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Commercial Rooftop Solar: Tackling America’s Energy Crisis
Some property owners are exploring a new revenue stream by generating energy for the grid.
The growth in AI machine learning, data centers and the electrification of the economy will more than double U.S. energy demands over the next 10 years according to some projections. Unfortunately, the nation’s electric grid infrastructure is not prepared for such a transformation.
Grid congestion results in higher energy costs, delays and outright restrictions in connecting to the grid, hampering commercial real estate development and expansion.
One solution gaining traction with CRE executives is leasing commercial rooftops for new solar installations. This approach addresses energy shortages while also generating income for property owners, boosting property values and supporting local economies. Commercial rooftop solar can be built quickly, going from concept to operation in 12 to 24 months.
Commercial Rooftop Solar Solutions
The looming energy crisis is driving opportunities for commercial real estate owners to generate more energy for the grid while also creating a new revenue stream.
Years ago, commercial rooftop solar installations powered the building itself. This limited the size of the system and restricted its use to properties with high energy demands. With current commercial rooftop models, buildings no longer need to consume the energy the rooftop panels generate. Instead, the energy is fed into the grid, allowing property owners to receive revenue through an annual lease payment regardless of a tenant’s energy needs or occupancy status.
In a typical arrangement, solar project developers lease roof space and manage all aspects of the project, including financing, ownership and maintenance of the photovoltaic installations. They also handle connecting to the grid and enrolling customers to purchase the generated electricity. This model, known as “in-front-of-the-meter,” signifies a significant shift from providing power for on-site use, which is referred to as “behind the meter.”
Under a rooftop solar lease, tenants are not obligated to purchase the power, although they often have the option to buy clean energy. Additionally, the energy generated by a commercial rooftop system does not get connected to the building’s electrical systems, so the installation process does not disturb day-to-day tenant operations.
Solar Landscape recently partnered with Prologis to develop and finance more than 30 million square feet of commercial rooftop solar projects. The portfolio, which spans over 50 projects across New Jersey, Maryland and Pennsylvania, supports Prologis’ goal of deploying 1 gigawatt of on-site solar and battery storage by the end of the year.
Solar Landscape typically leases rooftop space for 25 cents to 85 cents per square foot per year for 20 years and invests about $20 per square foot into the systems.
Shaping the Energy Infrastructure
According to the National Renewable Energy Laboratory, corporate action can significantly influence market trends. By adopting solar energy, real estate owners can demonstrate leadership on sustainability. This makes them attractive to tenants prioritizing environmental responsibility in their business models.
A recent rooftop tour demonstrated the commercial rooftop solar partnership between Prologis and Solar Landscape. Courtesy of Solar Landscape
“Investing in on-site clean energy solutions is integral to decarbonizing our buildings and distinguishing our real estate portfolio,” said Natasha Keefer, vice president of energy solutions at Prologis. “These investments directly benefit our customers and the communities in which we operate while addressing the increasing energy demands of our expanding customer base.”
By leveraging this infrastructure, CRE leaders are becoming power players in shaping the energy infrastructure that supports business operations. Rooftop solar has a stabilizing impact on the electric grid, providing reliable, affordable energy where it’s needed most. The Brattle Group has found that commercial and industrial rooftop solar provides several times more value than rural, ground-mounted solar farms because it is installed close to where the electricity is used, minimizing the need for costly new electricity lines and system upgrades. Since the electricity doesn’t have to travel far, less energy is lost, and the strain on the grid is reduced.
If CRE owners use their buildings to generate power, the less expensive energy will be, and the additional power will enable more development opportunities.
REITs alone control approximately 38.5 billion square feet of roof space in the U.S. — a largely untapped resource for solar installations. As demand for renewable energy surges, commercial real estate can drive clean energy adoption —
and support the resulting environmental and economic benefits — at commercial scale through rooftop solar.
Benefits Beyond Energy Generation
In addition to addressing energy shortages, rooftop solar delivers a range of benefits for commercial real estate owners, developers and tenants.
New source of net operating income: Rooftop solar capitalizes on unused commercial roof space. In exchange for leasing their rooftops to solar developers, property owners receive lease payments that boost the bottom line. “This is a great ancillary revenue opportunity for us,” said Will Cowan, executive vice president and chief strategy officer at National Storage Affiliates Trust. “We don’t have to make a significant capital investment, and it requires minimal time and effort from us.” Last year, National Storage Affiliates Trust announced that Solar Landscape would develop at least 100 megawatts of rooftop solar across 8.5 million square feet of its facilities’ rooftops nationwide.
Increased property value and marketability: JLL found in 2024 that properties with solar in North America can command a 7% higher premium. Tenants are increasingly seeking sustainable, cost-effective properties, so buildings with solar can be more attractive to potential buyers or tenants, commanding higher rents or resale values.
Supporting local communities and job creation: Rooftop solar creates positive macroeconomic benefits. By working with solar developers, commercial real estate owners can contribute to local workforce development and job creation. Hosting solar projects can also forge connections with local governments and utilities, further cementing a property’s role as a community asset.
“Across our commercial portfolio, rooftop solar is a model for how to create job opportunities in addition to clean energy,” said Jennifer McConkey, managing director of ESG and operations at Principal Asset Management.
Principal’s commercial solar projects have received national award recognition from Commercial Property Executive magazine and the Institute of Real Estate Management for creating jobs and job training in the local community. By hosting solar on the roofs of its commercial warehouses in Illinois and New Jersey, Principal enabled Solar Landscape to train residents to become solar installers, resulting in trainees getting hired into full-time positions. Solar Landscape’s workforce development program, known as STEP-UP, has reached more than 2,500 trainees to date.
Speed and simplicity: Unlike other forms of energy infrastructure, rooftop solar can be deployed quickly and with minimal disruption. Usually completed in months, installations allow property owners to rapidly address energy concerns.
Challenges and Site Assessment Factors
Without proper planning, commercial rooftop solar projects can face challenges. For example, there is a limit to how much power the grid can accommodate, and solar projects must apply to connect. Interconnection is awarded on a first-come, first-served basis. Therefore, it is important for commercial real estate owners to apply for interconnection early, as available capacity diminishes over time.
One of the first steps in considering commercial rooftop solar is a site assessment, which considers:
Location: Each utility offers a different energy retail rate, which drives the lease rate offered by a developer.
Roof age: Solar panels typically last longer than 20 years, so it is best to avoid installing them on older roofs or to replace the roof before installing them.
Grid conditions: Depending on where the commercial building is located, there may be challenges connecting a solar rooftop system due to grid congestion.
As energy demand increases, the viability of commercial rooftop solar empowers the commercial real estate industry to play a key role in addressing the looming crisis while generating revenue, enhancing property values and boosting its sustainability credentials.
Shaun Keegan is CEO and co-founder of commercial solar developer Solar Landscape.
