briefcase | invest smarter | Issue #130

Roofs. The home of gargoyles and long-lost frisbees. Also, the world record holder for ‘famous last words’: “Screw it, I’ll just fix the roof myself…”

Alongside parking, rooftops are one of the few untouched physical resources that exist in real estate. These assets are seriously underutilized. Consider that 20% of NYC is covered by buildings; that’s a fifth surface area that can be used for things like solar arrays or greenery.

According to a recent report, retailers across the U.S. have enough rooftop space (7.2B square feet) to produce over half of their energy needs through solar panels. That’s a lot of savings!

The sky is the limit when it comes to the revenue and community benefits of underutilized rooftops.

Green roofs work wonders by combating the notorious urban heat island effect, but they also have the power to absorb stormwater and air pollution, leaving our cities feeling fresher. And green rooftops can even double up as cozy habitats for wildlife, creating a more harmonious balance between nature and urban living.

Despite this, most cities have yet to fully embrace green rooftops as a solution to a number of urban planning ills. Herein lies a fantastic opportunity just waiting to be seized.

Because the reality is, in addition to the environmental and social benefits of green rooftops, there’s a significant revenue upside as well.

As we enter a commercial real estate winter, commercial landlords should welcome the possibility of expanded revenue streams. Green rooftops can provide that.

🌱 Increased Property Attractiveness

Integrating rooftop greenhouses into commercial buildings can significantly enhance their value and attractiveness in the real estate market. The addition of these unique and sustainable features sets the property apart from competitors, making it more desirable to potential tenants and investors.

By incorporating a rooftop greenhouse, commercial landlords can position their property as a sustainable and forward-looking space, attracting high-quality tenants and potentially commanding higher rental rates.

🌱 Growing NOIs

The reality is that greenery on your building’s roof can also improve your net operating income by reducing heating and cooling costs. The average temperature of a green roof vs a non-green roof is dramatic and can impact your utility costs.

🌱 Diversification of Revenue Streams

Rooftop greenhouses offer commercial landlords the opportunity to diversify their revenue streams beyond traditional lease agreements. By partnering with urban farmers or horticultural organizations, landlords can enter into profit-sharing agreements or lease out the greenhouse space for agricultural purposes.

This diversification allows landlords to tap into the rapidly growing market for locally grown, organic produce while generating additional income. Moreover, such partnerships can foster a sense of community and social responsibility, further enhancing the reputation of the property and attracting like-minded businesses.

🌱 Corporate Social Responsibility

Incorporating rooftop greenhouses demonstrates a commitment to environmental stewardship and corporate social responsibility. These structures contribute to the reduction of carbon footprint by shortening the supply chain and reducing transportation distances for fresh produce.

🌱 Enhanced Tenant Experience and Employee Well-being

Green spaces have been linked to increased productivity, reduced stress levels, and improved mental well-being. By allowing tenants to connect with nature within an urban setting, landlords can create a more attractive and enjoyable working environment, leading to higher tenant satisfaction and retention rates.

This is particularly true for office assets that are struggling to support back-to-work programs and keep leases in place.

So What? In an era of increasing debt costs and lower valuations, rooftop greenhouses present an interesting revenue stream for landlords globally. Alongside the additional environmental benefits, there are likely generous grants and tax credits for these types of projects.