Increase Net Operating Income with Energy Performance Benchmarking
According to energy.gov, there is more than 81 billion square feet of commercial building space in the U.S. Imagine the cost of energy use in all of these buildings. The figures must be astounding, especially since energy is one of the highest operating expenses for commercial buildings. Wasted energy negatively affects net operating income. Improving energy efficiency benefits tenants, potential purchasers, and increases the bottom line.
The energy efficiency of a building factors into its value, making the investment in retrofitting an existing building financially worthwhile. According to the American Society for Testing and Materials (ASTM), a building’s annual usage of energy includes cooling, heating, electricity, and other sources of energy (natural gas, propane, fuel oil, coal, wind and solar energy). The U.S. Department of Energy states, “The potential to reduce energy consumption in existing and new commercial buildings is enormous. On average, 30% of the energy used in commercial buildings is wasted…”
The audit process begins with the Energy Performance Benchmarking Assessment. Assessments or energy audits benefit buyers, sellers, and lenders. Prospective purchasers are wise in determining baseline conditions with an energy assessment. The benefits of improving energy efficiency reach far, including: Improving occupancy rates and increasing rental income. Commercial tenants are wise in leasing green buildings. Higher rents are possible with higher energy efficiency, according to The Institute for Market Transformation (IMT), who publishes resources and statistics for green building and sustainability efforts that are transforming the real estate market.
Improvements to Decrease Energy Costs & Increase Net Operating Income
Lighting and HVAC system upgrades are common ways to benefit a shopping center, attracting eco-friendly customers and tenants. Installing Low Emissivity (Low-E) Windows in office and multi-family buildings increases thermal insulation by reducing the transference of infrared solar radiation. Attractive double paned, energy efficient windows appeal to tenants. Double and triple pane windows also keep traffic noise to a minimum in high density areas.
(graphic credit: americanenergyinnovation.org)
“A 2008 study by the CoStar Group found that rental rates in ENERGY STAR-labeled buildings rented at a $2.40-per-square-foot premium over similar unlabeled buildings. The labeled buildings also had 3.6 percent higher occupancy rates” (IMT, 2015). For more information on benchmarking: (www.imt.org/uploads/resources/files/PCC_Benefits_of_Benchmarking.pdf).
Moving a building into the green building category enhances opportunities for the attraction of eco-friendly consumers and tenants. Responsible owners seek ways to improve energy efficiency and environmentally conscious citizens respect this choice. Energy Star labeled buildings and LEED certifications have many advantages and benefits.
Leadership in Energy and Environmental Design (LEED) Certification by the U.S. Green Building Council
Rollins College built a LEED Gold certified building, the Bush Science Center, on its campus in 2013 in Winter Park, Florida (rollins.edu). Although the science center is newly constructed, the U.S. Green Building Council also has a LEED O + M rating system for existing buildings, like shopping centers, K-12 schools, hotels, and warehouses that need renovating. These existing buildings can also achieve the Leadership in Energy and Environmental Design certification (http://leed.usgbc.org/o-m.html).
Rollins has one of the most sustainable campuses, although not all buildings are LEED certified. In some cases the cost for certification was invested back into a retrofitting project and the building may be just as sustainable, but not have the third party certification (rollins.edu). The cost of third party certifications should not stop an owner or lender from increasing NOI and achieving a more sustainable building, shopping center, or apartment complex.
Thinking about hiring a firm to do an independent Building Energy Performance Assessment (BEPA) for an office building or a multi-family project? There’s a boutique commercial building consulting company based in Orlando, Florida that provides a myriad of services to commercial building owners and lenders, including BEPA audits to help improve energy efficiency, lower energy costs, and increase net operating income (NOI).
When it is time to order Property Condition Assessments and/or supplemental Building Energy Performance Assessments for a portfolio, please call on the professionals at Commercial Building Consultants, LLC (CBC). With more than 65 years of combined experience, the CBC team has traveled the U.S. assisting lenders, owners, and prospective purchasers with commercial building due diligence. To learn more about CBC’s professional staff, building consulting services, including Building Energy Performance Assessments, please visit the company’s website: http://www.commercialbuildingconsultants.com/building-energy-performance-assessment/.