Real estate strategies for constrained utility budgets

• Capital pressures are reshaping utility real estate strategies amid unprecedented infrastructure demands: As electricity demand accelerates at five times the historical rate driven by AI data centers and electrification, utilities face a capital crunch requiring $200+ billion in annual investments while regulatory constraints limit rate increases, prompting strategic real estate portfolio optimization to unlock needed funding.
  
  
• Comprehensive asset visibility is essential for utilities managing vast, complex property portfolios: With portfolios spanning thousands of facilities across multiple states—including substations, operations centers, offices and warehouses—utilities must leverage centralized platforms like CMMS and capital asset renewal dashboards to track condition, calculate replacement values and make data-driven decisions about underutilized or aging assets.
  
  
• Proactive maintenance strategies deliver significant long-term cost savings and operational resilience: Every dollar of deferred maintenance costs utilities $4-$7 in future expenses, while strategic preventive maintenance can extend facility lifespans by 15-25 years and reduce 30-year total cost of ownership by 25-40%, making disciplined capital planning essential for avoiding emergency repairs and managing predictable spending.
  
  
• Office footprint optimization presents the most immediate opportunity for capital release: Hybrid work models, talent market shifts and geographic proximity requirements are prompting utilities to consolidate office space, with strategic rightsizing efforts delivering millions in annual cost savings and property sale proceeds while maintaining operational effectiveness and improving employee experience in modernized facilities.
   

The U.S. utility sector is undergoing its greatest transformation since the mid-20th century. Surging electricity demand, driven by data centers powering AI, is pressing energy and utility companies to increase spending on new generating capacity. At the same time, investments must be made to modernize and upgrade existing infrastructure, much of which was built in the 1960s and 1970s.

These unprecedented demands are driving higher capital requirements for utilities. At the same time, the sector faces intense pressure to manage costs due to regulatory constraints on rate increases and the need to keep electricity affordable for consumers. The collision of rising infrastructure demands with limited capital budgets has prompted many utilities to take a closer look at how they can optimize their corporate real estate (CRE) portfolios.

By harnessing technology and expertise to build an efficient, resilient CRE portfolio, utilities can unlock capital needed for facility upgrades and grid expansion. This guide will help utility companies assess and leverage real estate for competitive advantage, while meeting the demands of tomorrow’s energy users.

After decades of minimal growth, U.S. electricity demand began to accelerate in 2025 and is expected to increase at a 2.5% compound annual growth rate through 2035, compared with a 0.5% CAGR from 2014-2024, according to research by Bank of America Institute. The sharp increase in demand is fueled by AI data centers, manufacturing growth and the adoption of electricity-based technologies such as electric vehicles (EVs) and heat pumps. According to the U.S. Energy Information Administration, power plant developers and operators plan to add a record 86 gigawatts (GW) of new utility-scale capacity in 2026, following the addition of 53 GW in 2025. This projected expansion will increase total U.S. generating capacity by 8% compared to the end of 2024.

The utility sector is building new power plants, transmission lines and other electrical infrastructure to meet this burgeoning demand, as well as investing in sophisticated tools for demand forecasting and grid management. The price tag is significant. A study by S&P Global Market Intelligence projects that aggregate energy utility investments will total $222 billion in 2026, $228 billion in 2027 and $208 billion in 2028. In early 2026, one major utility raised its five-year capital plan by another $16 billion to a total of $103 billion.

Due to budgetary constraints, utilities are exploring unique sources of capital to fund upgrades to their facilities. Private equity firms, which are helping finance the AI boom, are making major investments in the utility sector, a trend that could result in a more dependable grid to support the data center buildout. For example, a consortium led by BlackRock’s Global Infrastructure Partners and Sweden’s EQT AB recently agreed to buy AES Corp in a $33.4 billion deal to fuel the U.S. power company’s capital expansion.

Developing a robust capital plan requires full visibility into the assets you own and lease—a gigantic task for many utility companies. Utilities have unusually vast and complex real estate portfolios, which in some cases span more than 10 million square feet and include several thousand facilities across multiple states.

