Clear answer
Clear answer, explained.
The project IRR is what matters more than payback — and against a 30-year asset financial model, well-structured CRE energy projects typically deliver IRRs that exceed most other capital improvements on the asset.
Key points
What this means in practice.
- Completed GI CRE projects: simple payback of 5–8 years before incentives
- After the federal Clean Technology ITC and accelerated CCA: simple payback of 4–7 years
- IRR is more meaningful than simple payback for CRE assets — measured against the 30-year asset financial model
- Well-structured CRE energy projects typically deliver IRRs exceeding most other capital improvements on the asset
- The asset value uplift through NOI improvement (at a 6% cap rate, $100K saved = $1.67M value) compounds the financial case beyond payback alone
- A project-specific financial model is required — CRE project economics vary significantly by building type, lease structure, and incentive access
When this applies
Best-fit environments.
- You are a CRE owner evaluating solar and need a realistic payback range for lender or investment committee approval
- You want to understand why IRR is a more relevant metric than simple payback for a long-lived CRE asset
- You are comparing solar against other capital improvement options for your building and need a financial benchmark
- Your asset management team needs a CRE-specific payback and IRR reference before commissioning a project assessment
Q·01
