large portfolios. If we're speaking specifically about social performance is typically the social performance of industrial estates is the worst when we're comparing that to the wellbeing outcomes. compared to residential or commercial. And pretty much every point that you touched on Ian is when you add all of them up, that is where you have detrimental impacts coming from. And that's when people are going into those environments day in, day out. And that's where you get the compounding effects where that really adds up negatively and you're heading in the complete wrong direction. I really appreciate the...

thoughtfulness of the tiny little touch points that all add up to tilting the design and operational experience in your favor that someone is going to leave that building, that estate atthe end of the day in a positive mood, which then has the wider societal benefits of the upstream and downstream impacts. just on the bike. one of the things we see a lot is on industrial estates is, I don't know, there might be three, four large occupiers. And within that, the occupier will dotheir fit out and the fit out will be a hundred percent of the floor. The floor space will be for storage and then there's no amenities or comfortable amenities for the occupiers. And when you walk around the estate at lunchtime, people are sitting out in under bike shelters or they're sitting on.a footpath because there's no communal amenities for people to sit outside and share food and the internal ones either are not there or they're not of good quality that someone would want to spend their time in.

it's just adding all of these little layers for how will people live and spend theirtime and how can you enhance that overall experience even just to the touch points of seeing flowers adds up to a big picture of a much better outcome. And I really like that approach and how that hasalso aligned with your values. And that's what has attracted you to coming to the business aswell. I think this is a really nice time to transition into the governance infrastructure of thebusiness. And this is, in my opinion, is very rarely spoken about, but in terms of governance, butis the most important because without good governance, you do not have environmental outcomes orsocial outcomes. And you hit the nail on the head with your comments around the numbers must be green because if you do not get the financials right, you cannot then have a social or environmental impact. that is the foundation of everything good happening is you have to have that foundation right first.

And I'm really keen to explore Ian from founding the business, your specificapproach to governance. You've set up a pan-European company with a very highly experienced C-suitefrom nothing. And you've hit the ground running from day one. how have you actually approached thegovernance infrastructure for your business across multiple geographies? sort of culturalintricacies, different laws, regulations effectively and quickly.

Ian Worboys: I think that the first thing on that is that all the country heads have worked with me in the pastor have known for many years. mean, And most of the country heads have either worked with me before at Tramble Crow or P3.

Adam Hinds: Mmm. Wow.

Ian Worboys: Or I say, we've known that we know each other. they already know my passion for being green. Andwe've already shared those thoughts when I was asking them to would they leave their companies andcome and join me if I was able to set up EGLS. they all said yes.

Secondly, and I, this sounds a bitageist, but it's not meant to be ageist is that as one gets older, one realizes that one day you're not going to be around and therefore what you do today has an impact on the future for your children and for me now, my grandchildren and for them for the same sort of thing. And therefore, when you come to say about the governance, if your leaders already have the same thinking as you, they will then ensure they pick team members who also think it. And it goes down the company.

Adam Hinds: Mmm.

Ian Worboys: When we interview people, and it's part of our governance, we ask about what they think about being green. We offered a job to someone yesterday whose thesis at Cambridge was all about being green and sustainability and can it be afforded? I mean, was music to my ears that someone looked young. But Ido think that just ensuring that when you look at a building, you send in someone to do an assessment of what is there and what could be done to improve it.

Just that one little thing. It's relatively little cost. Stefan will go up there or we'll use an external person if we've got too many to look at at the same time. And understanding what can we do to live our own philosophy. Andalso one of the reasons we are owned, we're part of Canco. is a Kuwaiti listed company and as you can imagine in Kuwait where electricity where power is no problem and they are not as green maybe out there as they should be but Kamco once across their all their businesses and their parent company Kitco it's a sort of 50 billion assets under management in total and one of the reasons they chose us was because we're green because we are adding something that they feel is needed across the region as well. And although we're in Europe at the moment, maybe one day we'll grow into the Middle East. Be able to take that forward to people who are very oil-based and don't think about things like that. their governance is, and just saying their governance on us is not just financial, it's are we being green?

Adam Hinds: That comes, yeah, sorry.

Ian Worboys: Are we living what we've sold to them?

Adam Hinds: And that comes back to one of the first points around how you're operating in Eastern Europe. aspart of your role and strategy is the educational element. And what a great opportunity that wouldbe in the Middle East as well from an educational, taking your experiences, your knowledge, yourevidence to prove what has performed there and then to help transform that. market and I thoroughlyappreciate that approach. Mm. Mm.

And I think just from a listener's perspective, I'd like to summarize a few key points I've taken today as to where I think EGLS gets their superpowers from.Before I transition into the last question for you as to any final advice that you have for listeners on delivering the future of logistics space, but a few key notes from a listener's perspective while my esteemed guest, on their answer is... They take a very long term view. we were using the 75 years. was just one of the numbers that came up, but everything that we've spoken about today takes a really long term view. within that long term view, there's also a much wider view in terms of how does that asset or that portfolio or the business interact with a wider, either local or global context. And I think having that zoomed out view, inherently makes you more considerate to the wider stakeholders that you will impact.

And that actually benefits you commercially because the wider stakeholders you deal with are the ones who underpin the value of that building or your business because they're the ones who rent it, they insure it, they use it,they fund it, et cetera. They consent it if you're going through a planning application. having that really long-term view and wider context makes you a lot more powerful commercially, but also waymore impactful, whether that's environmentally or socially. I think that's a really, really keysuperpower that has been demonstrated today. The second one is making the cultural approach and making everything better. And then when you're applying that to a wider context of time, over time and a wider context of geographical location, that compounds and then that then basically makes everything that you're doing in your company and in your assets, the benefits compound internally for you and externally for the people that you're influencing.

I think that's a very powerful cultural point that I picked up today. The numbers being green. think that is really, really, really valuable take home for everyone today is ensuring the balance of the financial part first because nothing else can come without the financials working, but balancing the environmental performance and the social outcomes with the financial outcomes. And when you get the three of those right, it's very powerful. And then you have a scalable model that can then actually deliver the impact. And the last one on the governance piece that I took away from Ian's comment is around the way that they setup and delivered a pan European governance infrastructure very, very quickly and successfully was the key appointments were not done cold. They're they were relationships that had already been forged over time and built on founding values and consistent values. And they had been battle tested, whether that working together or knowing each other for a long period of timeAnd I think that when. combined coming together with a shared goal and a unique goal and an inspiring goal has resulted in being able to do a lot of amazing things very quickly with a lot of geographical and cultural challenges that come with a pan-European business. just from a listener's perspective, that has been a few of my key takeaways. I'd like to transition into the last question for you. Any final advice for the listeners on delivering? the future of logistics spaces that you would like to leave that you haven't potentially already mentioned.

Ian Worboys: For me it is being, it's looking to the future and being prepared to say well we think electric cards are the future but is it? Could hydrogen cars be the future hydrogen lorries? think was JCB recently said they've developed a hydrogen engine for their vehicles they could use. And I was talking with FM Logistics in Spain.

All their forklift trucks are hydrogen powered and they take solar panels, solar power from the roof and use that in converters to create the hydrogen power which then has is incredibly green. it's always looking ahead. It's exciting to be able to look ahead and see what might be coming around the corner.

Adam Hinds: Ian, Congratulations on everything that you've achieved far and will continue to achieve.Please, please, please keep inspiring and educating because it's amazing what you're doing. keep upthe great work. Thank you for your time.

Ian Worboys: Thank you, Adam. Thank you very much.