You Found the Perfect Building. But Can You Power It?

By Walt Jordan, Chief Revenue Officer, dGEN Energy Partners

You found it.

The building is in the right location.

The price works.

The financing works.

The zoning works.

There’s room to grow. The highway access is good. The workforce is nearby. Maybe you’ve even negotiated the deal.

On paper, it looks perfect.

Then somebody asks a question that should have been asked much earlier:

Can this property actually support the amount of power your business needs?

That question can change everything.

I talked about this recently on the radio because I think energy is becoming a much bigger part of the commercial real estate conversation.

For certain businesses, finding the right building is no longer enough.

You also have to find the right power.

The Building Can Work….and the Infrastructure Still May Not

Think about a manufacturer moving into a larger facility.

Or a company adding automation.

A cold-storage operation.

A healthcare facility.

A laboratory.

A large warehouse.

An advanced manufacturing company.

A data-heavy business planning significant expansion.

The property itself may check every box. But what happens when the electrical demand of the operation is significantly greater than what is currently available at the site?

Maybe additional utility infrastructure is required.

Maybe an upgrade is possible, but the timeline doesn’t work.

Maybe the company expects its power requirements to grow considerably over the next five years.

Or maybe the business simply cannot tolerate the consequences of losing power.

Those aren’t small issues to discover after the real estate decision has already been made.

We Need to Start Asking About Energy Earlier

Commercial real estate conversations traditionally begin with things like:

Price.

Location.

Square footage.

Taxes.

Zoning.

Parking.

Transportation.

Financing.

Those are obviously still critical.

But I believe another category belongs on that list:

Energy infrastructure.

Before committing to a commercial property, I would want to understand:

What is the property’s existing electrical capacity?

What does the business actually require today?

What will it require if it expands?

Are major electrical upgrades necessary?

What is the anticipated timeline for those upgrades?

How important is uninterrupted power to the operation?

What have the property’s historical energy costs looked like?

What condition are the roof and major mechanical systems in?

Could solar, battery storage or on-site generation make sense?

And perhaps most importantly:

What happens if the grid cannot provide what the business needs on the timeline the business needs it?

That last question is becoming particularly important.

The Cheapest Building Isn’t Always the Cheapest Building

This is where commercial buyers and tenants need to look beyond acquisition price or rent.

Suppose Property A is cheaper than Property B.

At first glance, the decision seems easy.

But then you learn that Property A requires a significant electrical upgrade, has aging mechanical equipment, a roof approaching the end of its useful life and considerably higher expected energy costs.

Property B costs more initially but has infrastructure better suited to the operation.

Which property is actually less expensive?

That’s why I think commercial buyers should start considering energy alongside the other operating and capital expenses of a property.

The real cost of a building isn’t just what you pay to acquire it. It’s what you have to spend to operate it.

Reliability Has a Value Too

Cost is only part of this.

For some companies, an outage is inconvenient.

For others, it’s extraordinarily expensive.

If a manufacturing line goes down, what does an hour of lost production cost?

What happens to refrigerated inventory?

What happens in a medical or laboratory environment?

What happens to a business that depends on servers, automation or continuous operations?

Once you put a dollar amount on downtime, the energy conversation changes.

Reliability stops being an abstract issue.

It becomes a business decision.

Don’t Automatically Start With a Technology

This is important.

I wouldn’t walk into every property and immediately say it needs solar.

Or batteries.

Or an on-site generator.

That’s backwards.

Start with the business.

What does it need?

Where is it vulnerable?

What are its expected energy costs?

How much power will it need in the future?

What infrastructure is already available?

Then determine the solution.

Sometimes that might involve utility upgrades.

Sometimes solar.

Sometimes battery storage.

Sometimes distributed or on-site generation.

Sometimes roofing and efficiency improvements.

And sometimes it will be a combination.

The technology should follow the problem.

This Matters to Sellers and Developers Too

There’s another side of this conversation.

If I own or develop commercial property, I want to know how attractive that property will be to tomorrow’s businesses ….not only today’s.

A building with strong utility infrastructure, available capacity, resilient energy options and the ability to accommodate future demand may have an advantage when sophisticated tenants or buyers start comparing sites.

That means energy planning isn’t necessarily just an expense.

It can become part of how a property competes.

The same applies to industrial parks and communities trying to recruit employers.

If two locations offer similar land, labor, transportation and economics, but one can clearly explain how a company’s future power needs will be addressed, that’s a meaningful distinction.

Imagine Discovering It at the End

This is the scenario I keep coming back to.

You’ve spent months finding the property.

Your broker did the work.

The attorneys are involved.

The lender is ready.

The municipality approves the use.

You’ve negotiated the economics.

You’ve planned the move.

And then you discover that getting the power you need could become one of the biggest obstacles in the entire project.

That’s when energy stopped being a utility conversation.

It became a real estate conversation.

And increasingly, I believe it needs to happen at the beginning of the deal ….not the end.

Before you buy the building, lease the space or commit millions of dollars to a new location, understand what it will take to power the operation you’re putting inside it.

Because the perfect building isn’t really perfect if your business can’t operate the way you need it to.

Walt Jordan

Guest Writer for Patriot Real Properties

Chief Revenue Officer

dGEN Energy Partners

dGENEnergy.com

This article is intended for general informational purposes. Commercial property owners, buyers and tenants should consult appropriate real estate, engineering, utility, financial and energy professionals when evaluating a particular property.