The True Cost Of Power: Power Is the New Location. That Changes What Your Building Is Worth, Right as Its Debt Comes Due.
Last week this column measured the true cost of power in time, the roughly five-year wait to connect a large new building to the grid. This week measures it in value. New research from JLL shows that same power scarcity is now priced directly into what a building is worth, at the very moment a record wave of debt forces owners to prove that value in a refinancing. The connection queue from last week and the debt wall this week are two faces of one problem, and they meet on the same asset.
By Keith Reynolds | Publisher & Editor, ChargedUp!
Power Became the New Location
For a century, the value of a building started with where it sat. JLL, the global real estate services firm, argues that the rule has shifted. In research it calls Where Energy Meets Property, the firm holds that the old mantra of location, location, location is giving way to location, resilience, reliability, because access to dependable power has become a defining factor in what a property is worth across every major sector.
The figures behind that claim are hard to ignore. In Silicon Valley, buildings with high-power leases transacted at rents averaging 49% higher than other leases over the past three years, JLL found, and 33% higher than even the newest buildings. Industrial power prices across major economies climbed about 18% from 2019 to 2024, against just 4% in the five years before. And the wait to connect a large new power load now approaches five years in major markets, the same queue this column examined last week. JLL's insight is that the queue is no longer only a delay. It is a value line. A building that already has reliable power, or can make its own, is worth measurably more than one still waiting for the grid.
Read that finding back into a portfolio and it reframes the whole asset. Power is no longer a cost buried in the operating statement. It is a feature the market now prices, the way it once priced a corner lot or a highway exit. Buildings that have it command a premium. Buildings that lack it face a discount, and increasingly a hard ceiling on what they can become.
The Debt Wall Makes It Urgent This Year
A value shift can be absorbed slowly in a calm market. This is not a calm market. Roughly $875 billion in commercial and multifamily property loans, about 17% of all outstanding commercial mortgage debt, come due in 2026, according to the Mortgage Bankers Association. More than $1.5 trillion matures across 2025 through 2027, with the peak near $1.26 trillion in 2027. Most of these loans were written between 2019 and 2021, when the interest rate that anchors borrowing costs sat near record lows.
The refinancing gap is stark. Many maturing loans carry rates between roughly 4% and 4.7%. Refinancing today often lands closer to 6.5%. For a large building, that difference can decide whether a loan pencils out at all, and it forces a hard choice: inject fresh equity, sell into a soft market, restructure, or raise the building's income enough to carry the heavier debt. A refinancing is, at bottom, a moment when a building must prove its value and its income to a cautious lender. And thanks to the JLL finding, power is now part of what that lender is judging.
Why the Two Forces Multiply
Separately, each pressure is survivable. Together they compound. A building refinancing into higher rates needs stronger income to support the new loan. Rising electricity costs are draining that income at the same time. And a building that cannot secure reliable, affordable power may lose the tenants or the rent premium that would have carried the debt, exactly the premium JLL now measures. The debt squeeze and the power squeeze pull the same rope from opposite ends, and the building in the middle is repriced by both.
What It Looks Like on One Building
Consider a warehouse bought in 2020 with a $30 million loan at 4%, maturing this year. Refinancing at 6.5% raises the annual interest cost by hundreds of thousands of dollars, which means the lender wants to see more income before renewing. Meanwhile, the building's power bill has risen with commercial rates, and a nearby data center has tightened the local grid, making it harder to add the electrical capacity a prospective tenant wants. The owner is squeezed from both sides at once: the loan needs more income, and the power situation is eroding it. Now suppose that same owner had added onsite solar and a battery two years earlier. The energy bill is lower and steadier, the building can offer reliable power as a leasing advantage, and the stronger, more predictable income is exactly what makes the refinancing close. Same building, same debt wall, a very different outcome, decided by who controlled their power.
The Response That Answers Both
This is why distributed energy has moved to the center of the conversation. Lowering and stabilizing a building's energy cost lifts the one number both pressures hinge on: net operating income, the money a building keeps after expenses. A higher, steadier income supports a larger loan at refinancing and raises what the building is worth. One move answers both the debt problem and the power problem, because underneath, both are problems of income.
Onsite solar and battery storage cut the energy bill and shield the building from the grid's price swings, which makes income more predictable, precisely what a wary lender wants to underwrite. That reliability protects the rent premium well-powered buildings now command. And where an owner lacks capital to build these systems while also facing a maturity, third-party arrangements let a provider install and own the solar or storage at no upfront cost, leaving the building with a lower, steadier bill. That raises income without adding to the debt the owner is already working to refinance.
