Solar for Commercial Real Estate
Commercial Real Estate is a game of percentages. Taking actions to maximize your cap rate not only brings in more money, but also increases the value of your property. However, most methods of increasing your cap rate include costly investments into your property to justify raising rents. What if I told you that there was not only one option, but two options for increasing your net operating income for free. Welcome to the world of solar for commercial real estate.
What companies are using solar to reduce their operating expenses?
Many companies, both large and small, are utilizing solar to gain an economic benefit. From strip malls looking to generate extra revenue not tied to occupancy, land owners finding the highest use for their property, or giants like Google and Amazon reducing costs and satisfying shareholders, solar has a use case for everyone.
By far the most attractive free solar option is a site lease. With this method, the solar developer pays for and owns the solar system on your property. They then sell the power to third parties, and share the profit they make with you. You can consider the solar system as a tenant on your roof. Additionally, many solar developers will replace or repair your roof for free if necessary. This can be a great way to avoid the costly purchase of a new roof, while making some additional money on top of that. Major states where site leases work are New York, Massachusetts, and Maryland. While site leases are not viable in every state, our next option works in many more states.
Power Purchase Agreement
A power purchase agreement is another great option for solar at no additional cost to you. It is similar to a site lease in that the solar developer owns and pays for the system. However, the electricity generated by the system must be purchased by the tenants of the building it is on top of. This electricity is provided at a discount, usually between 10-20% off, compared to the normal price of electricity. Depending on the state and set up, discounts on your electricity could even get as high as 30%. This option is best for businesses that own their buildings and would benefit from the reduced cost of electricity.
Which Solar for Commercial Real Estate Option is Best for my Business?
Still a little confused about which solar for commercial real estate option is best for you? A simple rule is that site leases are best for real estate firms while PPAs are best for owner-occupied real estate. This is not a hard and fast rule however, as real estate firms may pay an electric bill for common areas, which a PPA would help reduce. Interested but not sure where to start? Swing on by NRG Market and let the helpful folks over there assist you in figuring out which option is best for you! They have helped provide solar payments totaling in the eight figures to their real estate clients.