Commercial real estate owners are awash in opportunities when it comes to their energy needs. On top of traditional utility providers, renewable solutions such as on-site solar, battery storage and microgrids have flourished in the last decade. It couldn’t come at a more opportune time, as nationwide energy rates are up about 5% year-over-year, and some coastal metros have seen rates increase of up to 11%. Power outages are rising, too.
“This is arguably one of the most dislocated energy markets there’s ever been, which means there is incredible opportunities for property owners,” says Tim Popp, SVP of Strategy and Operations at Coast Energy.
Renewable systems can be deployed quickly to reduce grid dependence, lock in revenue or savings and enhance energy reliability. An added bonus: they can also lower operating expenses and provide a strong value proposition for tenants.
Immediate Financial Benefits
For property owners, solar, storage or microgrid systems can boost net operating income almost immediately, Popp says. Previously underutilized rooftops or parking areas can be monetized for generation or storage revenue, while lower utility bills directly improved costs. “When you look at that on a cap-rate basis for the value of the property, it increases the property value considerably,” Popp explains.
Long-term power purchase agreements spanning 10, 15 or even 25 years, provide predictability and lock in revenue or savings. “It gives a lot of certainty and serves as a great defense against utility variability and utility rate increases,” Popp notes.
Reliability Takes Center Stage
As the grid becomes more strained, Popp points out that reliability can be equal or greater in value than savings. Cold storage sites, grocery stores, manufacturers, and healthcare facilities all rely on uninterrupted power. "Having power that’s consistent and available can maintain operations during what would otherwise be a very costly event," Popp says.
The risk is only growing. A study from Texas A&M University shows that power outages have increased in severity 20% annually since 2019. As grid instability rises, the ability to generate and store power on-site has become a key differentiator for properties that can’t afford downtime.
Meeting Tenant and Investor Demand
Renewables also help owners align with tenant and investor expectations around carbon reduction and operational efficiency. According to a recent survey, 43% of commercial real estate tenants say that building features, including energy and operational efficiency, influence their site selection.
“That’s a benefit that property owners can leverage," Popp says. Having on-site power generation gives tenants confidence in energy availability. What’s more, “It can attract and retain tenants if there's a decarbonization goal,” he adds.
Because on-site renewable systems can be installed relatively quickly, owners can respond in real-time to new sustainability mandates or investor pressures.
From optional to essential
By generating additional revenue, lowering operational expenses, boosting reliability, and meeting rising tenant expectations, renewable energy is quickly becoming a core operational strategy.
For more insights and thought leadership from Coast Energy, click here.
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