Which Comes First – Electric Vehicles or Charging Stations?

Electric vehicles (EV), just 2% of the cars on the road in the U.S. today, represented 9% of U.S. car sales over the past two years and almost four in ten Americans (38%) are considering buying an EV as their next vehicle purchase, according to a recent Pew Research survey.  In April, the Biden administration announced a series of ambitious proposals on auto emissions, the most aggressive of which targets 67% of all car sales to be electric by 2032.  In response, some existing apartment communities are installing charging stations to attract residents with an EV and compete with neighboring communities that already offer charging.

In many municipalities, charging stations are a development requirement for new apartment communities.  But installing a charging station at existing, older communities can be challenging and expensive.  An EV consultant recently priced the installation of commercial charging stations at ten of Pathfinder’s larger properties – located in San Diego, Denver, Portland, Phoenix and Sacramento – and the average cost per station was over $21,000 with costs in some communities significantly higher due to required electrical infrastructure upgrades.

The good news for apartment owners is that EV charging stations can generate income via tenant usage fees, although estimating the revenue can be challenging – and the bar is high to pay back a $21,000 initial investment.  At communities where charging stations don’t exist, most residents won’t have an EV, so installing one requires landlords to assume that (i) some portion of the existing residents will buy an EV and (ii) the community will attract new residents who already own an EV.  (Economists dub this the chicken or egg dilemma.)  Despite the required leap-of-faith, landlords are increasingly installing EV charging stations in an effort to retain existing tenants, attract future tenants and hopefully, generate some income along the way.

An Update on the Office Sector – It’s Still Bad

In 1989, the business guru Peter Drucker, said “Commuting to office work is obsolete. It is now infinitely easier, cheaper, and faster to do what the 19th century could not do: move information, and with it, office work, to where the people are. The tools to do so are already here: the telephone, two-way video, electronic mail, the fax machine, the personal computer, and so on”

34 years later, the state of the global office market is a reflection of this prediction.  A recent McKinsey report estimates that by 2030 there will be an $800 billion loss in office values among the World’s nine “superstar” office markets – Beijing, Houston, London, New York City, Paris, Munich, San Francisco, Shanghai, and Tokyo.   A 2022 analysis by NYU and Columbia University estimated that U.S. office values could fall 40% (or $453 billion).  The decline in values is a result of the rapid increase in the number of hybrid workers, which tripled between March 2020 and January 2023, and McKinsey believes the current rate of office attendance could persist.

The decline in office occupancy is also affecting retail sales, especially in central business districts, which will eventually affect tax revenues.  In New York City, for example, 24% of the City’s 2020 budget came from office and retail property taxes.  As both sectors decline, cities may need to reduce services or increase tax rates in an environment where many are already struggling to resolve homelessness, crime and transit issues.

And the bad news?  McKinsey’s $800 billion figure represents a 26% decline in value under a moderate scenario.  In the severe scenario, values would drop by 42% ($1,292 billion) and could be worse if compounded by rising interest rates.