Published Expert Article
– by Esther Kettering, MBA
Vice President at Pinnacle Real Estate Advisors

The best advice to industrial users seeking heavy power for manufacturing or R&D operations is “plan ahead” – way ahead!  Local and regional governments are promoting conversion to all-electric supply in the relatively near future.  When quizzed about whether capacity exists to satisfy this big change, the answers from engineers as well as public utility representatives range all the way from “no worry, we’ve got you covered,” to “we have no idea,” to a simple “no!”

There are competing interests for power and political priorities.  In the effort to save the planet, questions arise:  Can the grid support it, and is all-electric the best decision?  Interests collide to convert homes and commercial buildings to all-electric, at the same time to add EV chargers, and to create solar collectors that require building more infrastructure.  The additional infrastructure is not only to supply the users, but also to return excess power to the grid.  One developer reported that the utility provider congratulated him on committing to installation of solar PV arrays on the new buildings further stating that the infrastructure does not yet exist for conveying power back to the public utility for credit. 

To add to the excitement, “Energize Denver” is not just coming, it’s already here!  Refer to https://energizedenver.org/   Now is the time for owners, tenants and brokers to be informed.  This Denver Ordinance requires larger buildings to benchmark energy performance standards so improvements can be measured in future and the building can be compared to its peers.  Fines can be assessed for non-compliance in determining a building’s Energy Use Intensity “EUI”.  Brokers and owners are required to disclose the EUI status of buildings in all advertising and other materials related to a building’s sale.   The State of Colorado has its own version.  See https://energyoffice.colorado.gov/ 

Predictability is critical for manufacturers.  Many cannot increase production without increasing electrical service to their facility.  Others cannot tolerate an interruptible power supply.  Backup generators are required for emergencies and are most often diesel powered.   How will that change in the all-electric world?

Xcel Energy has a process in place for increasing power for smaller users, say – under 2 megawatts.  It all starts by completing a Service Application form at https://co.my.xcelenergy.com/s/partner-resources/build-remodel/apply  If you are a business, this process is apparently not different than applying for residential service.  If your business manufactures critical supplies for, say, the next medical crisis or re-shoring computer chips now made overseas, this is the form.  According to contacts at Xcel Energy, there is no priority assigned to critical infrastructure for supply lines vs. residences or, for that matter, ball field lights in the neighborhood park.  The Xcel rep I spoke with indicated turn-around time for a Service Application form of 3 weeks would be reasonable.  That 3 weeks is simply to get a response to an estimate of 1) whether the service can be provided, 2) how long it might take, and 3) how much it might cost.  One Xcel rep indicated a service boost for a manufacturing facility could easily take over a year!  Further, any increase to service would be subject to size & scope of work, design time, building permits, installation in conflict with other utilities on-site, and weather.  In other words, it will be a challenge to accurately predict delivery & completion!

My experience indicates that the smaller the manufacturing or R&D operation, the shorter the user’s decision horizon.  Larger users, say 20,000 SF and larger, tend to recognize the need for advance planning of several months to a year or even more.  The smallest users, expanding from a space of 5,000 SF or less up to almost 20,000 SF, tend to be surprised by their growth and some lack a good plan and realistic time frame for relocation.  Often, these users are in a stage of early and rapid growth of operation and call a broker indicating a need for more space in 30, 60 or 90 days.  Even if the broker identifies a right-sized space having most of the desired physical features (loading, HVAC, office vs. lab vs. manufacturing & warehouse) the power supply to the building might be inadequate or requiring change.

Newer large warehouse buildings have enough power to satisfy relatively simple pack & ship or assembly operations.  Over the years, I’ve worked with some big power consumers, so was curious to see the typical power supply in the inventory of existing For Lease buildings between 100,000 & 500,000 SF.  CoStar revealed 85 offerings.  Of those, 51 offerings or about 61% of the inventory indicate the power available.  Virtually all of those reporting the power supply indicated 480V 3 phase.  Using a standard of amperage per 20,000 SF, average offering was 435 amps, with a median 375 amps per 20,000 SF.  It was interesting to see that many of the buildings with greater supply than average exist in the west/northwest metro area where manufacture of beer, bottles, aluminum cans, medical devices, laser equipment, defense and aerospace products take place.

Regardless of the need to expand or acquire additional electric power, customers need to plan months if not a year ahead of the need, apply to the provider early, communicate often, and follow the process diligently!

Featured in the June 2024 Edition of the Colorado Real Estate Journal