De-gasifying and electrifying the built environment is a critical step toward Net Zero. Electrification will help eliminate the dependency of commercial property on fossil fuels, enabling the built environment to transition from one of the biggest planet-warming polluters to an active contributor to a decarbonised world.
Between widespread concerns about environmental health and government incentives toward zero-carbon targets, electric vehicles (EVs) have also taken off, representing a consumer-driven step toward an electrified world. In the US, the EV market is projected to grow at a compound annual growth rate of over 25% by 2028. New EVs are expected to reach a record-breaking 20% worldwide in 2023, up from 16% in 2022.
Given the efficiency of electric technologies relative to fossil fuel-based alternatives, electrification can significantly reduce carbon emissions and environmental impact. But as electrification takes hold, commercial building owners face growing pains, such as the high cost of installing electrical infrastructure and soaring electricity consumption.
In this article, we’ll explore the challenges building owners face, the benefits of an electrified portfolio, and why operational efficiency is key to overall success in a Net Zero future.
EV charging infrastructure
The rise of electric vehicles presents a particular challenge (and opportunity) within commercial real estate. By the end of 2023, a 35% year-on-year increase of EV sales is expected globally, with the largest markets in China, Europe, and the US.
With EV sales steadily increasing and a growing demand for charging stations at commercial spaces like offices and shopping centres, commercial building owners must investigate ways to integrate EV charging into their properties. On-site commercial charging will need to become a standard building feature within the next decade to keep pace with consumer demand, but EV charging at scale usually requires an upgraded electrical distribution system and upgraded electrical grid infrastructure.
Remae Gasmier, Head of Sustainability Consulting at JLL, sees commercial real estate as a potential driver of the transition to EVs in Australia, which currently lags behind other markets in adoption. Less than 0.5% of all cars on Australian roads are EVs—a figure that would need to be close to 100% by 2050 to achieve Net Zero targets.
This slow uptake is partly due to “range anxiety,” the fear that existing charging station availability won’t meet consumer requirements. Indeed, research shows that millions of EV charging stations will need to be installed to support their expected growth.
While electrification is an essential step toward reduced fossil fuel consumption, the journey to an electrified portfolio comes with a range of challenges. Perhaps the biggest challenge for building owners is cost, as they face both capex and added operational expenses in locations where electricity is priced higher than gas. Owners must replace end-of-life equipment with electrified alternatives, invest in new amenities such as EV charging stations, and face the cost of higher electricity consumption.
While there are government incentives and emerging capital sources, such as clean energy equities and green bonds, each building requires a unique approach to ensure a healthy balance sheet. In a recent CIM webinar, GPT Group’s Head of Sustainability and Energy, Steve Ford, commented on GPT’s approach to cost-effective electrification:
“The best time to upgrade plant and equipment is at a lifecycle opportunity,” he said. “Otherwise you’re spending capital on stuff with a lot of life left in it. That’s why monitoring and management is so important to get maximum value out of the equipment lifecycle.”
Powering up: The benefits of electrification
According to data from Statista, EV charging revenue will grow to nearly $2bn USD by 2028. Commercial real estate owners and investors looking to increase the value of their property portfolios will be well served to invest in EV charging stations and other electrified amenities as a benefit to tenants.
Among the benefits of adding EV charging infrastructure are:
- Attracting tenants: McKinsey estimates there will be 48 million EVs on the road by 2030 in the United States alone. These drivers will look for office spaces where they can charge their vehicles, making commercial space with EV chargers a significant asset for building owners looking to attract premium tenants.
- Preventing stranded assets: According to PwC, 17% of all charging points will be at workplaces by 2030. Property owners who don’t add EV charging stations risk getting left behind as commercial tenants increasingly require EV charging and other electrified upgrades in their leases. Government mandates may also soon require EV-compatible upgrades.
- Increasing property value: EV charging stations, electric boilers, and other electrical upgrades are increasingly in demand with commercial tenants, who are attracted to modernised commercial properties with upgraded infrastructure. This translates directly into added property value, though the precise ROI should be calculated against the cost of any upgrades. On average, building owners report a 9% increase in value for ‘green’ assets, across both new construction and retrofit projects. As regulations increasingly work to incentivise energy efficiency, this value will only rise.
- Adding revenue streams: Retail properties in particular can monetise their parking to provide an additional revenue stream. They can also enjoy increased spending from EV drivers who spend time shopping while they wait for their vehicle to charge.
The transition toward EV support is already occurring among Australian commercial property owners. Lendlease is installing around 80 EV chargers across its portfolio, including at popular shopping centres across Australia. At a premium-grade office building in Perth, Centuria is going a step further by providing both a charging station and a complimentary EV for tenant use during business hours.
Why operational efficiency is key
"Gas is responsible for almost 30% of building energy consumption in Australia – so eliminating gas from our buildings would make a material difference in a short space of time." - Davina Rooney, CEO, Green Building Council Australia
The transition to electrification may be a necessary step on the road to Net Zero, but it also requires an inevitable consumption tradeoff for commercial property owners. In one recent example at a property monitored by PEAK, energy use spiked by ~4500% after EV charging stations were installed.
Minimising the cost of energy spikes will only become more important for commercial building owners as they transition to a fully electrified portfolio. As owners look to keep operational expenses under control, building analytics tools like CIM’s PEAK Platform will be a critical asset in their quest for operational efficiency.
- Optimise performance: PEAK’s insights offer an advanced approach to managing and optimising high-consumption equipment such as HVAC systems and electric boilers. PEAK monitors real-time energy usage to identify inefficiencies and suggest actionable insights for optimisation. Our analytics can also fine-tune operational parameters to ensure maximum efficiency. GPT’s Steve Ford cited a recent example in which both energy efficiency and tenant comfort were improved at a major shopping centre in Queensland simply by optimising HVAC performance. Tenant complaints declined and the asset is now better able to meet and exceed energy targets, all without expensive equipment replacement.
- Predictive maintenance: By analysing data trends, PEAK can proactively flag required maintenance, preventing costly downtime and extending equipment lifespan. This proactive approach is vital to ensuring that systems run efficiently and reliably.
- Data-driven decision-making: PEAK helps empower owners and property managers by providing detailed insights into energy consumption patterns, helping facilitate informed decisions about where and how to invest in energy-saving measures, optimise system setpoints, and plan for future upgrades.
- Sustainability: As regulations around energy consumption and building emissions grow stricter, PEAK helps ensure that buildings comply with current standards and prepare for future regulations. By providing a transparent overview of a building’s environmental impact, PEAK makes it easier to implement clear strategies for sustainability.
As building owners across the globe consider the best route to electrification, experts agree that the transition will be necessarily slow. The current power grid lacks the capacity to support fully electrified cities without widespread system upgrades. But plans for an electrified built environment are well underway, and building owners should plan now for an increasingly electrified future.
Ready to optimise your building operations? Unleash the power of the PEAK Platform to achieve best-in-class performance. Watch a demo here.