These portfolios typically contain a wide variety of property types, including substations, operations centers, office buildings, warehouses and sheds, both staffed and unstaffed. Many of these assets are located in remote areas scattered across large geographic regions. Portfolios may include a large number of aging facilities that are underutilized or have been shuttered.

Identifying and tracking all these assets is an essential step in optimizing operations and making smarter decisions about your portfolio. Typically, this work is done by a facilities management (FM) team that visits all the sites and collects as much data as possible on the buildings and the equipment they house, including information on age, condition, service history and other variables.

The team then enters the data into a centralized platform such as Corrigo, JLL’s computerized maintenance management system (CMMS), which allows for streamlined work orders and asset tracking. A CMMS is the essential building block for predictive analytics, smarter CRE decisions and any AI integration. A further step is to pull the data into a capital asset renewal (CAR) dashboard, which calculates the replacement value and deferred maintenance costs of each building. The values form the basis of a facility condition index (FCI), which then gets incorporated into a comprehensive capital plan that helps guide maintenance decisions and prioritize capital investments across the portfolio.

If you have surplus property sitting on the balance sheet, location intelligence tools like MapIT can help you target the right buyer or identify the highest and best use for the property. Should you invest in modernizing a 50-year-old, fully depreciated asset? Or should you sell or demolish it? Leveraging technology and data to gain more insight into your assets can help you make the right decision.

Much of the U.S. power grid is operating near or beyond its intended lifespan. Roughly 70% of transmission lines are more than 25 years old, after which key components begin to degrade, and many have exceeded 50 years of service. Aging facilities and equipment have accelerated maintenance needs and are vulnerable to failure. Utilities that don’t invest proactively in maintenance will inevitably need to perform emergency repairs or replacements, sometimes while thousands of customers are facing a power outage.

Preventive maintenance is a proactive approach that seeks to address potential problems before they become critical failures. While preventive maintenance incurs slightly higher initial costs, over the long term it saves money by extending the lifespan of an asset and reducing operational risks and downtime. By contrast, reactively maintained assets begin to experience unplanned breakdowns as they age and must be replaced prematurely.

Research by the National Research Council and the Federal Facilities Council confirms the importance of preventive maintenance to your bottom line:
 

• Every dollar of deferred maintenance typically translates to $4-$7 in future costs, with some studies showing ratios as high as 10:1 for critical building systems.
• Well-executed capital planning can extend a facility’s useful life by 15 to 25 years beyond its original design life, representing substantial avoided replacement costs.
• Strategic capital investments can reduce the 30-year total cost of ownership (TCO) by 25%-40%.
   

Even with proactive maintenance, every piece of equipment will eventually need to be replaced. Scheduling the replacement in advance, rather than waiting for the unit to fail, reduces the risk of downtime and outages. For example, an HVAC system is most likely to fail during summer or winter, when it’s stressed by extreme temperatures. It can take months to source and install a replacement for the system, during which time the facility may have no protection from the harsh climate.

Proactively replacing the unit before it fails offers another benefit, namely predictability of spend. For instance, if your portfolio contains 20,000 roofs with an average lifespan of 25 years, you will need to replace an average of 800 roofs per year. Knowing this number, you can bundle all 800 roofs into a program and bid to a small group of preferred suppliers. Purchasing in bulk allows you to squeeze costs to a minimum and pass the savings back into your operations.

Remote monitoring provides further visibility into your maintenance requirements. Connected technologies such as interior and exterior cameras and temperature and humidity sensors allow you to view and monitor your facilities in real time without having to send an employee to a site that might be located hundreds of miles away.

Streamlining Facilities Management and Project Management operations with leading practices and integrated technologies enables you to mitigate risks and curb costs. Mapping out your maintenance needs also allows you to manage your spend in a programmatic way. Knowing how much you need to spend on maintenance over a 5- or 10-year period enables more accurate capital planning and can be impactful when filing a rate case.

