The adoption of electric vehicles has grown tremendously over the past year and a half. The trend will accelerate as consumer demand, which is being fueled by higher gasoline prices, tax incentives, funding from the Inflation Reduction Act, and the increased desire for environmental sustainability, continues to rise. For commercial real estate, the boost in electric vehicle use will create immense opportunities, as EV charging stations become sought-after additions to properties ranging from multifamily dwellings to retail centers.
An exponentially growing market
America now has 1.6 million electric vehicles on the road, but the electric vehicle charger infrastructure has lagged. There are currently just over 50,000 public charging sites equipped with barely 125,000 ports, according to the U.S. Department of Energy.
America now has 1.6 million electric vehicles on the road, but the electric vehicle charger infrastructure has lagged.
The number of electric vehicles on U.S. roads is projected to reach 26.4 million by 2030, comprising nearly 10% of cars and light trucks, according to a June 2022 report from the Edison Electric Institute. Unit sales of electric vehicles nearly doubled to over 600,000 from 2020 to 2021 and are projected to soar to 5.6 million annually by 2030. Based on these forecasts, nearly 12.9 million charging ports would be needed—more than 100 times the current amount—to support the number of electric vehicles on U.S. roads, according to data from the same report.
Ramping up a public charging infrastructure will be critical over the next few years to support this growing segment.
How real estate can benefit
Using the gas-and-convenience store model, which has been around for decades, the retail real estate sector is ideally positioned to capitalize on EV charging station growth.
The gas-and-convenience store model focuses on upselling to customers arriving for a fill-up, but comes with significant limitations to the retailer, the biggest being the relatively short time it takes to refuel a car with gasoline, which doesn’t leave much time to shop. Also, the convenience of paying at the pump frequently keeps customers from walking into the store. In addition, the highly flammable nature of gasoline limits the ability to put a gas pump just anywhere.
Unlike gas pumps, EV charging stations require the vehicle to charge for a minimum of 15 to 20 minutes, leaving more time for the customer to take advantage of adjacent retail. This includes locations ranging from gas-and-convenience stores to shopping centers, restaurants and movie theaters. They can be installed virtually anywhere, giving retailers an opportunity to draw more foot traffic and increase time spent on site. In addition, the installation of EV charging stations can help attract more upscale customers; the income of an electric vehicle owner is more than twice the national average, according to data from the Fuels Institute. That individual is also more likely to support shopping centers and vendors that support environmental sustainability.
The limited number of charging stations appears to be holding back growth in electric vehicle sales, another reason real estate could help fill the void.
The limited number of charging stations appears to be holding back growth in electric vehicle sales, another reason real estate could help fill the void. According to J.D. Power research released in August, customer satisfaction with Public Level 2 charging stations fell to 633 on a 1,000-point scale from 643 a year earlier.
“This lack of progress points to the need for improvement as EVs gain wider consumer acceptance because the shortage of public charging availability is the number one reason vehicle shoppers reject EVs,” J.D. Power said in a press release announcing the study.
As electric vehicles are more widely adopted, other real estate spaces, including multifamily dwellings, commercial offices, industrial spaces and hotels will need to be equipped with charging ports to remain competitive.
Source: Edison Electric Institute, RSM US
In addition, as real estate firms look to align with their environmental, social and governance (ESG) objectives and reporting requirements, they will also want to accurately measure the environmental impact of implementing charging stations.
A jumpstart from incentives and legislation
One of the barriers to the development of a widespread charging infrastructure is the expense, which includes costs for equipment, ongoing operations and maintenance, as well as for the installation needed to get power to the charging station site from the electric grid. Much of these costs to date have been paid for by the customer or organization hosting the charging equipment. This has limited the adoption of new chargers due to the difficultly in justifying the cost, given that electric vehicles now only make up less than 1% of cars on the road. However, as this number grows rapidly, an electric vehicle infrastructure will be critical to support this growth.
The Alternative Fuel Vehicle Refueling Property Credit, which provides a credit for up to 30% of the cost of equipment and installation, helps to offset a considerable portion of the costs. As real estate companies look to modernize their existing properties or to develop new commercial spaces that include EV charging stations, they can take advantage of this tax incentive.
In addition, the Infrastructure Investment and Jobs Act, which includes $7.5 billion to build a network of chargers nationwide, will help provide a much-needed jumpstart to ramp up the public and commercial charging infrastructure.
The exponentially growing electric vehicle market will provide significant opportunities for commercial real estate, while helping to support the country’s transition to carbon neutrality. It will be critical for real estate companies to invest in infrastructure for this growing segment to remain competitive and maximize profits.