There’s a revolution going on and it’s happening quietly but rapidly. Automakers all over the world are responding to the seachange in public opinion on climate change and introducing electric vehicles and hybrid models to their ranges. Some of these manufacturers have even vocalized plans to do away with combustion engines altogether in the next decade.
Strangely, installation of electric vehicle (EV) charging stations is not keeping pace with uptake on EVs themselves and this presents challenges for manufacturers and consumers but also presents a big opportunity for the commercial real estate market.
What’s the EV Market Opportunity?
The International Energy Agency (IEA) stated that all the growth in global car sales came from electric vehicles in 2021 and despite supply chain challenges causing a serious headache for manufacturers, the EV market more than doubled between 2020 and 2021 to 6.6 million, representing 9% of the total global car market.
Source: IEA, Global sales and sales market share of electric cars, 2010-2021, IEA, Paris https://www.iea.org/data-and-statistics/charts/global-sales-and-sales-market-share-of-electric-cars-2010-2021
Of the 10 best-selling auto brands in Canada for 2021, all of these manufacturers now have a range of electric vehicles in their line-ups, including the beloved Ford F-Series which has been the best-selling vehicle in North America for decades. With millions of investments from these big-hitters of the car world and an estimated CAGR of 19% between 2022-2028, there’s little doubt in our minds that electric is the future.
The Canadian federal budget for 2022 also outlines some compelling measures to assist in making zero-emission vehicles (ZEV) more affordable for both individuals and businesses including the extension of the personal program Incentives for Zero Emission Vehicles, the creation of a new incentive program worth $547 million to enable businesses to upgrade their fleets plus funds to build a national network of EV charging stations. Furthermore, there are investment tax credits of up to 30% in the pipeline for investments into net-zero clean technologies, further details of which should materialize in the fall 2022 budget announcement.
All this traction is certainly very encouraging news for the climate, however we could be heading towards a bit of an impasse in terms of EV market growth. There is definitely consumer appetite to insulate themselves against epic gas prices and a willingness to ‘do their part’ for the environment, however, although EV sales are at an all-time high, the Canadian market still lags behind Europe, UK and China in sales.
The main thing preventing consumers from owning and operating an electric vehicle is misgivings about how much range they will offer and the ‘unknown’ around where and when charging facilities might be available. Over 65% of Canadians will be changing their vehicles over the next five years but this lack of robust EV charging infrastructure is a barrier to adoption that may see Canada lagging behind. This poses a huge opportunity for CRE building owners and investors who recognize the EV ‘trend’ is here to stay and do something about it rather than waiting for the market and then playing catch-up.
EV Charging Stations - Build it and They Will Come
All electric vehicles need charging stations and for longer-range vehicles, home charging stations will need back-up from a reliable network of chargers at all the places we might frequent. In this respect, EV chargers can differentiate every type of commercial asset from offices and malls to apartment blocks, hotels and distribution facilities.
2022 will be the year of hybrid work and the return of the commute is already a source of anxiety. For new and prospective EV users, convenience will be a big concern, not only in terms of how the commute will pan out but is there anywhere to charge an electric vehicle at or within walking distance of a place of work? Can you even get to work without adding time onto the journey for recharging and how long will it need to be on charge? Office landlords installing the necessary facilities on-site have a differentiator for attracting tenants and likewise, businesses can attract the growing number of employees wanting these stations on-site.
The argument for installation at hotels is perhaps even more persuasive; when given a choice between a hotel with and without EV charging station, drivers are almost certain to choose the one with, so that they may get up in the morning and continue onwards in their journey without having to stop somewhere else.
Shopping malls and grocery stores will need to offer the same convenience to visitors whereby you can shop or go to a restaurant, safe in the knowledge your vehicle will be charged and ready to complete the entire journey back home.
Commercial Real Estate…Charging Now
Installation of these facilities at any CRE asset is not going to be inexpensive, it is however going to be less so if developers can incorporate present and future needs up-front. Development costs can be considerably more for rapid chargers, five times as much potentially, however in a workplace setting particularly, rapid charging is not essential. Providing EV charging stations at the workplace where even in the new normal we’ll spend a couple of days per week, is an effective way to support the transition to zero-emission and gives property owners the upper-hand.
In a multi-unit residential building, there are many benefits to installing EV charging stations, not least;
Brand perception, positive PR and the uplift in tenant attraction and retention that comes with offering an eco-friendly ‘luxury’ amenity;
Uplift in revenue as tenants are prepared to pay a premium for EV charging facilities at home;
Incremental revenue that may be generated by the EV stations themselves - on-site advertising and revenue generated from overstaying or off-peak parking in EV parking spots can be a lucrative, additional income source for property owners;
EV charging stations may contribute towards achieving sustainable building certifications such as LEED and BOMA best.
Very soon, EV charging at commercial buildings and sites will be considered a necessity as opposed to a luxury and future-proofing a project can yield much bigger returns than retrofitting. Not only will it be imperative for attracting tenants and visitors, it will be increasingly necessary for meeting federal and provincial regulations around greenhouse gas emissions. More and more tenants will be making decisions on properties based upon social responsibility and building owners that embrace the EV market early, send a strong signal on their stance in creating a more sustainable world.
Developers must work with prospective tenants and utility providers early in the process to identify what energy requirements the project will have through its lifecycle and this means taking into account a complex range of market data and making some inferences around the rate at which electric vehicles are advancing and what might be needed to run EVs both now and in the future.
Reach out to PCG for more insight into this emerging CRE movement and how it might feature in your next project.