Matt Schlindwein is taking his time adopting the technology, however. The managing partner of East Brunswick, N.J.-based industrial real-estate firm Greek Real Estate Partners said a fraction of the more than 300 warehouses he manages in the Northeast have solar panels on their roofs.
That’s largely because the highly-touted benefits of solar power run up against serious costs as the panels are brought in: The installations are expensive, he said, and there’s a risk that the heavy panels could damage the building.
“Number one for a tenant occupying a large-scale industrial warehouse building is a good floor, not a leaky roof,” Schlindwein said. For the past decade, “the amount of benefit that the landlord could have from doing solar was limited,” he said.
Schlindwein isn’t the only real-estate executive with concerns about the hot technology. Warehouse operators across the U.S. have been cautious about installing the panels on their roofs, even as companies have gotten attention for installations on shopping malls, self-storage buildings and distribution centers.
Commercial buildings in the U.S. installed 1,913 megawatts of solar power in 2023, up from 1,034 megawatts installed in 2014, according to trade group Solar Energy Industries Association and research firm Wood Mackenzie. That compared to 40,290 megawatts installed nationwide last year across all residential, commercial, community and utility projects.
Low electricity prices and high costs for the green technology have made it difficult for landlords to justify the investment, industry experts say. Structuring the deals can be complicated, with landlords reluctant to take on the cost of an installation when the financial payoff may come years after the average five-year tenant warehouse lease.
Schlindwein said deals involving solar installations have gotten more creative. He’s been setting up more solar-panel arrays over the past two years under agreements with solar-energy operators that lease the roof space directly from the landlord, for instance. Those companies set up and manage the panels and send the energy generated to local utility companies and customers.
That deal structure offsets some of the risk by creating a new source of revenue, Schlindwein said.
“It’s enough that it’s motivating to want to consider doing it,” he said. “You still have the same concerns that you used to have, but you’re getting enough of a benefit that you’re willing to overcome those concerns and make the jump and do it.”
For warehouse operators, solar installations offer a possible solution to a longstanding problem: how to make use of the sometimes-vast acreage on top of their buildings. In addition to solar panels, some developers have added parking to roofs or designed skylights to bring in natural light and cut electricity costs.
Prologis, the world’s largest industrial real-estate operator, has installed more than 500 megawatts of solar power across its portfolio as it works toward a goal of generating a gigawatt of solar power worldwide by 2025. But the solar installations still represent just 5% of the company’s buildings worldwide, said Vibhu Kaushik, global head of utilities and energy storage at Prologis.
“We have a lot of room to go,” Kaushik said.
Kaushik said the warehouse’s location determines whether the math works.
In Illinois, for example, electricity cost about 11 cents per kilowatt hour for commercial customers as of March, according to the U.S. Energy Information Administration. Kaushik said that’s less than the approximately 12 cents per kilowatt hour in that state for solar power.
By contrast, electricity in California cost nearly 24 cents per kilowatt hour in March, according to the EIA, while Kaushik said solar power there costs about 11 cents.
“States where energy is expensive, solar will pencil out easier. Where energy prices are still cheap, it may not,” he said. “You can come up with a handful of states across the U.S.—you can count them on your fingers—that it actually pencils out.”
Other factors are beyond developers’ control. The return on investment also depends on how sunny it is in a particular location, Kaushik said, noting solar panels produce far more energy on average in Southern California than in Seattle.
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