After Rent
Electrification, Energy Revenue, and the Inversion of Tenant Selection
For centuries, the logic of property ownership has rested on a single, unshakable constraint: buildings cost money to own and operate, tenants pay rent to cover those costs, and therefore tenant selection must optimise for financial capacity. Everything else (community value, social contribution, cultural fit) has been secondary at best. A luxury afforded only after the rent cheque clears.
I’m increasingly convinced this constraint is about to have competition.
Not because landlords will suddenly develop social consciences. But because the economics of buildings are shifting in ways that loosen the dependency on tenant payments as the primary income stream. And if that dependency loosens, the logic of tenant selection inverts.
This Letter is an attempt to trace that argument through. It starts with electrification, but not the version you’ve been hearing about.
The Wrong Argument
The case for building electrification has been made on emissions reduction, climate compliance, and regulatory inevitability. Mandates proliferated. Deadlines were set. The narrative was clear: electrify or face stranded assets.
That case is now crashing into reality.
Grid constraints are biting. Interconnection queues are measured in years, not months. Political winds have shifted: New York delayed its all-electric building mandate, Berkeley’s gas ban was struck down, heat pump shipments are declining. The green imperative, however valid, has run into the physical and political limits of forcing change faster than infrastructure can adapt.
But here’s what’s being missed in the backlash: the strongest case for electrification has nothing to do with being green.
It’s about control.
The Control Thesis
I’ve spent enough time in plant rooms to know the difference between a building that’s alive to its energy system and one that’s deaf to it.
A gas boiler has two states: on and off. You burn fuel, make heat, that’s it. The building has no relationship with the grid beyond drawing power for ancillary systems. It can’t respond to price signals. It can’t participate in demand response. It can’t sell anything back.
An electric building is different in kind, not just degree. A heat pump with variable-speed compressor can modulate continuously. Add battery storage and it can time-shift consumption. Add an AI-optimised building management system and it can anticipate load before you know you need it. Add network connectivity and it becomes a node in a virtual power plant, aggregated with thousands of other buildings to provide grid services that get paid.
The electric building is responsive. The gas building is inert.
This isn’t about emissions. It’s about what electricity allows you to do that combustion doesn’t: measure, compute, store, shift, respond, participate.
The trajectory of civilisation is toward more control over energy. Every leap (from muscle to steam, coal to oil, centralised to distributed) has been about densifying energy and increasing the precision with which we deploy it. Electricity is a higher-quality energy carrier than combustion. You can do more precise work with it. The electric building sits on the right side of that trajectory. The gas building is an artefact.
The Economics Have Flipped
The barrier to this future was always cost. Batteries were expensive. Solar was marginal. The grid was the only game in town.
That world is disappearing faster than most realise.
Battery pack prices for stationary storage fell 45% in 2025 alone, the steepest decline of any lithium-ion segment. Stationary storage is now the cheapest category. Full system costs for utility-scale battery installations have dropped to around $125 per kilowatt-hour, down 93% since 2010.
Solar-plus-storage makes the building partially grid-independent. You generate on the roof, store in the basement, dispatch when you want. The grid becomes a backup and a market to sell into, not a dependency.
And the revenue opportunities are real. Virtual power plants aggregate distributed energy resources (rooftop solar, batteries, EV chargers, flexible loads) and provide services to grid operators. Demand response programs pay buildings to shift consumption away from peak periods. Energy arbitrage captures the spread between cheap and expensive power.
Research from Lawrence Berkeley National Laboratory estimates the value of building-sector load flexibility at $22 billion per year in the US alone. Over two decades, grid-interactive efficient buildings could deliver $100-200 billion in power system savings.
This isn’t theoretical. It’s happening. And it changes the fundamental economics of what a building is.
The Building as Infrastructure
Here’s the shift:
Traditional model: Building is a container for economic activity. Value comes from what happens inside: productive tenants paying rent. Energy is a cost to be minimised or passed through. The building is passive.
Emerging model: Building is a node in an energy network. Value comes from what the building does: generate, store, shift, sell. Energy is a revenue stream. The building is active.
The moment a building participates in VPPs, demand response, and grid services, it stops being a passive container and becomes a productive asset in its own right. The revenue isn’t dependent on who’s inside. It’s dependent on what the building can do.
If those revenue streams become substantial enough, the building’s economic viability becomes partially decoupled from tenant payments.
Rent doesn’t disappear. But it stops being the only thing that matters.
