The Biden administration has taken aggressive measures to address climate change, with agendas aimed at reducing global greenhouse gas emissions by 50% (from 2005's levels) by 2030 and reaching net-zero emissions in the U.S. by 2050.
The president's latest briefing, which was released on Aug. 5, 2021, announced the details and the plans backing the Build Back Better Agenda, including ensuring 50% of all vehicles sold in the U.S. are emissions-free by 2030. So, what do electric vehicles have to do with real estate? A lot more than you may think. Here's what real estate investors need to know.
The demand is coming, and investors can fill the gap
This initiative can only be successful if the country has the infrastructure to support it. And the infrastructure needs to be addressed in two ways. The first way is through production, ensuring car manufacturers have the proper supply chain and manufacturing space to produce enough electric vehicles. Second, there need to be enough electric vehicle stations to recharge vehicles at a national scale.
According to a 2020 study conducted by the National Renewable Energy Laboratory (NREL), there are only 105 charging stations per 100,000 people in the U.S., with the majority of the charging stations being located in just five states: Vermont, California, Washington, D.C., Hawaii, and Colorado.
In 2020, electric vehicle sales made up only 2% of all car sales in the U.S. That's a huge gap that will need to be filled over the next nine years. Even if the lofty goal of 50% of all cars being electric by 2030 isn't achieved, there will be major incentives that push consumers and producers toward this goal, creating a clear demand and opportunity for investors in this space.
Charging stations everywhere
This clear opportunity for investors is to install charging stations at their investment properties. For example, offices and retail centers can be perfect locations to install charging stations, allowing employees and customers to recharge their vehicles while working or shopping and businesses to promote shopping at one of the retail shops as their vehicle recharges.
Apartment complexes could also add charging stations to their allotted parking areas, potentially giving them a competitive advantage compared to other rental units in the area. Even fix-and-flip investors and landlords should consider adding an electric vehicle charging station at their properties -- it could be the selling feature that helps make your property stand out against others.
But the demand won't be limited to just the residential or commercial sectors, such as retail, office, or hotel, but will include the infrastructure and energy sectors as well. Transportation contributes 29% of all greenhouse gas emissions, the largest among all the sectors, according to the Environmental Protection Agency (EPA). The second-largest contributor is electricity.
To truly have these initiatives accomplish the goal of net-zero emissions, property owners will also have to consider ways to address energy sources, such as installing solar panels or utilizing carbon-neutral energy sources.
This means demand will also increase for industrial real estate, which helps supply the very necessary manufacturing, warehouse, and distribution space for providers to create things like vehicles, charging stations, solar panels, wind turbines, and other alternative energy sources.
Cost vs. reward
A Realtor.com study found that homes located near charging stations were valued higher than those that weren't. There is definitely value to having or offering charging stations at your property, but the value isn't always justified by the cost, at least not yet. Eventually, the demand will validate the cost, but right now, there still is a breaking point that investors must consider carefully.
While home charging stations are relatively affordable -- running anywhere from $863 to $3,123 on average, according to HomeAdvisor -- the cost can change considerably depending on the type of charger you install and your property's ability to support the installation. Older homes with outdated electrical components may need to be updated to support the charging station needs, which can be quite expensive, costing upwards of several thousand dollars.
Commercial real estate charging stations, on the other hand, can be quite expensive, costing anywhere from $20,000 to $50,000 for the stations alone and as much as $50,000 or more for installation and parts. Commercial charging stations, which charge vehicles at a much faster rate, are ideal for retail centers, gas stations, parking garages, or other public service areas because people aren't there for an extended period of time.
However, some commercial operators -- like offices, hotels, or even residential apartments -- may be able to use other noncommercial stations that charge at lower rates to help offset upfront cost to value.
Administration changes often outline new initiatives, some that stick and some that fade with the next administration. There's no saying whether this goal will be achieved, but there's definitely a clear direction for the future, and right now, the future is green.