What are the benefits for landlords of installing solar panels on commercial properties?

Installing solar panels on commercial properties in the UK can help landlords realise significant benefits, including financial rewards and differentiation in a crowded market. By generating on-site renewable energy, landlords can enhance property appeal, reduce operating costs, and contribute to the UK’s broader sustainability goals. In this short article we look a bit closer at some of these benefits.

Financial Benefits

Solar panels enable landlords to reduce energy costs by generating electricity on-site, decreasing reliance on grid power. This can lead to lower operational expenses for tenants, making the property more attractive. Additionally, landlords who include energy costs within lease agreements may see increased profitability by reducing overall energy expenditures.

Solar panel installations can also benefit from government incentives and tax advantages, further improving return on investment. Typical payback period for solar installations is between 5 to 7 years, with ongoing savings extending beyond 30 years due to minimal maintenance costs and improved technology.

Enhanced Property Value

Commercial properties equipped with solar panels are increasingly sought after in the market. Energy-efficient buildings tend to attract tenants more quickly and may command higher rental yields due to the long-term cost savings they offer. Research indicates that commercial properties with renewable energy installations can achieve higher valuations, as buyers and investors prioritise energy efficiency in their decision-making. Reduced running costs and alignment with sustainability trends contribute to stronger long-term asset appreciation.

Our clients, Landlink Estates are reaping the benefits of their solar installation, as are their tenants!

Improved Marketability

Energy-efficient commercial properties with solar panels appeal to tenant businesses that prioritise sustainability (not to mention those which are focused on lower operating costs). As market demand for eco-friendly office and industrial spaces inevitably grows, landlords who invest in renewable energy solutions may benefit from lower vacancy rates and more consistent rental income.

Corporate tenants seeking long-term leases may be more likely to choose properties with solar panels due to the promise of stable energy costs and improved corporate social responsibility (CSR) credentials.

Sustainability and Regulatory Compliance

The UK government has set ambitious carbon reduction targets, and commercial landlords are increasingly expected to improve the energy efficiency of their properties. Installing solar panels helps landlords meet Energy Performance Certificate (EPC) requirements but also contributes to reducing Scope 2 and Scope 3 emissions by enabling tenants to source renewable energy directly from the property.

Businesses are under growing pressure to address emissions across their supply chains, and landlords who provide sustainable energy solutions can stand-out from the crowd by helping tenants meet their carbon reduction commitments. By integrating solar energy, landlords support broader sustainability objectives, enhance their green credentials, and align with evolving corporate environmental, social, and governance (ESG) strategies. This shift can provide a competitive advantage in attracting high-profile tenants looking to reduce their carbon footprint across their operations and supply chains

PPA Options and Multi-Let Buildings

Power Purchase Agreements (PPAs) offer landlords an alternative way to install solar panels without upfront capital investment. Through a PPA, a third-party provider installs and maintains the solar system, while the landlord or tenants purchase the generated electricity at a fixed rate, often lower than grid prices. This setup allows landlords to recoup costs from tenants through service charges or inclusive lease agreements, ensuring financial feasibility.

Additionally, Eden Sustainable has developed a method to install solar panels on multi-let commercial buildings while complying with the licence supply exemption, enabling landlords to distribute renewable energy among multiple tenants without regulatory obstacles.

Landlords Landlink Estates have installed solar on their buildings and now everyone is benefitting

Considerations

While the benefits of solar panels are substantial, landlords should consider factors such as upfront installation costs, roof suitability, and long-term maintenance. Professional energy assessments can help determine the feasibility and optimal system size for a commercial property. Additionally, exploring financing options and government incentives can mitigate initial expenses and accelerate financial returns.

In conclusion, landlords who install solar panels on their commercial properties can benefit from lower operating costs, enhanced property value, improved marketability, and regulatory compliance. As demand for energy-efficient commercial spaces increases, investing in solar energy presents a strategic opportunity for long-term financial and environmental gains.

If you’re thinking about making the switch to a more sustainable energy future, then contact us via our website and we’d love to help you unlock the benefits.