CRE Struggles To Keep Pace As EV Industry Surges Toward $100B

With the proliferation of electric vehicles, the days of Americans making trips to the gas station to fuel their vehicles are fading, ushering in a new era in which workplaces, stores and restaurants serve as the main provider of power, creating a new challenge and an opportunity for property owners.

What may seem like the simple addition of a few charging stations is actually a complex puzzle, weighing capital investment and incentives against potential profit and infrastructure needs against desired charging speeds. 

Some properties will need significant upgrading to make them suitable, and there isn't a standard model of who will pay for what when it comes to the tech. All the same, CRE is now partnering with EV specialists to make it happen.

“Fast and ultrafast chargers will see significant growth in the retail and fleet sectors,” said Ethan Sprague, senior vice president of sales, marketing and policy at FreeWire Technologies, an EV charging installer. “The retail sector includes public gas and convenience stores, big-box retailers and rest stops — anywhere you would typically spend five to 30 minutes.”

The electric vehicle supply equipment market will expand from a $6B to $7B to a $100B industry by 2040, enjoying a 15% compounded annual growth rate in the meantime, according to PwC projections. The growth will support the estimated 27 million EVs that will be on the road by 2030.

Property owners of all stripes see EV charging as a way to add revenue, either by attracting tenants using charging as an amenity or by charging for power. But getting a piece of the pie won’t be easy or cheap.

More common, slower chargers, known as L2's, range from $2,500 to $4,900 each, while faster L1 chargers range from $20K to $150K, depending on such factors as speed and output power required. Other expenses can include upgrades to electrical transformers, cables and other equipment.

Hotels, office properties, airports and areas where drivers would spend hours or days parked will require less fast-charging and rely on slower chargers, said Sprague, whose company specializes in direct-current fast chargers.

Most EV stations are privately owned, according to the U.S. Energy Department's Alternative Fuels Data Center. Out of roughly 61,850 U.S. charging stations, only 1,285 are owned by governments at various levels. 

That leaves private industry making up the difference.

Most charging in the United States is now done in a private garage or at the workplace, the Rocky Mountain Institute reports. Those charging stations are the slower variety, which tend to be sufficient for drivers with access to private parking, but not enough to support a full transition to EVs.

The institute estimates that EV sales' share by 2032, assuming the Inflation Reduction Act credits remain in place, will be 76% for private cars, 84% for medium- and heavy-duty trucks, and nearly 100% for commercial fleets.

The transition will require a rapid uptick in publicly available fast-charging L1 infrastructure, especially in property types not well serviced yet by charging stations, such as truck-using industrial facilities, retail and hotel properties.

Much of the funding for charging infrastructure will come from the federal government, assuming there is no radical policy shift in the coming years, as well as state and local incentives, and even utility rebates. The passage of the Inflation Reduction Act in 2022 provided incentives for the electrification of passenger and commercial vehicles, domestic battery production and charging-infrastructure development.

State governments are also supporting the transition. The Ohio Department of Transportation recently awarded $13.8M in funding to develop 20 fast-charging EV stations, with 14 of the locations owned by EVgo eXtend partner Pilot Co.

Ohio is one of the first states to announce awards from the National Electric Vehicle Infrastructure Program, which was established by the infrastructure bill and includes over $5B in funding to build EV charging infrastructure. Over the next five years, DriveOhio will release over $100M in federal funds to further support EV charging infrastructure.

“Fast-charging deployments are poised to scale at unprecedented rates thanks to the public-private partnerships,” EVgo CEO Cathy Zoi said.

Landlords are partnering with third-party companies to operate chargers and typically charge users, a part of which goes to the landlords. But that model isn't universal, Edmunds reports. Some businesses provide EV chargers as a benefit to workers, though most do not. Museums, hotels, high-end supermarkets and even public libraries sometimes provide EV charging without charge, though sometimes parking does involve a fee.

In theory, EV charging stations could pay for themselves. When used between 15% and 30% of the time, most stations turn a profit. In an RMI model of a network of charging stations in greater Los Angeles, the institute projects that average utilization at a functioning network of stations will be higher than that range, perhaps as much as 36%, which would spread the fixed costs over more revenue.

A network that provides 90% electrification to LA's transportation network companies, for example, could earn $53M to $116M in gross revenue each year, RMI notes, though it is careful to say that obstacles to the development of such a network include lack of initial demand and high site acquisition costs.

A significant frontier for EV charging stations is industrial properties, either at warehouses and logistics facilities, or as standalone places that charge the growing fleets of electric trucks.

Industrial properties face the same challenges installing EVs as more consumer-facing ones, TeraWatt Infrastructure CEO Neha Palmer said. TeraWatt's stations in 18 states power truck fleets with full-spectrum EV charging stations, and it is currently opening new stations along I-10 west from California.