Example:

The largest electric company in Illinois, with 3.8 million customers, enlisted JLL to deliver a number of services including FM and occupancy planning for their portfolio of 63 owned and leased assets totaling 4 million square feet. JLL’s technology and tools, 360 OneView and BI Dashboard, gave leadership a transparent view of the portfolio.

The team identified operating risks and improved reliability through preventive maintenance, equipment replacement and improvement of HVAC and lighting systems to ensure system performance and occupancy comfort. In addition, the team conducted a master planning effort that resulted in densifying existing office building sites and leasing additional space, allowing the company to accommodate headcount growth of more than 400 employees in one year.

Offices are a key component of any utility’s real estate portfolio. Although they comprise a minority of the total occupiable space, offices impose significant leasing or ownership costs and play an outsized role in employee satisfaction and retention. At the same time, office properties, particularly those that are not included in rate cases, present the most viable opportunities to reduce space, resulting in significant cost reductions. Smart decisions in space allocation impact shareholder value for privately held utilities.

Here are some key considerations for optimizing your office presence:

Hybrid disruption

The work-from-home trend has profoundly affected the utility sector, with many companies shifting to a hybrid model in which employees work in the office two or three days a week. Office attendance policies should inform your decisions about renovations and rightsizing your portfolio.

Talent challenge

With many energy companies facing significant shortages of skilled workers in traditional high-cost markets, you may need to rethink your location strategy with a view to accessing larger talent pools. The talent shortage is driving employment growth in emerging hubs that often feature lower operational costs alongside a growing workforce.

Proximity policies

For the most part, utility companies face the same set of office efficiency and utilization issues as other corporations. One key difference, however, is that utilities expect employees to live within their service areas, which creates major geographical constraints that impact portfolio strategies.

Employee well-being

As in other industries, the employee experience should be a priority. Compelling workspaces help attract and retain talent and support higher productivity. Providing more collaboration spaces, break rooms for field workers, natural light and healthy food services can help build a stable, reliable workforce—reducing turnover and saving costs.

Example:

A Northern California utility company’s real estate portfolio had become overgrown through decades of expansion, resulting in operational inefficiencies and high maintenance costs. The company partnered with JLL to divest excess customer service offices and consolidate its under-utilized portfolio in San Francisco’s East Bay submarket.

JLL worked with the company to close 65 customer service sites totaling 1.1 million square feet, including 19 leased locations, by negotiating lease terminations and selling owned assets. To secure approval from the California Public Utilities Commission for these closures, the team gathered extensive customer-use data and developed studies demonstrating the benefits of closing specific offices as well as the nominal impact on California residents.

In addition, JLL helped the utility company reduce and realign its East Bay portfolio to take advantage of the shift from 100% onsite work to a hybrid model. The company relocated its headquarters and consolidated five offices into one, reducing its East Bay footprint by 50%, from 1.8 million square feet to 900,000 square feet, while maintaining adequate space for future growth.

Ultimately, the utility was able to shrink its footprint by 1.74 million square feet across 75 sites and avoid $36 million in annual costs without impacting operations or the customer experience. The company also achieved a further $2+ million in initial cost savings and generated $3.5 million in cash from property sales, resulting in a total project value of $42 million. The smaller footprint also removes more than 500 employee cars from Northern California roads.

Advancing technology is placing unprecedented strain on America’s power infrastructure, prompting energy and utility companies to pour hundreds of billions of dollars into modernizing and expanding the grid. This historic infrastructure buildout creates massive challenges for the industry, alongside regulatory change, growing competition and the transition to clean energy.

More than ever, utilities need to optimize their CRE portfolios to reduce costs, free up capital and stay nimble in a volatile landscape. Navigating these challenges requires a strategic partner with proven expertise. JLL offers an integrated suite of services to optimize your operations and reduce costs, including Facilities Management (FM), Project and Development Services (PDS), relocation project management, occupancy planning and more.

Click here to learn more about our services in the utility sector.