The value math anchors this series. At an 8% capitalization rate, the standard yardstick for converting income into value, every $1,000 a building removes from its annual energy cost adds roughly $12,500 to its worth. In a refinancing, that added value and stronger income can be the difference between a loan that closes and one that does not. With commercial power prices still climbing, up 5.8% over the past year in the latest federal data, per the Energy Information Administration, the savings a building locks in today are worth more every year the grid tightens.
Speed to Power Is Speed to Revenue
There is a further advantage that matters most to an owner racing a maturity clock, and it is where this week's story rejoins last week's. The five-year wait to connect to the grid is not only a value discount. It is lost time, and lost time is lost revenue. A finished building that sits dark waiting for utility power earns nothing while its debt keeps accruing. Onsite generation collapses that timeline. A building that makes its own power can open and start earning in the months an equipment installation takes, rather than the years a grid connection can require.
For an owner and a community planner, that speed is a shared prize. A building that powers itself asks less of a strained local grid, which is exactly what a planner needs when new demand is pushing local infrastructure to its limits. The owner gets to market and into revenue faster, protecting the income a refinancing depends on. The community gets development that does not overload the grid or force everyone else's rates up to serve it. Controlling your own power, using solar, storage, and the controls that manage them, turns a grid bottleneck into a speed-to-revenue advantage for the owner and a capacity relief valve for the community. The refinancing hedge and the community benefit are the same move.
A Practical Sequence for an Owner Facing Both
For an owner staring at a maturity and a rising power bill at once, the moves are straightforward and they reinforce each other.
1. Start with the cheapest savings. Efficiency, controls, and lighting cut the bill immediately and lift income before any large investment, strengthening the refinancing case right away.
2. Attack the peak. A large share of a commercial power bill is the demand charge, a fee based on the single highest burst of power the building draws. Battery storage and load management cut that peak and the cost tied to it.
3. Add onsite generation, with or without your own capital. Solar and storage lower and stabilize the bill and speed the building to power. If capital is tight because of the refinancing, a third-party ownership arrangement delivers the benefit without the upfront cost.
4. Underwrite power as an asset feature. When refinancing or selling, present reliable, low-cost, onsite-backed power as the value driver JLL has shown it to be, not as a footnote to the operating statement.
The Bottom Line
The maturity wave was visible for years, and so was the rise in power demand. What is new is that they arrive together, on the same buildings, in the same year, and that the market now prices power into value the way it once priced location. An owner cannot lower interest rates or single-handedly fix the grid. An owner can control how much power a building must buy, how stable that cost is, how much of it the building makes itself, and how fast it gets to revenue. Each of those lifts the income that both the lender and the market are now scrutinizing. In a year when nearly $1 trillion in debt refinances into a power crunch, the building that owns and manages a share of its own energy is the one best positioned to carry its debt, hold its value, and reach revenue before the clock runs out.
Frequently Asked Questions
What does JLL mean by location, resilience, reliability?
JLL's research argues that reliable, affordable power has joined location as a primary driver of what a building is worth. It found high-power leases in Silicon Valley commanding rents up to 49% higher than comparable space, because tenants now pay a premium for dependable power and connection capacity.
How much commercial real estate debt is maturing in 2026?
About $875 billion in commercial and multifamily loans, roughly 17% of all outstanding commercial mortgage debt, mature in 2026, with more than $1.5 trillion coming due across 2025 through 2027 and a peak near $1.26 trillion in 2027.
Why do the debt wall and power costs compound each other?
A building refinancing into higher rates needs stronger income to support the new loan, but rising power costs drain that income, and weak power access can cost the rent premium that would carry the debt. Both pressures hinge on the building's income, so both improve when energy costs fall.
How does controlling power speed a building to revenue?
Connecting a large new load to the grid can take about five years. Onsite generation can power a building in the months an installation takes, so it opens and earns sooner rather than sitting dark and accruing debt. Faster revenue also eases strain on the local grid, a benefit owners and planners share.
How much value does cutting energy cost create?
At an 8% capitalization rate, every $1,000 of durable annual energy savings adds roughly $12,500 to a building's value, and third-party ownership can deliver solar or storage with no upfront cost, raising income without adding debt.
Sources
https://www.jll.com/en-us/newsroom/power-availability-becoming-key-driver-of-cre-value
https://www.jll.com/en-us/insights/where-energy-meets-property
https://www.connectcre.com/national_topper/capacity-challenges-march-2-2026/
