Commercial real estate owners are no stranger to meeting current and prospective tenants’ increased demands. During the last few years, those demands have revolved around reliable in-building wireless connectivity. There’s no question that’s a demand that will remain for years to come, but there’s another demand that’s gained momentum recently, particularly for office CRE and apartment landlords—charging stations for electric vehicles.
Based on recent EV sales, there’s a good chance that the demand for charging stations will only grow. EV adoption is expected to increase at approximately 25% annually during the next five years, according to a recent RCLCO report.
“The robust growth in EV sales necessitates the real estate owners install significant volumes of EV charging stations across all land uses and geographies,” the report said. “Specific trends underlying growth in EV charging, including the mass adoption of EVs, the diversification of EV drivers and supportive regulations and incentives indicate that the relative distribution of charging stations among land uses will likely change as well. Multi-family, office, retail and hospitality locations will see significantly more demand, while every land use will experience order-of-magnitude in overall charging station supply requirements.”
Putting EV chargers in place could benefit CRE owners as well as their tenants, according to RCLCO. The organization notes that early adopters could enjoy new revenue streams while those who are late to the party might see, “reductions in asset positioning.” Additionally, CRE owners who don’t deploy EV chargers during the construction stage might pay more for installation after the fact. Meanwhile, in markets where the EV surge has really taken off has seen properties that don’t offer charging stations risk losing tenants and positioning.
“Within these affluent markets, and across several others, there remains a strong opportunity to utilize charging stations as a means to achieve premium positioning and differentiate an asset in a crowded field,” the report said. “In all instances, real estate owners and developers who install EV charging stations early will benefit from capital cost reductions due to myriad government and utility incentives.”
While there are incentives for CRE office space owners and apartment landlords to deploy EV charging stations, there’s the question if they’re able to. Keep reading to see what will play into landlords’ decision making when it comes to putting EV chargers on their property.
What are electric vehicle chargers?
An EV charger is a piece of equipment that supplies electrical power to charge plug-in electric vehicles. The charger pulls and electrical current and brings power, or electricity, to EV, similar to any appliance that gets energy when it’s plugged into a wall.
Are EV chargers worth the investment?
EV chargers offer benefits to CRE owners and tenants alike, but there is a question if the benefits outweigh the initial investment or not.
“Landlords are providing charging stations for tenants as an amenity,” Mark Dunec, managing director in the real estate solutions practice at FTI Consulting, told GlobeSt.com in August. “As a minimum, I think there will be charging stations produced through all of the various property types. We will see it everywhere, including residential homes.”
The Biden administration’s energy plans could potentially lead to more EV charger adoption. The plan would require every car manufacturer to produce 50% electric vehicles, which is expected to create more jobs.
“It is not just coming; it is already here. It is here to stay,” Dunec said.
Dunec noted he was skeptical of the plan’s call for installing new charging stations across the U.S. The concern is EV’s charging technology is constantly changing. That means EV charging stations could eventually become obsolete.
“Right now, vehicle charging stations are necessary, but with the rapid advancement in technology, we are going to move away from charging stations,” says Dunec. “There are some startup companies today that are developing five-minute battery charges. As technology continues to progress, the batteries in the vehicles will be much smaller. I think that an individual will be able to change their own battery without a mechanic.”
Dunec noted he disagreed with the Biden administration’s plan for widespread installation of EV charging stations but thinks it’s still worthwhile for landlords to make the investment. That’s because until there’s a solution that actually obsoletes the EV station, chargers will be needed. Eventually smaller batteries will become more readily available, but in the meantime, charging stations remain EV drivers’ go-to power source.
While Dunec doesn’t think Biden’s plan should call for the widespread installation of EV charging stations, he does think that landlords need to make the investment today. “Until the actual product is there and you don’t need a charging station, they are necessary. Once smaller batteries are available for the masses, charging stations will become obsolete,” he says. “Until then, charging stations are necessary.”
