by Brianna Crandall — January 16, 2015—Commercial property owners and managers can take their leasing to the next level—specifically, the rooftop—by capitalizing on rising demand for solar power arrays, writes Roy M. Palk, senior energy adviser for national law firm LeClairRyan, in the December issue of Real Estate Forum.
“Across the country, the rise of cheaper and more efficient solar technology is driving demand for commercial and other rooftop space among utilities,” writes the Richmond, Virginia-based attorney. “The trend is particularly pronounced in the 30 states with renewable portfolio standards (RPS) that require utilities to make use of green energy.”
In the column, “Turning Your Rooftop into Profitable GLA with Solar,” Palk notes that the U.S. solar market grew by 21 percent in the second quarter alone. For most commercial property owners, he contends, engaging in constructive partnerships with utilities makes the most sense.
“In these power-purchase agreements, the utility owns, maintains and installs the solar panels; it handles the engineering studies and permitting process; it insures and indemnifies the landlord; and, last but not least, it pays good money to lease the landlord’s otherwise-unproductive rooftop space,” Palk writes. “Why would a utility go to the trouble? By owning the panels, it can include the power produced by them in its rate base and receive a return on its investment, even as it meets RPS requirements.”
In Arizona, in fact, two power companies have floated plans to spend millions of dollars to install solar panels on viable rooftops across the state; their goal is to get access to this square footage before third-party competitors can beat them to it, Palk explains.
“For property owners, then, this raises the prospect of having multiple parties competing to lease your rooftop—a nice position to be in,” he writes.
Against this backdrop, Palk—who formerly served as president and CEO of East Kentucky Power Cooperative—encourages landlords to think differently about the square footage atop their buildings. As a result of the postwar real estate boom, American farmers gradually learned to think of their excess acreage as potentially lucrative development sites, he writes.
Along the same lines, today’s landlords would do well to think of their rooftops as potentially lucrative gross leasable area (GLA), Palk continues. Indeed, industrial real estate company Prologis and retailers such as Ikea, Costco and Staples are already among the leading adopters of solar. To explore this territory, start by engaging in a dialog with energy-industry and utility experts, he advises.
“If the right variables are in place,” Palk writes in the conclusion to the column, “you could take your leasing to the next level—the roof.”
