Real Estate

Rooftop Romp: How Office Owners Can Unlock Value On The Top Floor

Office demand is in a state of flux. The widespread adoption of hybrid work and intensifying economic headwinds have left companies unsure of their real estate needs. While both office owners and occupiers share an optimistic outlook about the future of office usage, property managers are pioneering new ways to generate revenue in the place of reduced rental income—and they are finding that from the roof, these problems don’t seem so big.

Building rooftops are a mine of revenue-generating possibilities. They are conducive to a wide variety of uses and require few modifications to unlock significant value. The possibilities are endless, but they can all be encapsulated by The Five E’s—environment, energy, entertainment, events and ecommerce. Below is a steadfast guide to rooftop monetization.

The five E’s

These are the five E’s, a group of categories that provide a framework of the opportunities available to activate a commercial rooftop, along with varying lease structures and time commitments to give owners the option to create value in alignment with their core business strategy.

Environment: The roof of a commercial building may not seem like the place for a nature retreat, but these open-air spaces are actually an ideal way to support ecological initiatives. The Aon Center in Chicago, for example, partnered with urban beekeeping company Alveole to use the rooftop space as storage for brood boxes, the hive-like crates where bees live and produce honey. Rooftops can house urban farms to grow the food that feeds communities or landscaped gardens to give people access to greenspace. Green rooftops have a bonus benefit in that they lower surrounding air temperatures and reduce the building’s energy consumption, and in addition to revenue from leases and partnerships, they have a lifetime operational cost savings of about $200,000 compared to traditional rooftops.

Energy: As the world increases adoption of renewable energy, property owners can provide the critical space needed for solar power projects, an essential source of clean energy. In addition to utilizing solar power to operate the building and meet internal ESG goals, solar partnerships can also serve as an ancillary revenue source. Typically, these solar farms, as they are sometimes called, operate on a licensing agreement with an energy company, which in turn sells the power back to a local municipality. In one of the largest such deals, Washington DC Transit Authority signed a 25-year agreement with a solar company that has a total value of $50 million over the lease term.

Events: With 360-degree views from a perch above a bustling city, rooftops can be magical. As such, they are highly sought-after destinations for private events, like weddings, birthday parties and corporate functions, and that demand nets a healthy price-tag. Peerspace, a website for short-term rentals, estimates that rooftops cost anywhere from $50 to $200 per hour. Generally, building owners need to do very little to accommodate a private event. The host will build out the space, clean after and in most cases, even provides insurance. Even better, events have no long-term commitment, and ownership can rent the space out at will.

Entertainment: Following the pandemic, consumers are craving unique, in-person activities. Entertainment venues—pop-up shops, restaurants, bars, night clubs, concerts and even movie theaters—are habitually seeking rooftop spaces to literally elevate the experience. Rooftop Cinema Club creates an outdoor movie theater at Row DTLA in Los Angeles, for example, with twice daily movie screenings. Despite the nontraditional location, partnering with an entertainment venue is no different than securing a lease with any other retail tenant, and it comes with a strikingly similar set of terms, providing stable long-term revenue for ownership.

Ecommerce: The supply chain to get a package from warehouse to doorstep has become increasingly complicated, but commercial rooftops can provide an essential service to logistics companies looking to solve for the last mile: a drone landing zone. Drones can deliver everything from retail goods to food and pharmaceuticals directly into a city center via a commercial rooftop. By 2030, drones are expected to deliver 6% of household purchases to consumers, and as research from JLL notes, any city that is built on a grid system would be an ideal fit for rooftop drone delivery services.

Capitalizing on rooftop revenue

The rooftop is certainly a mine for supplementary revenue, but unfortunately, there is a caveat: Not just any rooftop can support these functions. As a prerequisite to leasing the space, the rooftop in question must be easily accessible, ideally by an elevator that can move large items, and it must be outfitted with basic utilities, including access to power and water. Without these features, owners will be limited in their ability to utilize the space.

The rooftop use should also not impede building functions, like mechanical features and ventilation. This is typically an issue with solar panels and urban farms, which cover the surface of the rooftop. Urban farms and greenspaces require the most supportive infrastructure with a waterproof membrane, a root barrier and a drainage layer.

To ensure the rooftop space can accommodate these uses, building owners should consult with property managers during the construction or renovation of the property. Every building is unique, and property managers can evaluate the space and advise owners on essential features that will maximize revenue-generating opportunities.

The pandemic aside, market cycles will always change. Unlocking value in unused space will diversify income streams and mitigate loss whenever the market turns.