With significant tailwinds from the current U.S. administration and major OEM commitments to electrification, a near-complete transition to electric vehicles (EVs) seems inevitable. However, the $5 billion for EV charging earmarked in the Bipartisan Infrastructure Bill is a drop in the bucket compared to the estimated $87 billion of charging infrastructure investment needed to achieve 100 percent EV sales by 2035 – and that estimate is just for passenger EVs!
The private sector, and within it – the real estate industry, will be called upon to fill in the gaps. While it may seem like a daunting investment, providing EV charging will soon be essential for maintaining a competitive edge whether you’re in the business of retail, residential properties or commercial offices, and can even provide additional revenue streams down the line. But the biggest opportunity is the coming wave of commercial EV fleets. There will be a race to develop properties into charging hubs for medium to heavy duty electric trucks as demand will grow more quickly on the vehicle side than real estate can supply.
Public EV Charging Stations Drive Additional Revenue for Property Owners
Currently, property owners are providing EV charging stations for tenants and customers as an amenity, offering just a handful of charging ports in parking lots for hundreds of vehicles. Given the current administration’s aggressive EV targets, the number of charging stations will need to increase dramatically. Charging will no longer be a “nice-to-have” but a necessity to maintain the business. It takes just 5 to 10 minutes to fill up a gas tank but charging an EV takes significantly longer – anywhere from 30 minutes to several hours – and people will prefer to charge up where they can multitask and have a meal, get some shopping done, or access other services. Offering charging incentivizes EV drivers to visit locations where charging stations are available, which supports retail businesses and can help drive traffic to out-of-town shopping centers. Having EV charging stations already developed in commercial office parks will make the property more attractive to prospective renters as well.
In particular, studies show that retailers benefit from installing EV charging infrastructure whether they charge fees for station use, act as the owner-operator, or receive lease revenue when relying on a third party owner-operator. Retailers generate additional sales revenue from customers either coming to a store for the purpose of using the charging station or spending longer times in stores while waiting for their vehicles to charge. An analysis by the New York State Energy Research and Development Authority (NYSERDA) saw more than 100 percent increase in charging station profitability for nearly all types of charging sites when modeling additional revenue from retail sales. Charging stations can also bring in additional revenue by serving as a new advertising channel.
New Opportunities for Land Development EV Fleet Charging Hubs
As electric trucks cost less to operate over the lifetime of vehicles compared to ICE trucks, adoption of commercial medium- to heavy-duty electric fleets is expected to occur at a faster rate than we saw with passenger EVs, furthered along by corporate sustainability mandates. The problem is, companies don’t have anywhere to charge them yet. Charging commercial fleets will require much more land space and technical complexity than public passenger charging, and the locations must be strategically relevant to each fleet’s unique business needs as well. Herein lies the opportunity for real estate owners: to leverage their property assets to develop highly in-demand fleet charging hubs.
However, as mentioned, there’s a lot of technical and energy expertise involved, and most fleet operators or property owners lack these capabilities in-house. Consider that charging 50 Class 8 trucks in one place requires 25X the amount of grid energy to charge the same number of passenger EVs. The local electrical grid simply won’t be able to handle the energy demand and even if it can, the utilities fees will be astronomical. Fortunately, there’s been an emergence of specialist charging-infrastructure providers that work with property owners to build on-site charging infrastructure that integrates renewable energy generation, storage, and demand management software to maintain cost efficiencies and ensure operational resilience for fleet operators. Some providers even provide the capital and serve as developers, operators and owners of charging infrastructure – which for fleet operators, converts a one-time capex burden into an opex opportunity.
With this new business opportunity, imagine how the previously undesirable empty land in between states and metropolitan areas will suddenly explode in value for its potential to be developed into electric trucking stops for long haul freight. As fleets present a strong recurring revenue profile, heavy EV charging is materializing into an investment worthy asset class – and REITs (real estate investment trust) would be well served to take note.
At least seven REITs including Federal Realty Investment Trust, Washington Prime Group, and Fulcrum Property have partnered with Electrify America to provide passenger EV charging to hundreds of their locations. The electrification of commercial fleets promises to provide even greater returns given the projected demand, land use, and third-party funding that will be required to build out the appropriate infrastructure. The emergence of heavy duty charging infrastructure as an asset class offers a once-in-a-lifetime opportunity for investors to enter a multibillion-dollar market at the ground level.
REITs and Heavy EV Charging as an Investment Worthy Asset Class
No matter what the business model or location, EV charging is set to become one of the most common forms of PropTech throughout the built environment over the next few decades. If the United States gets anywhere close to the ambitions of politicians and business leaders, millions of EV charging stations will be coming to homes, parking garages, retail lots, industrial fleets and highway exits across the country. A change this monumental means every property owner should consider supporting EV charging stations.