If you’re a commercial property owner, there’s money to be made on your roof, in your parking lot and on underutilized land.
Solar tenancy offers low-risk, alternative and long-term revenue growth.
A solar tenant is an installation of solar panels that produces clean energy for the grid. Property owners who host them are paid a monthly lease amount based on the value of the solar installation. The panels can be placed wherever there is available space, like rooftops, or secured onto solar canopy structures to shade parking lots and garages.
Solar tenancy provides a long-term strategy for diversifying and monetizing your existing real estate assets—both those that are at capacity and those that are underutilized.
And it’s easier to implement than ever.
Is solar tenancy for you? We’ll explain how solar tenancy works, outline the benefits and help you evaluate whether it’s the right move for your organization.
How solar tenancy works
Commercial property owners have multiple ways to improve ROI, but so much rides on tenant success. And predicting how national and local economics will impact rents, occupancy and vacancy is an ongoing challenge.
In contrast, “solar tenants,” such as rooftop or canopy systems, are predictable, low maintenance projects whose cash flows are not subject to the fluctuations of real estate dynamics—and the barriers to entry are low.
In solar tenancy, the commercial property owner is paid for the use of the square footage occupied by a solar system. The property owner doesn’t own the system or use the power generated by the system.
Financing is arranged by the solar provider when the commercial property owner agrees to do no harm to the system over the length of the lease term, and in return receives site lease payments. No payments or expenses are required of the host/property owner.
The most common solar tenancy agreement is 20 years in duration. Installation and maintenance is handled by the solar provider without disruption to your business or current tenant portfolio.
The time is right for solar tenants
The Solar Massachusetts Renewable Target (SMART) program includes special incentives (known as ‘adders’) for solar systems placed on rooftops and canopies—including parking lot carports. Not only does this make it easier for companies to take on solar tenants, it can help ensure that lease payments are level and predictable.
But there is one catch! SMART is designed to reward first movers—so the incentives decline as more solar projects are developed. Savvy property owners are working with solar providers to investigate or re-evaluate solar so that they can apply to SMART sooner, rather than later.
As with any disruptive technology—think hybrids and mobile phones—those that act early will reap the largest rewards.
Solar tenancy offers a wealth of benefits including:
Solar: Business as usual
Once viewed as experimental and expensive, solar power has entered the mainstream. Massachusetts’ long-term commitment to growing solar—and its sustainability benefits—provides a strong rationale for commercial property owners to take on solar tenants, including:
- Low-risk investment with steady, contracted income
- Financing arranged by the solar provider
- Installation, operation and maintenance covered by the solar provider
For more information on how third-party owned solar can impact commercial real estate, check out this article from Cresa.