The first thing is to have a location that's suitable for charging, Palmer said.

“The second piece of the puzzle is power,” she said. “People often aren't aware of the challenges associated with getting large amounts of power to a site. We've worked really hard with the local utilities to bring that power, and it's a time-consuming process in which most fleet operators have no background. They've been buying diesel for many years, but they don't understand the power grid.”

Developing EV charging stations, at least at the industrial scale TeraWatt does, can take anywhere from 12 to 36 months, sometimes even as long as 48 months, Palmer said.

“The long lead times are driven by a couple of things,” Palmer said. “Usually the utility will have some amount of power but not as much power as we need for a site, so that can take a couple of years in some cases. We're also seeing a supply crunch on the electrical supply chain — equipment that we need tends to have long lead times.”

Depending on what the client wants, Palmer said TeraWatt will develop and operate the charging stations for an ongoing fee, or develop them essentially as a build-to-suit that the client will operate. Both models will be more common in the future, she said.

In June, the state of Michigan partnered with Daimler Trucks North America, or DTNA, to build a “Mobility Charging Hub” to support the charging of electric commercial vehicles. The hub will be developed at an existing DTNA facility on I-96 in Redford, Michigan, a location that sees over 10,000 heavy- and medium-duty commercial vehicles per day.

In 2021, DTNA opened the first publicly accessible charging station designed for medium- and heavy-duty commercial vehicles in Portland, Oregon.

Greenlane, a joint venture that DTNA founded in partnership with NextEra Energy and BlackRock Renewables, plans to build its first charging corridor in California, and is also focused on Texas and East Coast freight corridors, a DTNA spokesman told Bisnow by email.

“Ultimately, the JV aims to create a national Greenlane charging network requiring hundreds of Greenlane locations, which will be located along major freight routes with quick, easy access from highway exits and with access to local amenities,” the spokesman wrote. “We feel it’s critical to have dual-purpose charging stations that meet the needs of the zero-emission commercial vehicle fleet.”

Though her company doesn't provide EV charging stations for trucks at its industrial properties yet, Hiffman National Director of Property Management Operations Sarah Canella said that there is a lot of conversation about the infrastructure necessary to do so.

“There are a lot of items that still need to be ironed out,” Canella said.

“At industrial buildings, there are charging stations for tenants' personal cars, but charging a heavy-duty truck is different, requiring a lot of upgrades to the power grids," Canella said. "Still, it's something that we can't ignore. We have to be thinking about [it] as part of our ESG offerings that we're building out for our clients and our tenants.”

Other property types will also see EV charging station growth, experts say.

“We partner with grocers, shopping centers and restaurants in addition to gas stations and convenience stores to build stations,” EVgo Senior Vice President of Market Development, Public Policy and External Affairs Sara Rafalson said.

EVgo currently has stations at Sheetz, Wawa, Cumberland Farms and Chevron locations, and over the next few years, the company will deploy 2,000 charging stalls at Pilot and Flying J locations nationwide in collaboration with Pilot Co. and General Motors, Rafalson said.

“Public-private partnerships are essential to build a nationwide charging network,” Rafalson said. “We leverage public funding, including utility charging incentive programs, state grant programs and the National Electric Vehicle Infrastructure program.”

Last year, Swtch Energy raised $13M to expand its portfolio of EV chargers in North American apartment and condo buildings. The company manages about 7,000 ports in 1,000 EV charging stations in the United States and Canada.

Swtch Energy CEO Carter Li said that he was inspired to start the company back in 2016 because of his own personal challenge owning an EV while living in an apartment complex unequipped to support them.

“Back then, property managers said, 'This is too complicated, this isn't worth our time.' I'm glad to say things have changed since then,” Li said. “The chargers we've installed are primarily in multitenant buildings, because it's less of an optional amenity now, versus something that drives tenant retention.”

Building code requirements are also coming around to requiring EV stations in new multifamily developments. In 2020, for example, the city of Chicago mandated that residential developments with more than 30 parking spaces have at least 20% of those spots supplied with EV charging equipment.

Retrofitting existing apartments with EV charging stations has its challenges, Li said, such as the fact that older buildings weren't designed with the electrical infrastructure to support many charging stations. Still, there are ways to work around that, such as through a system of booking charging times, since even relatively slow chargers only need a fraction of the time that cars tend to be parked at an apartment building.

“Charging stations for 100% of spots is unlikely for existing electrical infrastructure at most properties, but you can probably stretch it to about 20% to 30% of the parking stalls," Li said. "That will probably last you for the next five to 10 years as adoption slowly increases."