The Inversion of Tenant Selection
For centuries, the primary filter for tenant selection has been financial: credit quality, covenant strength, ability to pay. Secondary considerations (brand alignment, operational compatibility, community contribution) only mattered once the financial test was passed.
Loosen the financial constraint, and those secondary considerations can move up the stack.
In a building that earns meaningful revenue from energy services, you’re no longer asking only “can this tenant pay?” You’re asking:
What’s their load profile? A tenant with predictable, flexible consumption creates more VPP value than one with erratic, inflexible demand. Their energy characteristics become a selection criterion.
Do they bring flexibility value? EV fleets that can be aggregated into demand response. Equipment that can be curtailed without operational disruption. Willingness to participate in the building’s energy programs.
Do they contribute to what we’re building here? If financial pressure isn’t absolute, you can select for community value, network effects, cultural alignment. The health clinic that serves the neighbourhood. The startup that attracts talent. The anchor tenant that defines the building’s identity.
The building stops being a container you fill with whoever pays most. It becomes a platform you curate.
This Sounds Utopian
I know how this reads. The landlord-tenant relationship has been transactional for so long that imagining it otherwise feels fanciful.
But follow the technology curve.
Battery costs have been dropping roughly 20% per year for over a decade. Solar is already the cheapest source of new electricity generation in most of the world. AI-optimised building management systems are scaling rapidly. Virtual power plant capacity is doubling year over year in major markets.
The infrastructure decisions being made now (electrical capacity, battery readiness, BMS sophistication, network connectivity) determine whether a building can participate in this future or gets stranded from it.
A building being spec’d today without energy-ready infrastructure will be retrofitted at 5-10x the cost, or will simply be unable to access these revenue streams. It will compete for tenants on rent alone while participating buildings compete on a broader value proposition.
The stranding risk isn’t only about climate. It’s about capability.
What This Means for Capital Allocators
If this thesis holds, the questions shift.
On acquisition: What’s the energy revenue potential of this asset? What investment unlocks that potential? What’s the optionality value of being “participation-ready” even if the economics don’t fully pencil today?
On due diligence: Move beyond NABERS ratings and compliance certificates. What’s the electrical infrastructure capacity? Can the building support the loads required to be a grid-interactive asset? What’s the BMS sophistication? Can it respond to price signals at the millisecond level?
On hold/sell calculus: A building with energy revenue potential is a different asset than one without, even if current income is identical. Terminal value assumptions should reflect capability, not just tenancy.
On leasing: How do you structure participation in energy economics? Revenue sharing with tenants who bring flexibility? Lower base rent in exchange for demand response participation? The lease becomes a participation agreement, not just an occupancy contract.
On valuation: Buildings that can earn from the grid are part-property, part-infrastructure. The buyer pool may shift. Utilities, energy companies, infrastructure funds may become acquirers alongside traditional property investors. Valuation methodologies that capture only rental income miss the picture.
The Risks and Uncertainties
I want to be honest about what could make this thesis wrong.
Technology risk. Battery costs could plateau. Grid integration could prove harder than projected. The revenue opportunities could remain modest relative to traditional rent.
Regulatory risk. Energy markets are heavily regulated. Rules governing VPP participation, demand response compensation, and grid services vary by jurisdiction and could shift unfavourably.
Execution risk. Most building owners and managers have no experience operating in energy markets. The capability gap is real.
Timing risk. The trajectory seems clear, but the timeline isn’t. This could take longer to materialise than the technology curve suggests. Patient capital is the right framing; impatient capital could be disappointed.
Market structure risk. If everyone pursues this, the returns compress. Energy revenue could become table stakes rather than edge.
These are real risks. But I’d rather be early to a structural shift than late.
After Rent
I’m not predicting the end of rent. Tenants will pay for space for a long time yet.
But I am suggesting that the constraint which has governed tenant selection for centuries (the absolute primacy of financial capacity) is about to have competition.
When a building can earn its keep through energy services, the iron logic of “whoever pays most gets the space” softens. When that logic softens, other considerations can rise.
What kind of building do you want to create? What community do you want to convene? What value do you want to exist in the world beyond extracting rent?
These have always been questions for the privileged or the idealistic: those who could afford to leave money on the table.
The technology curve is making them questions for everyone.
I’ll be developing this thinking further. The infrastructure decisions that matter, the assessment criteria that capture capability, the deal structures that might emerge: these deserve closer attention.
If this framing resonates with how you’re thinking about long-term asset positioning, I’d welcome the conversation.
Published: January 2026