How France’s Tertiary Decree Changes the Landscape for Logistics Warehouses

“ The term ‘tertiary’ says it all. While this new decree does not apply to the primary (agriculture, mining, etc.) and secondary (industry, manufacturing, etc.) sectors, it does cover all other buildings, including warehouses. By default, then, one can say that the entire logistics real estate sector is covered by this measure. ” In response to questions from some industry professionals, this introductory statement by Benoît Dubois-Taine—Partner and co-founder at Systenza—has the merit of recalling the essentials.

Resulting from the ELAN Act (November 2018), Decree No. 2019-771 of July 23, 2019—also known as the “ Tertiary Decree ”—applies to tenants and owners of tertiary-use buildings with a floor area of 1,000 sq. m. or more. Its purpose? To require a reduction in final energy consumption at these sites of 40% by 2030, 50% by 2040, and 60% by 2050. This target must be met based on a reference year set no later than 2010. And an obligation naturally entails penalties, with a schedule of fines (€1,500 for individuals; €7,500 for legal entities) and the publication of a public list of poor performers (the Eco Energie Tertiaire rating).

That is the theory. In practice, this new requirement has raised many questions in the logistics sector. They concern, in particular, the crucial choice of the reference year for the building or portfolio of buildings to be declared. “ Obviously, many would be tempted to select a year further in the past. That would make it possible to recognize any energy-saving measures already taken. But it is not necessarily easy to find invoices more than 10 years old to substantiate that choice. The risk, therefore, is hastily declaring a reference year for which data are available, without knowing whether it will be the most relevant one going forward ,” explains Grégory Gutierrez, partner attorney at DS Avocats.

To this difficulty, which is common to all business activities, is added another that is more specific to logistics : the so-called “ absolute value ” orders, which specify certain criteria for selecting the reference year, are currently incomplete. As a result, industry stakeholders cannot select their reference year with full knowledge of the facts. This situation led the government to make some adjustments after Afilog, along with other associations and federations, highlighted the issue. On September 23, 2022, the Ministry for Ecological Transition granted covered entities an extension until December 31, 2022 (rather than September 30) to report their energy-consumption data for 2020 and 2021 on the “ Operat ” platform. It was also specified that it would be possible to change the reference year throughout 2023. Yet, despite this additional time, the challenge of establishing absolute values is not behind us.

Another source of concern is the shared responsibility of the tenant and owner in the effort to optimize the building’s energy performance. What effort can be expected from a tenant who may leave before the first 2030 milestone? How can an owner ensure progress when they are not present at the site on a day-to-day basis? “By diffusing responsibilities, we may end up in situations where each member of the pair believes it is not their job to act,” says Benoît Dubois-Taine.

Fortunately, in the field, industry stakeholders have solutions to reduce the energy consumption of their logistics buildings. First come measures to track, analyze, and optimize consumption related to uses such as heating and electricity. These initiatives offer three advantages: they are proven, require no major investment, and above all deliver rapid results. Once that has been done, the next stage requires more extensive changes.

Not necessarily to the building envelope, which is less critical in logistics than in offices. Rather, it involves replacing or integrating new equipment. “ Optimizing the energy performance of older sites will require replacing systems that are now outdated. I am thinking in particular of heating systems, lighting, and air conditioning ,” explains Michel Hédouin, project manager at Sinteo. These changes will have to be made while ensuring compliance with safety rules specific to logistics real estate, particularly those concerning fire risk prevention.

Finally, the last component of this energy optimization is the integration of renewable energy, especially rooftop photovoltaic panels. The 2019 Energy and Climate Act and the 2021 Climate and Resilience Act therefore require 30% photovoltaic coverage when constructing this type of building. This threshold was raised to 50% coverage (over three years and across the scope of a single operator) by the charter of mutual commitments on the economic and environmental performance of logistics real estate, signed in 2021 by the French government and Afilog.

While it is still difficult to measure the impact of the Tertiary Decree on logistics real estate practices, the industry fortunately did not wait for this text to commit to energy efficiency. As early as 2011, Afilog conducted the first survey on the energy performance of warehouses. “ It is clearly time for action. Industry professionals know that the target of a 50% reduction in consumption by 2040 will be difficult to achieve. Yet that should not be a reason to give up. In addition to energy efficiency, the issue of carbon footprint is also becoming a priority in the industry. Logistics companies want to respond to society’s expectations ,” says Benoît Dubois-Taine. Better still, energy performance is also an economic concern and a component of the value of logistics real estate assets. First, because rising prices in the energy market now make it essential to consume only what is needed. But also because meeting the Tertiary Decree’s targets could become a factor in warehouse valuation and a contractual issue tomorrow.

“ An owner who fails to meet their obligation could give the buyer or tenant leverage in negotiations, or even make the asset less attractive to an investor. For economic as well as environmental reasons, the Tertiary Decree is helping to reshape market standards in logistics real estate. It is therefore better to be a good performer today by ensuring the gradual compliance upgrade of buildings, rather than having to work urgently as the ten-year deadlines approach ” The landlord-tenant relationship will be the operational arena for this new reality. Attentive, diligent, but still seeking guidance and clarification, the logistics real estate industry is on the front line of the energy transition.