Institutional Real Estate, Inc.

NAREIM Dialogues Fall 2017

The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products

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Page 14 of 47

REPRINTED FROM NAREIM DIALOGUES FALL 2017 What solar cost trends can we identify? The Lawrence Berkeley National Laboratory has been tracking solar costs for several years and has documented an average 6–12 percent annual cost reduction. The most significant cost declines started in 2009, at first largely due to global solar panel prices and in more recent years due to other hardware and "soft" costs (e.g., permitting and installation). For solar arrays on non-residential buildings, prices fell 7–9 percent (depending on the system size) in the most recent year analyzed. Installed prices have a large degree of variation across projects, indicating an opaque market and ineffective buying processes. How can solar improve fundamental property performance? Energy cost savings alone can pay for the cost of solar projects on property rooftops, carports, and the surrounding land in as little as two years. Properties can leverage these attractive economics to improve property fundamentals through energy cost reduction, energy sales revenue, and rent-based revenue. Energy Cost Reduction A solar array located on the property site reduces the amount of electricity that the property owner needs to purchase from the grid. Depending on the amount of electricity needed and the size of the solar array, the property can completely eliminate its energy bill. Owners can either pass the cost savings along to tenants, capture the savings for themselves, or take a hybrid approach to capture some savings and pass the rest on, depending on the lease structure and owner/ tenant preference. General Growth Properties directly owns 31 megawatts of solar capacity as of year-end 2016 (#9 among U.S. companies), cutting energy consumption across its portfolio by 215 million kilowatt-hours since 2011, amounting to tens of millions of dollars saved. Diligent deal teams will take energy cost savings due to solar into account for property valuation. NAREIM DIALOGUES FALL 2017 13 ©

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