Why Power Quality Is Becoming One of the Biggest CRE Blind Spots

Investors Rarely Underwrite the Electrical Stability of a Building

Most commercial investors focus their analysis on rents, cap rates, structural conditions, parking, or tenant demand. However, one factor that increasingly determines whether modern tenants can function inside a building, power quality, is almost never part of the due-diligence conversation. As industrial, office, logistics, lab, and manufacturing users become more reliant on stable and uninterrupted electricity, the ability of a building to deliver clean, consistent power is moving from a technical detail to a central investment risk.

Modern Tenants Operate With Near-Zero Tolerance for Electrical Fluctuation

Power interruptions that once caused mild inconvenience can now shut down entire operations. Even a brief voltage sag can force robotics systems to restart, disrupt CNC machinery, damage automated equipment, spoil temperature-sensitive inventory, or wipe out hours of production. Many tenants cannot tolerate instability, and their cost of downtime far exceeds their cost of rent. When a facility struggles with electrical consistency, it becomes functionally obsolete for these users regardless of its physical specifications.

Utility Infrastructure Differs More Than Most Investors Realize

Many investors assume that electrical infrastructure is uniform within a submarket, yet the reality is often the opposite. Buildings only blocks apart may have vastly different feeder lines, transformer ages, redundancies, and historical outage patterns. These variations are typically invisible during a tour, yet power quality exerts significant influence over a tenant’s ability to operate. When infrastructure is unreliable, even otherwise well-located buildings become difficult to lease to modern users.

Power Upgrades Are Often Slow, Expensive, and Operationally Disruptive

Investors sometimes believe that adding power is simply a matter of calling the utility and requesting an upgrade. In practice, the process of adding power can take years and involve equipment with long lead times, complex installation requirements, and regional capacity constraints. Transformer replacements or distribution upgrades regularly take nine to twenty-four months. In certain areas, the available grid capacity does not exist without significant substation work. These realities can undermine redevelopment timelines and create risks that do not appear in the initial underwriting.

Tenants Are Beginning to Prioritize Power Quality in Their Site Selection

A growing number of sophisticated users now ask early questions about outage frequency, voltage stability, transformer age, feeder redundancy, and service reliability. This shift resembles the early days of the broadband era, when connectivity became a basic expectation rather than an optional amenity. In the same way, buildings that cannot demonstrate reliable electrical performance may fall behind as automation and data-driven operations become commonplace.

Electrical Reliability Is Becoming a Direct Driver of Asset Value

Buildings with poor electrical stability often appeal only to a narrower pool of users, which increases downtime, reduces renewal probability, and forces owners to make more aggressive concessions. Conversely, properties with strong electrical infrastructure are better positioned to attract tenants whose operations are deeply tied to power-dependent systems. These users typically place a higher intrinsic value on the space and commit more deeply to it, which enhances long-term asset performance.

Underwriting Power Quality Should Become a Standard Part of Due Diligence

Commercial investors who want to stay competitive should begin evaluating power quality with the same rigor they apply to roofs, paving, or mechanical systems. This means understanding outage histories, transformer condition, feeder capacity, and regional utility constraints. It also requires acknowledging that electrical infrastructure is not merely an operating detail but a fundamental component of a building’s competitiveness in today’s market.

Power Quality Will Soon Separate Competitive Properties From Obsolete Ones

The commercial market is being shaped by automation, data-centric operations, electrified equipment, temperature-sensitive inventory, and advanced manufacturing processes. As these shifts continue, buildings without reliable power will lose relevance, even if their physical specifications remain strong. The properties that deliver stable electrical performance will attract stronger demand, experience more durable occupancy, and command greater pricing power.

Investors Who Understand Power Reliability Now Will Lead the Next Cycle

This topic will not remain niche for long. Power quality is positioned to become as important to underwriting as structural integrity or location. Investors who learn to evaluate it today will be better prepared to attract modern tenants, avoid hidden risks, and structure deals that reflect the realities of how contemporary businesses actually operate. In a marketplace increasingly defined by technological dependence, understanding the electrical backbone of a building is becoming a defining skill.