Whether a solar system adds value to a commercial property doesn't need to be debated. Value added is directly related to how a building is utilized and the amount of electricity consumed. In Massachusetts, the average electricity usage rate is $1.50 per square foot per year. Considering a building with 10,000 square feet - you would have an annual power bill of $15,000 per year.
In the Boston area and based on average commercial electical rates, approximately 55,000 kilowatts would be needed to power this building. A system this sized would cost $220,000 or $4/kilowatt.
How does this add value to the property?
Eventually there will be enough commercial buildings with solar systems on the market to have a clear sales comparison, however until this is available, there are a number of ways of looking at the answer to this question.
The easiest way to consider added value is to look at the increased income the building would provide when it is leased with a solar system vs. without a solar system. In a relatively strong market like greater Boston, in which there is a shortage of raw land for new construction, a required equity yield of 7% at year one for the investment is appropriate. So, taking the avoided annual electrical charge of $15,000, which an older non-solarized building would still be saddled with, and capitalizing this additional cash flow at 7% would result in added value to the property of approximately $215,000. This figure is very close to the value added by a cost approach, and will most likely be supported by the sales comparison approach in the next few years.
In addition to additional property value, commercial real estate owners can also take advantage of other incentives like tax advantages, favorable financing terms and free electricity. A system pays for itself quickly with very little money out of pocket! Another upside is that a commercial solar system is putting the roof to work. Previously "unusable" property space is generating moulah!
Contact us today - we would love to come and see your property and talk to you more about what the specific benefits are for your building!
Director of Marketing at Boston Solar