Trammell Crow's $600M Solar Deal Is The Latest In A Wave For Industrial Spaces
U.S. commercial real estate owners have historically been slow to pursue solar energy, but a new $600M deal is the latest sign priorities are shifting.
It is the latest acknowledgment from an industrial real estate holder that solar has become an attractive amenity for its buildings as tenants and investors alike demand a focus on sustainability.
The deal will create 300 megawatts of capacity and is Altus' largest to date. The Connecticut-based solar company merged with a CBRE-backed special-purpose acquisition company in December, allowing Altus to expand dramatically. Trammell Crow is also an independently operated subsidiary of CBRE.
Trammell Crow Chief Operating Officer Adam Weers told the Journal he thought of solar as a "client service," lowering the carbon footprint at properties to attract ESG-conscious businesses.
Once the solar panels are installed, Altus will sell the power to Trammell’s tenants at a rate discounted from the typical electrical grid price. Trammell Crow will also collect rent from Altus.
The discounted price of solar energy can provide certainty in a tenant’s costs at a time of rising energy prices, Tradepoint Atlantic Managing Director Kerry Doyle said at Bisnow’s Mid-Atlantic Industrial Summit in February.
Doyle said he could lock in 25-year power purchase agreements with tenants through a solar project, while the longest time frame an electrical company could commit to was three years.
That has driven Tradepoint, a 3,300-acre industrial park at the Port of Baltimore, to build out the infrastructure for solar arrays on the roofs of its spec industrial and build-to-suit spaces. It also encouraged tenant McCormick to invest in its own 10 MW solar array on its 1.8M SF Tradepoint facility, Doyle said.
“To provide that level of certainty to your customers through putting that solar array in, there’s all these other advantages and considerations to be thinking of, over and above how many cents per SF it increases your build cost,” Doyle said. “It’s not really a nice-to-have; it’s a must-have.”
Out of all U.S. commercial buildings with 10K SF of rooftop space, just over 4% have solar installations, according to data from energy consulting company Wood Mackenzie cited in the Journal. The company projects that percentage to grow to 11.1% by 2030.
Other industrial landlords have already acknowledged solar’s potential as energy-intensive e-commerce facilities have increasingly driven the need for electrical capacity.
Prologis, which the Solar Energy Industries Association ranks among the top 10 major brands and businesses with installed solar capacity in the United States, has committed to building out 400 MW of solar capacity on its roofs by 2025. The firm told Bisnow in January it was on track to complete its goal.
On Monday, Prologis U.S. West Region President Kim Snyder told Bisnow that Prologis’ solar campaign was a good way to hedge against future energy and sustainability needs.
“One of the things that we've been working on as a company is recognizing that continuous growth in electrical consumption and electrification,” Snyder said.
Other landlords are also pursuing solar. STAG Industrial, a REIT with roughly 100M SF of rentable space, is looking to double its installed solar capacity to 50 MW over the next several years, according to its inaugural sustainability report.
Price Booker, managing director of business development for logistics landlord Realterm, said European investors were still ahead of the United States on supporting sustainability initiatives, but the market is quickly coming around.
Booker said the immediate return on investment can be low when pursuing sustainability initiatives in industrial spaces, but green credentials will increasingly make a difference for a building's back-end liquidity.
“Every investor meeting that I’m in now, they ask about sustainability,” Booker said at last month's Bisnow event. “If you don’t have some talking points on that, you’re in real trouble.”