Find new ways to improve cash flow through energy savings.
Building strong, productive relationships with your tenant or tenants has been a long but fruitful process. Keeping your cash flow optimized and operations costs manageable is an ongoing challenge but one you’ve consistently overcome with strong processes and regimentation.
You’re now at a stage in your commercial real estate ownership career that you can start to refine and hone how you manage your property.
Enter energy savings opportunities. According to Energy Star, the average commercial building captures only 70% of its energy usage. That’s 30% wasted on average.
Since you already have your proven process and systems in place, you now can turn your focus to implementing energy savings strategies to keep your tenants satisfied while improving your bottom line.
Since you’ve been in the game for a while, you’ve probably been tracking energy usage. If that’s the case, it’s time to dig in and do some analysis. Where are energy costs reasonable? Where is there room for savings? Once you identify energy usage strengths and weaknesses, you can identify which technologies, techniques or lease contract tools you can use to improve efficiencies.
Conduct an Energy Audit
After taking a very close look at your building’s energy performance and tenant usage levels, consider hiring an organization that conducts thorough, deep dive building energy audits. As you’ve learned throughout your commercial real estate management career, “You don’t know what you don’t know.”
It could be well worth the investment to have a pro offer another perspective and approach. Companies specializing in energy audits will have their fingers on the pulse of the latest tests and solutions.
Put the audit report together with your own analysis, and you’ll have a very strong foundation for implementing changes to your physical plant and your tenant lease agreements.
A Few Quick, Low-Cost, High Reward Actions
Not every energy usage approach has to be complex and high cost. There are any number of simple fixes you can make that will provide significant cumulative impact. For example:
- Remember to turn off lighting during hours where you can use natural light
- Install motion detection lighting in offices
- Replace light bulbs with compact fluorescent (CFLs) or limited-emitting-diode (LED) bulbs. You can even use LED Exit signs to save energy.
- Consider purchasing a maintenance service agreement with local contractors to manage annual repair costs.
- Depending on your industry, the installation of variable speed drives (VSDs) can help regulate usage levels.
- Install programmable thermostats in each office to automate/schedule cooling and heating usage according to building use patterns.
Get Tenants Involved
As you know, lease agreements vary on which party is responsible for paying utilities and other operations-related costs. You can read our blog on the different types of leases for a refresher if you feel in need.
Regardless of the lease type you’ve deployed, getting your tenants on board with improving energy efficiency in your building will only help. If you’re responsible for utility cost payments, then enlisting the help of your tenants and rewarding them for participation will benefit your bottom line. If your tenants are responsible for utility and maintenance costs, providing them with tips, strategies and tools to save money can only enhance the strength of your relationship and elevate your standing as a landlord.
Provide a manual with tips.
Create a building-wide contest and give out awards/rewards for the most energy efficient office.
Remember, you can install the newest and best technology but if the people using it don’t buy in its impact will be significantly limited.
Don’t Go Overboard
Stick to your philosophy of slow, steady, rational improvement over time. There is likely no need at the moment to install solar panels on your roof or invest in the latest and greatest green technologies.
There might be a time for that in the future.
For now, however, start with these low-cost, high impact energy savings changes and tap into the power of your people to make smarter energy use choices.
You’ve built your operation the right way, so that you’ve earned the space to continually improve your building’s performance and enhance the lives of your tenants, keeping them happy and hopefully paying their rent on time for years to come.
Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He has been an active member of the Frederick, Maryland community for over four decades. He has served as chairman of the board of Frederick Memorial Hospital and as a member of the Frederick County Charter Board from 2010 to 2012. He currently serves as chairman of the board of Frederick Mutual Insurance Company. Established in 1843, it is one of the longest enduring businesses in Frederick County.