How Real Estate Investment Trusts (REITs) Can Drive Solar Development

This guide by RMI explores how Real Estate Investment Trusts (REITs) can leverage their extensive rooftop and parking assets to drive solar development, reducing greenhouse gas emissions while increasing shareholder value. It identifies significant untapped capacity, outlines the financial and regulatory barriers to adoption, and proposes community solar as a viable solution to overcome these challenges.

• REITs control a massive amount of solar-appropriate surface area, including rooftops, parking lots, and garages. A Morgan Stanley report estimated this area at roughly 38.5 billion sq. ft., which could generate over 25 percent of all electricity used in US commercial buildings (approximately 320 GW), or about 10 percent of total US electricity sales. This potential is roughly 2.5 times the total US solar capacity existing at the end of 2022.
• On-site solar offers several strategic advantages for REITs, including the use of existing infrastructure to avoid permitting challenges on undeveloped land, optimal generation conditions on flat roofs, and the ability to offset power demand for EV charging. Additionally, solar helps REITs comply with building performance standards and phase-outs of natural gas. Morgan Stanley estimated that by 2025, on-site solar would be cheaper than grid electricity for 90 percent of the top 50 REITs, potentially resulting in a 3 percent revenue accretion.
• Despite the potential, REITs face financial and operational barriers. Direct use of federal energy tax credits is complicated by Internal Revenue Service recapture rules. For industrial and warehouse REITs, low energy intensity means distribution centers (70,000 to 1 million sq. ft.) might only use 10–20 percent of roof capacity, and interconnection delays may prevent selling excess power back to the grid. Furthermore, short commercial leases (three to five years) create vacancy and usage risks.
• Community solar is proposed as a solution to financial and vacancy risks by serving the broader community rather than just building tenants. This structure can provide an investor's tax credit bonus adder of 10–20 percent if power is sold at a discount to low- and moderate-income residents and businesses. While community solar exists in 28 states, only NY, IL, MA, MD, CA, MN, NJ, CT, and VA currently support rooftop community solar. In California, Virtual Net Metering provides a specific solution for multifamily housing.
• Some large real estate companies have already adopted on-site solar. Prologis, the largest REIT by market cap, has been in the top three for total megawatts of on-site solar installed for the past decade. Other companies in the top 12 include Lineage Logistics, Blackstone, Brookfield, and Hartz Mountain.

APA

RMI (2023). How Real Estate Investment Trusts (REITs) Can Drive Solar Development. https://rmi.org/resources/how-real-estate-investment-trusts-reits-can-drive-solar-development/

Chicago

RMI. How Real Estate Investment Trusts (REITs) Can Drive Solar Development. 2023. https://rmi.org/resources/how-real-estate-investment-trusts-reits-can-drive-solar-development/.

Wikipedia

{{cite report |author=RMI |title=How Real Estate Investment Trusts (REITs) Can Drive Solar Development |date=18 July 2023 |url=https://rmi.org/resources/how-real-estate-investment-trusts-reits-can-drive-solar-development/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2023how, author = {{RMI}}, title = {{How Real Estate Investment Trusts (REITs) Can Drive Solar Development}}, institution = {RMI}, year = {2023}, month = jul, url = {https://rmi.org/resources/how-real-estate-investment-trusts-reits-can-drive-solar-development/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }