Selling is hard, buying is harder. My wife was reading a book by Garin Hess with this title the other day and it got me thinking, “how do buyers thread the needle of purchasing exactly what they need, at the right quantity, at the right time, with the right amount of foresight?” I’ve been the buyer in my industry before so I understand this challenge quite well and often times the biggest salesperson in a transaction is the person who needs to make the internal sell to gather the buy-in from the organization to see the future.
As a sales professional in an emerging market, I’m often seen as the consultant to our buyer. The number one question I’m asked is “How many EV chargers should we put at our property?” If we were selling lighting or countertops our buyer would likely tell us how many they need but with a new industry like EV charging our buyer needs guidance to make a decision - Do I buy for today’s demand or do I buy for tomorrow?
As SEC Rule 156 states, “Past performance does not dictate future results.” While this is absolutely true of an investment, it’s also true for thinking about sizing for EV charging. People don’t charge their cars at gas stations, people charge at home and work and this is a new paradigm shift for our buyer who primarily owns apartment buildings. So while our buyer might think it’s OK to put one or two chargers in because they haven’t seen the demand yet, that historical performance is most certainly not indicative of future demand. The cars are arriving now, the automakers are delivering now and drivers are demanding to charge conveniently now. These clients also likely haven’t seen any demand because those drivers are ruling out their property. So our buyer is left saying - “how many do I need if I don’t know what the demand will be?”
This is the crux of the question as I often hear: “We want to be thoughtful” or “We want a strategy” and “We’re looking for a partner that can help us think through our needs.” Sizing is one of the biggest questions in this industry and how you solve it reflects the beliefs of our clients. How do you reconcile these things:
Over 7% of new cars sold in America are electric today
Less than 1% of all cars on the road are electric today
Over 50% of all new cars sold in America will be electric in the next 6 years
Renters heavily factor in apartments based on where they can charge their car reliably
18 of the top 20 auto manufacturers are actively producing electric models
While on the one hand you might say, I’ll just wait and see how this evolves, the other tells you, if you don’t act now, you’ll miss out on the chance to stand out. While there’s a big difference between having charging available at your building, it’s quite another to have *enough* charging at your building. How you interpret enough is the sweet spot.
If you asked landlords in 2013 how many package lockers they would need on their property, they would have said a “handful.” No less than a decade later, you have entire rooms and rows of package lockers built to receive packages. Why? Because Amazon and the rise of e-commerce shifted buying tendencies such that it’s easier to order your detergent or new socks online than it is to run to the convenience store or clothing retailer. Those buildings that didn’t see that e-commerce future back in 2013 are now dealing with disgruntled tenants who lose packages or get them stolen for lack of safe-keeping for delivery personnel. The analogy is uncanny and similar to what’s happening with EV charging in 2023.
If you put in two EV charging stations in 2023 and say “we’ll just wait and see” then you’ll have a wonderful time dealing with the frustration of tenants who have to wait to charge their car, or worse never get a chance to charge when they rely on it to get to work the next day. If you put in 30% of your parking stalls then you might sit with some idle stations for a short period of time but as the market matures, those stations will quickly get absorbed and attract residents who can count on a charging station when they need it most. Where do you stand as a landlord? Maybe there’s a sweet spot.
At Xeal, we work on finding the sweet spot for our clients. The sweet spot is the right amount of charging stations for your project and portfolio based on a multitude of factors that are unique to your buildings. Without giving away the house, we look at local demographics, building characteristics, growth rates of adoption and more to help advise our clients on the sweet spot and reconcile that with their budgets and investment horizon.
As a real estate investor, you’re often making predictions with your financial means about what tomorrow looks like. Hold periods matter and if you’re a long-term owner, you need to be investing today in the sweet spot for what tomorrow looks like. If you’re a value-add investor then your calculus might be slightly different as you look to find the sweet spot of capital investment today with NOI increases and your next buyer’s interests in mind.
Everyone wants guidance on how to find that sweet spot and in an emerging market like EV adoption, you better not undershoot it or you might be left with proverbial packages strewn about and a lot of unhappy residents.