As a commercial property owner, it’s your goal to get a return on your investment. You’re likely doing everything possible: keeping units filled, marketing the building, running operations smoothly, and more. At times, it might seem like you’re maxing out your earning potential, but there’s another value-add strategy you likely haven’t considered—community solar.
With community solar, property owners can increase their net operating income, retain tenants in the building, and benefit the environment and surrounding residents in the process. The best part? It’s easier than you’d think.
What is Community Solar?
At its core, community solar is a renewable energy program that brings the benefits of solar to local residents that can’t access the resource. Many people, like renters, commercial property tenants or those in more industrialized areas, want solar’s cost savings and sustainability but don’t have the means to install their own solar system.
Instead, they subscribe to a community solar program and agree to purchase the energy produced by an offsite location. Typically a large field or C&I rooftop, these systems operate at maximum efficiency and produce more than they need to keep their lights on.
So, they serve their excess solar energy to the community solar customers. It’s a winning deal for everyone: the owner of the solar system maximizes their output and the community gets discounted, sustainable energy.
With their large open roof spaces and infrastructure, commercial properties seem perfect to provide for community solar programs, but many don’t take advantage of the opportunity. This is mainly due to solar system financing typically offering little benefit to the owner, as they bear all the risks and reap little reward. However, with the right solar partner, property owners can participate in a community solar program—and increase their rent roll and property value in the process.
Here’s how:
1. Lease Roof Space to a Commercial Solar Provider
To maximize the benefits of solar, commercial property owners can work with a solar partner to bring a system onsite. Instead of a traditional solar purchase where the owner handles all costs, this agreement has the solar partner paying all installation, maintenance, and operations fees. They create a solar program on the commercial roof with no hassle or added work to the owner.
Essentially, the solar partner becomes a new tenant, who rents your roof space and takes on all of the work and cost of installing and managing the solar program.
The solar partner pays steady, monthly rent for the occupied roof space. The amount increases yearly according to a pre-established rate and varies based on the square footage of the system.
This agreement is the same as any standard tenant lease and doesn’t require any complex agreement—plus it’s guaranteed for 25 years. Over that time, they’ll generate clean energy and provide power to tenants for a discounted rate.
2. Enroll in a Community Solar Program
With a partner, you’ll also have the option to support a community solar program and expand the system’s reach. Because you’ll have more people drawing solar energy than just your tenants, your solar provider will need to build a much larger system, taking up more roof space.
This larger solar program results in more solar panels, more square footage, and a higher amount of rent for the property owner. With the system providing extra kWh of sustainable energy to more tenants and community members, your roof space becomes much more valuable.
To get you enrolled in the program, your solar partner will handle all the details of listing your commercial property as a participant so you can maximize your potential rent revenue. They’ll simplify the process, using the streamlined application and approval processes for solar offered by a dozen states.
3. Recalculate NOI and Property Value
Because of the long-term rent increases from community solar, the solar system positively impacts the building’s net operating income. Better yet, it also boosts its overall value. It’s as if you’ve added a lease with a new 25-year tenant on an unused portion of the property—no additional maintenance or hassle required.
Because property valuation is based on rent roll divided into the cap rate, you’ll have more income on paper and a larger value overall. Simply add the new monthly amount of your solar rent, boosted by community solar demand, to your total gross revenue for the building.
This not only increases the property’s value on the books; it also increases its actual resale value on the market. The additional rental income, combined with the physical solar system on the property, makes the building much more desirable for prospective buyers. But don’t worry, because you’re working with a solar partner, there’s no additional property taxes on your end.
4. Retain Tenants with Solar Energy
Outside of NOI, community solar also benefits the local property by offering secondary benefits to tenants. They’ll enjoy energy savings and the benefits of sustainability, increasing renewal rates and improving tenant satisfaction in the process.
As renters in your building, tenants can opt into the community solar program and get priority access to the discounted energy produced on the roof. Your solar partner distributes the energy fairly amongst everyone in the multi-tenant building, providing kWh according to need.
With this discounted solar energy, tenants will see lower monthly energy bills and reduced overhead, giving them more flexibility and purchasing power for their business. They can reinvest this money, save for a slow month, or simply keep the lights on longer. And, if they’re ever looking to move, they’ll have to factor in the increasing cost of energy into their decision.
Plus, they’re using a sustainable resource to power their building, which offers marketing opportunities and intrinsic benefits. Solar has a widespread appeal and many are calling for greater adoption. Because your tenants’ energy options will align with their values and their customer’s beliefs, you’ll see greater satisfaction levels overall.
5. Benefit the Environment
While not immediately impacting your bottom line, solar can also boost your brand image in the surrounding community with its environmental impact. While not directly affecting your rent roll, these secondary incentives increase visibility and sentiment with surrounding residents.
Many property owners choose to market the fact that their building is generating renewable energy, and this can resonate with tenants, consumers and investors.
This additional power source also creates more stability and reduces blackouts by taking stress on the power grid. It positively impacts the local community, increasing your standing in the community as a result.
Turn Your Roof Into Revenue
By supporting a community solar program, you can maximize the earning potential of your commercial building by serving more members in your community. Through partner agreements, larger systems, and tenant energy discounts, buildings can unlock extra rent roll value and increased net operating income. The key is finding the right solar partner, along with plenty of unused roof real estate.
Serving multi-tenant properties across the United States, King Energy installs, operates, and manages commercial solar systems for commercial property owners – increasing property revenue and saving tenants money on power bills. We handle the system end-to-end, owning everything from permitting and cleaning to enrollment in community solar programs. We look forward to partnering with you to make the solar process simple, hassle-free, and financially beneficial for all.
Contact us for a personalized rent estimate for your property!