How power supply constraints are reshaping industrial asset value

In this Q&A with Stuart Patience, Head of Energy Solutions, we explore how power supply constraints are reshaping industrial asset value

What is happening with industrial power supply in the UK?

Electrification is driving the shift in how buildings use energy. As tenants move away from gas – adopting electric heating, installing EV charging infrastructure and introducing automation such as robotics and conveyor systems – demand for power increases.

At the same time, the grid is struggling to keep up. The strain is being felt across the UK and is only set to worsen; almost half of all primary substations will be experiencing capacity constraints by 2035, according to energy analysts Regen.  

In some cases, we are seeing connection dates being pushed out by years rather than months. That creates a perfect storm in which demand is rising, but the availability of power simply isn’t there.

Why has grid capacity become such a critical factor in real estate decisions?

Unlike most aspects of a building, power supply is very difficult to change. The industry has clear processes around how to extend a building or reconfigure a space but increasing grid capacity is not straightforward.

We’re working on projects where clients are being told they’ll need to wait until the early 2030s for additional capacity. That means power availability is now a fundamental constraint on development, refurbishment and occupation. If the power isn’t there, the project simply cannot progress in the way it was originally planned.

What impact is the strain on grid capacity having on commercial assets?

Power has become one of the first things occupiers look at when assessing a building.

A few years ago, grid connection capacity would not have featured prominently in marketing materials. Now it is often highlighted because it directly affects how a building can be used.

We are starting to see a shift in perception: buildings with strong power supply are more attractive, while those with limited capacity are becoming harder to position in the market.

That will increasingly influence both leasing and investment decisions over time and potentially create stranded assets.

Does limited power availability affect asset value?

It will. While there is limited formal data at this stage, the direction of travel is clear. Assets with robust grid connections will outperform those without.

If you have a large industrial unit with insufficient capacity, it restricts what tenants can do in that space. That impacts demand and, ultimately, value.

Over time, we expect to see a clearer pricing distinction between assets that can support modern energy requirements and those that cannot.

Why are some tenants giving power back to the grid?

In some cases, tenants reduce their power capacity to save on standing charges. If they are not using the full allocation, it can appear to be a sensible short-term cost saving.

The issue is that once that capacity is returned to the grid, it is very difficult to recover. It is effectively reallocated elsewhere. That creates a long-term risk for the asset, as future occupiers may require more power than is available.

How realistic is it to assume power can be reinstated later?

It is not realistic at all. If capacity is given up, it should be treated as gone.

We are seeing connection timelines stretching over many years, so assuming that power can simply be reinstated later is risky. This is where lease structures and asset management strategies need to evolve to protect power supply as a critical component of the building.

How much of the issue is being driven by data centres?

Data centres are a significant factor, particularly with the growth of AI and the push to locate infrastructure within Europe. There is a substantial pipeline of new facilities; Barbour ABI’s database identified a total of 171 data centre construction projects that have started in the last year and are due to start in the next five years. Of course, all of these require huge amounts of power.

However, they are only part of the picture. The broader shift is across the entire built environment: residential electrification, heat pumps, EV adoption and increased cooling demand are all placing additional pressure on the grid.

What role can solar PV and battery storage play in combatting power shortages?

On-site energy solutions are becoming essential. Solar PV can typically offset around 25 to 35 per cent of a building’s annual energy demand, reducing reliance on the grid.

When combined with battery storage, that energy can be used more strategically as it allows building owners to manage peak demand, store excess generation and improve resilience.

In a constrained grid environment, that flexibility is increasingly valuable.

What are the most common mistakes asset owners make when it comes to power?

The biggest issue is jumping straight to a solution without understanding the building’s energy profile. Many owners do not have detailed data on how their assets consume energy, which makes it difficult to size systems correctly.

We also see projects being driven purely by contractors without independent technical oversight. That can lead to poorly designed or installed systems, which create long-term risks for the asset. Early-stage advice is critical to avoid those issues.

What should investors and asset owners be doing now?

The priority is early engagement and informed decision-making. That means understanding current energy use, future demand and the capacity of the existing grid connection.

From there, it is about developing a strategy that combines demand reduction, on-site generation and long-term planning for electrification. Buildings need to be designed and managed with future energy requirements in mind, not just current use.

At Hollis, we bring together building surveying, engineering and energy expertise to help clients make those decisions with confidence. The earlier we are involved, the more effectively we can protect asset performance and long-term value.

References:

•    MCS Foundation: Investing in local grid infrastructure should be a national priority – new report

•    Barbour ABI: What’s driving the surge in data centre construction projects in the UK?