The Electric Vehicle (EV) bandwagon is gaining speed and momentum. Led by Tesla, EVs are seen as an eco-friendly alternative and as a status symbol. In 2020, the market share of EVs represented less than 2% of all vehicles in the US. In Colorado, that rate is 3.6% higher than all but four states. The market share of EVs is growing quickly and is expected to double in the next five years. Federal, State and local governments are all-in on EVs, due to the reduction in greenhouse gases created. As a result, EV charging stations are becoming more commonplace.
Charging Stations Gaining Popularity With Institutional CRE Companies
Many institutional CRE companies have embraced EV charging stations (“EVSE” or Electronic Vehicle Supply Equipment) at their properties. EVSE can attract and retain eco-conscious tenants and position the property as sustainable, cutting edge, and high-tech. Of the 3,600 EV charging stations in Colorado, however, only about 15% are at commercial properties.
Property managers should think of EVSE as a marketing opportunity to attract and retain tenants as well as a potential revenue source. As the market share of electric cars increases, EVSE will become more standard and expected in higher-end properties. Those who underestimate the impact of EV growth and delay offering EVSE may see their position slipping in the market.
Do Charging Stations Make Economic Sense for Mid-Market Properties?
But what about office properties that are positioned below the top tier? Those properties are often not usually owned by institutions with deep pockets. Does EVSE make sense for mid-market properties? First, we must look at the different types of charging stations.
There are three levels of EVSE: Level 1 is for residential use, Level 2 applies to most commercial applications, and Level 3 is for high-capacity commercial use.
For this conversation, we are only talking about Level 2 charging stations as they are the most common for commercial properties. A Level 2 EVSE requires 240V, single or 3-phase power and a 40–80amp dedicated circuit, per charging station. A Level 2 EVSE can fully charge a BEV (Battery Electric Vehicle), think Tesla, in 6-8 hours.
Electrical Upgrades a Large Determinant of Cost
The average cost to purchase and install a Level 2 EVSE is about $6,000. However, installation costs are highly variable with each property. The electrical system is the largest variable in installing EVSE. Almost all commercial retrofits will require at least some upgrades to the electrical power supply and distribution system, including new transformers, panels or even additional power supply to the property.
Most mid-market properties were built in the 1980s to early 2000s, when building electrical demands were much lower than they are today. As a result, the electrical upgrades required will be the determining factor for most mid-market properties when analyzing EVSE viability. Additional costs include changes to the parking lot striping, additional signage, and an additional data line.
Rebates, Incentives, and Funding Options
Fortunately, there are many rebates, incentives, and funding options available through City, State, and Federal sources that can significantly reduce installation costs and improve ROI. The State of Colorado, the Regional Air Quality Council (RAQC) and Colorado Energy Office (CEO) have teamed up to offer funding options for EVSE. The State of Colorado offers a $2,500 tax credit for an EV purchase. The Federal Government offers a tax credit of up to $7,500. There are many other incentives available for EVs and EVSE installations.
Adding Revenue and Value With EV Charging Stations
EVSE can add revenue to a property. The most typical ways to bill for EV charging are by time or by energy used. Properties can charge by the hour ($3.00 per hour for example), charge by the KWH with a built-in mark up, or a combination of both.
Obviously, the largest variable in revenue is usage. Is there a demand at the property? How many EV cars are in the parking lot on a daily basis? Having only one or two cars limits the revenue potential. Bear in mind that this number will increase with time. Will new EV stations add to the marketability of the property and most importantly, will adding EV stations increase the number of leases signed? Asking these important questions can help mid-market owners determine whether EVSEs are worth adding.
More EV Use and More Data Are Needed
At present, most mid-market properties will not have enough electric vehicles on-site to make the cost of installing EVSE a worthwhile investment. This will change as the EV market share increases. Mid-market properties that do install EVSE may have a distinct marketing advantage over properties that do not offer them. At some point, offering EV charging stations will elevate a property’s marketability, especially for mid-market properties with very few EVSE. However that time is probably in the distant future.
As more Class-A properties install EVSE it will be important to follow the future published data pertaining to their use (and ROI). At that point, mid-market owners can make more informed decisions regarding the potential viability of EVSE.
Mark W. Kennedy
is the President of Wheelhouse Commercial in Denver, Colorado. For more information about how Wheelhouse Commercial can help manage your properties, please call 303.518.7406 or email info@wheelhousecommercial.com.