Clear answer
Clear answer, explained.
At a typical CRE cap rate of 6%, every $100,000 of annual operating cost saved adds roughly $1.67M to asset value. The math is mechanical: NOI ÷ cap rate = asset value, so a permanent reduction in electricity expense compounds into the long-term valuation. For a fully owner-operated building, the impact is direct; for net-leased assets, the structure depends on how electricity costs flow through to tenants.
Key points
What this means in practice.
- Solar reduces the operating expense line that flows through to NOI
- At a 6% cap rate, every $100,000 of annual operating cost saved adds roughly $1.67M to asset value
- The math is mechanical: NOI ÷ cap rate = asset value — a permanent OpEx reduction compounds into valuation
- For owner-operated buildings, the NOI impact is direct and immediate
- For net-leased assets, the structure depends on how electricity costs flow through to tenants
- Solar savings are permanent — they continue compounding into the asset value over the 30-year system life
When this applies
Best-fit environments.
- You own or manage a commercial real estate asset and want to understand how solar affects NOI and valuation
- You are preparing an investment case for on-site solar and need to quantify the asset value impact for a lender or investor
- You are evaluating a CRE acquisition and want to understand the upside from an energy programme on the asset
- You want to understand how the NOI impact differs between owner-operated and net-leased structures
Q·01