Meanwhile, Gravity, an EV taxi service and charging infrastructure startup, has shown full confidence in the market. The company announced in September it would partner with landlord Related to open Manhattan’s first indoor fast-charging EV hub at the latter’s Manhattan Plaza, The Real Deal reports. The site will have 29 charging ports and its own dedicated entrance, allowing EV drivers to recharge their cars in minutes. The site is expected to support approximately 600 EV’s a day.
The Related deal is the first of several partnerships Gravity plans to form with NYC landlords that want to bring charging service to EV drivers, according to Gravity CEO Moshe Cohen.
“We’re interested in every single capable property, and very actively engaged in exploring their potential,” Cohen said in an interview.
Gravity’s site selection comes down to space and power supply. Manhattan’s commercial garages are typically short on the former, while every fast-charging port needs approximately 100 amps of power that have be drawn from under used sources, according to Cohen. Meanwhile, landlords like Related are recognizing the difference between a city-based EV charging location and a “destination” charging station outside of the city.
“(Landlords) are thinking nationally — their whole portfolios — and what happens from a real estate perspective as there’s a move to EVs,” Cohen said. “It’s very synergistic and natural. And frankly, the more sophisticated landlords are gravitating to solutions like ours.”
What’s the case against EV chargers for landlords?
Benefits aside, there are expenses and risks CRE owners and landlords have to think about before they install EV chargers on their properties. For example, EV’s have to be charged on a special dedicated circuit, according to Mashvisor. New EV owners receive what’s known as a “Mobile Charger”, which is external to the vehicle and plugs into an outlet. These chargers work on 115 V circuits, but every circuit is meant for EV use.
What does this mean for CRE owners? Well, if car manufacturers require their EVs to be charged on a dedicated circuit, particularly one that goes straight from a panel to an outlet, there’s a chance a property’s shared circuit could trip the breakers, leading to a dangerous situation. Outside circuits also have to be ground fault protected by code. If a landlord permits a tenant to charge their vehicle on improper circuit, they open themselves up to liability risks.
Here are a few other reasons landlords might be hesitant to add EV chargers to their property:
• Additional costs—an EV charger that operates on 240 V circuits, also known as a Level 2 charger, costs on average $6,000 to install. Landlords might also have to pay extra to upgrade the panel so it can accommodate the higher-level circuit. Adding a simple outlet to a parking lot could cost more than $10,000.
• Extra work—CRE owners, property managers and landlords could wind up being the “EV charger” police to ensure that electric vehicle owners don’t remain in a charging parking spot once they’ve finished powering up their car. They might also have to resolve disputes when a tenant who drives a conventional vehicle park in an EV-dedicated spot.
• Fire risks—some EV’s have had past issues where they’ve caught fire and burned up, sometimes inside residence garages. While fire risks could happen with any type of vehicle, but a charging EV could increase that risk
• Higher electric bills—EV’s are more eco-friendly and energy-efficient than traditional vehicles from a fuel standpoint, but they aren’t inexpensive to “fuel”. According to the U.S. Environmental Protection Agency’s (EPA) fuel economy site, Tesla and Ford have EV models that cost $750 per year to charge.
“Unless your tenant is paying for the electricity, a wise rental property owner would steer clear of offering a charging location for an EV,” Mashvisor’s John Goreham wrote.
What’s the future for EV chargers and CRE?
Landlords will have to decide if installing EV chargers is the right fit for their property, but if electric vehicle sales continue to rise, it might be worth it to do so to meet a tenant demand that might one day rival the one for wireless connectivity.
“As EVs proliferate, so too will the volume of charging stations, necessitating a strong response from real estate owners whose portfolios will be expected to install and make available vital charging infrastructure, RCLCO said in its report. “Real estate owners and operators, therefore, need to pay close attention to the ways in which EV growth and adoption are impacting real estate asset management and driving changes in tenant demands and preferences. A property’s success and performance will rely at least in part on its anticipation of, and proactive response to, these shifting trends in EV adoption.”
