Cleantech Poised to Capitalize on Real Estate Opportunities, Tax Incentives

The cleantech industry is moving at breakneck speed. With the American Recovery and Reinvestment Act (ARRA) signed into law in February, the cleantech sector is poised for continued growth as venture capitalists flock to what they hope will result in big returns.

Venture capitalists have already poured $8.7 billion into energy-related startups in the United States since 2006. Looking abroad, clean technology venture investments in North America, Europe, China and India totaled a record $8.4 billion in 2008.

As an emerging industry, cleantech companies are well-positioned in the current marketplace to capitalize on premium office or industrial space available at a discount while also maximizing tax incentives related to their expansion efforts.

For example, ARRA has injected roughly $60 billion into green initiatives and created $20 billion in beneficial tax incentives for cleantech companies. In May, the Department of Energy allocated $786.5 million in Recovery Act funding for new and existing projects in biorefineries, sustainability research, infrastructure-compatible biofuels, and ethanol research. The government has additionally granted $2.3 billion in tax credits to manufacturers of equipment needed for cleantech which will continue to bolster support for this emerging sector.

Fueled in part by this influx of capital and incentives, many cleantech companies are maturing rapidly and working to relocate to new regions from which to stage their expanding operations. In July, the biofuels joint-venture between BP and Verenium Corporation announced it will move its corporate headquarters from Cambridge, Mass. to Highlands County, Fla.

In August, Swedish-based Swebo Bioenergy revealed it will expand into the United States with a new office in Annapolis, Md., that will serve as its U.S. base of operations. Meanwhile, other cleantech companies, such as Denmark-based Vestas Wind Systems, are steadily expanding their U.S. operations. Vestas is in the process of launching three new offices in Colorado, adding to its existing presence in Portland, Houston, Chicago and Boston.

At the same time, there are also a growing number of relocation destinations to consider based on new tax incentives for real estate transactions, whether it’s a company in Silicon Valley looking to relocate or expand their operations in Colorado or an international company interested in establishing a presence in the United States.

The following five U.S. cities offer an array of attractive destinations for cleantech companies looking to relocate:

– Austin: Austin is providing the new headquarters for the Clean Technology & Sustainable Industries Organization (CTSI). CTSI chose Austin because it has a thriving cleantech community, consisting of researchers (including those at the university level), sustainable development and investment. The Innovate Texas Foundation is also located in Austin, and expects to work with CTSI.

– Boston: In 2008, the Boston area saw an investment of $387.17 million in greentech projects. The Boston area also includes a variety of cleantech pioneers, including Aeronautica Windpower, Conservation Services Group, Boston-Power, Inc., Evergreen Solar, GreatPoint Energy and others.

– Denver: Denver continues to be one of the strongest hubs for cleantech companies. The Colorado Clean Tech Initiative ensures that start-up businesses in the state receive some assistance with funding. Meanwhile, Denver also has a blueprint for cleantech use and transportation that focuses on sustainability. The city was one of the first to get an alternative fuel vehicles for public transportation, and boasts the first major airport to reach ISO 14001 standards.

– Seattle: Seattle is on the short list of cities that are likely to receive millions in funding for the purpose of jump-starting alternative energy technology. An annual budget from the federal government, if Seattle is approved as a R&D center, could be as high as $200 million.

– San Francisco: San Francisco regularly hosts the prominent Cleantech Forum, bringing in cleantech leaders from throughout the county to share best practices, while the city also continues to maintain its status as a recognized destination for emerging companies. San Francisco also has a sustainability plan that tackles air quality, biodiversity, energy issues and green economic development.

As an emerging industry, cleantech companies searching for new office or industrial space also have the opportunity to create tremendous value across the country through strategic lease negotiations, as building owners and developers aggressively battle rising vacancy rates.

According to Reis Inc., a New York real-estate research firm, the vacancy rate recently hit 16.5%, a five-year high, as companies returned a net 19.6 million square feet of space to landlords in the third quarter in 2009. Due to the increasingly large blocks of available space, landlords are being forced to make more creative concessions than ever before to lure tenants, which include tenant-improvement allowances for build outs and renovations, as well as discounts on naming rights and signage.

Opportunities Abound

In order to take advantage of these opportunities, both foreign and domestic cleantech companies exploring expansion or relocation initiatives need to closely examine their options, which increasingly include a variety of local, state and federal tax incentives for qualified companies.

Lou Vidaillet is Vice President of Howard Ecker + Company where he specializes in business development, lease negotiation, lease analysis and tracking multiple office markets across the United States. Howard Ecker + Company recently launched its Cleantech Real Estate Group (CREG).