Offices, apartment buildings, stores and other commercial real estate buildings are big energy users. In office buildings alone, energy accounts for as much as one-third of operating costs, typically making it the largest single expense.1

The building sector consumes more energy than either manufacturing or transportation, using about 40 percent of the energy consumed in the U.S., at a cost of at least $400 billion each year.2

Clearly, any building owner would appreciate energy purchasing strategies that could help reduce this budget burden. Fortunately, in today’s competitive energy markets, numerous opportunities exist to improve how building owners or energy managers purchase their energy.

But it’s not only about how you buy energy—it’s also about how you use and manage it.

Making a building more efficient—using less energy while maintaining necessary operations—can lower your operating costs. Consider the numbers: If you reduce energy use by 10 percent in a 100,000-squarefoot office that pays $2.50 per square foot for energy, you have the ability to save $25,000 in net operating income (NOI).3

Intelligent Energy Management for Commercial Real Estate Owners

Commercial and residential buildings account for 12 percent of annual greenhouse gas emissions in the U.S.4 Minimizing that footprint through energy efficiency can turn a property into a community asset rather than a liability—particularly as states strive to comply with the Clean Power Plan, which was enacted in August 2015 by the U.S. Environmental Protection Agency (EPA).5 The rules require that states reduce carbon dioxide emissions to specified levels.

The Clean Power Plan has practical implications for commercial real estate. For example, some cities and states are likely to create new environmental reporting requirements—in particular, building benchmarking standards along with tighter building codes and larger incentives that encourage smart energy use.

The growing concern about climate change from governments, businesses and consumers alike is among the key reasons that savvy building owners are expected to invest $960 billion globally by 2023 on improvements to heating, ventilation and air conditioning (HVAC) systems, windows, lighting, plumbing fixtures and other energy-intensive equipment.6

Energy Management for Commercial Real Estate

Gain a Competitive Edge

Commercial real estate owners are also recognizing the competitive value of buildings that embrace smart energy management—which may account for why 20 percent of new buildings are being built “green” from the start.11

High-performing buildings—those that are exceptionally energy efficient, durable, sustainable and focused on occupant comfort 12—enjoy a competitive advantage when trying to attract quality tenants, as many tenants appreciate the comfort and convenience of a smart, environmentally friendly building. Today’s advanced energy technologies not only can save energy, but can also improve air quality, lighting, and temperature and humidity control.

Furthermore, tenants find that workers in high-performing buildings are happier, more productive and less likely to miss work, according to several studies identified by Carnegie Mellon University.13 

Aim for Higher Occupancy Rates, Rents and Resale Value

Given their enhanced comfort, it’s not surprising that high-performing buildings tend to achieve enviable occupancy rates. In a survey of multiple studies, researchers found a greater occupancy rate—up to 23 percent more—for green-certified office buildings, with no instances of green certification negatively affecting building occupancy (see below).14

Tenant demand for green properties may be one reason that analysts report that commercial real estate owners can sometimes charge higher rents if their buildings offer advanced energy features. Some LEED buildings, for instance, are able to charge lease premiums of 25 percent or more, according to a report by the Institute for Market Transformation (IMT) and the Appraisal Institute.15

The sophistication of a building’s energy system also appears to increase its resale value. A range of studies have found improved resale values of 5 percent to 35 percent for buildings with LEED or ENERGY STAR designations.16

These factors—higher occupancy, higher lease income, better resale values—make a compelling case for focusing on energy strategy, especially in cases where government incentives are available.

Commercial properties can earn predictable internal rates of return above 5 percent if they employ an

effective energy strategy, according to Lux Research .17.

Most commercial property owners lack the time and expertise to focus deeply on their energy needs and savings. So a knowledgeable energy provider can be an important part of your energy strategy. An experienced company will craft options and recommendations based on your business objectives and your short- and long-term goals for the property. With proper guidance, you can leverage the right

combination of energy supply and services to help maximize your property’s ROI.

Don't let the energy market control you, control your energy. Get started today!

Download our free Smart Energy Strategies for Commerical Real Estate guide now!

__________________________________

1. ENERGY STAR, “Commercial Real Estate: An Overview of Energy Use and Energy Efficiency Opportunities,” retrieved August 2015
2. Institute for Market Transformation, “Building Energy Performance Policy,” retrieved August 2015
3. Institute for Market Transformation and Appraisal Institute, “Green Building and Property Value: A Primer for Building Owners and Developers,” 2013
4. U.S. Environmental Protection Agency, “Sources of Greenhouse Gas Emissions,” retrieved August 2015
5. U.S. Environmental Protection Agency, “Fact Sheet: Energy Efficiency in the Clean Power Plan,” retrieved August 2015
6. U.S. Green Building Council, “The Business Case for Green Building,” retrieved August 2015
7. ENERGY STAR, “How Will ENERGY STAR Benefit My Shopping Center,” retrieved September 2015
8. U.S. Green Building Council, “The Business Case for Green Building,” retrieved August 2015
9. Institute for Market Transformation, “Building Energy Performance Policy,” retrieved August 2015
10. Ibid.
11. Lux Research, “Driven by High Rents and Values, Green Buildings Market Grows to $260 Billion,” October 29, 2014
12. National Institute of Building Sciences, High Performance Building Council, “About the Council,” retrieved August 2015
13. U.S. Green Building Council, “Linking Energy to Health and Productivity in the Built Environment,” retrieved August 2015
14. World Green Building Council, “The Business Case for Green Building,” 2013
15. Institute for Market Transformation and Appraisal Institute, “Green Building and Property Value: A Primer for Building Owners and Developers,” 2013
16. Institute for Building Efficiency, “Green Building Asset Valuation: Trends and Data,” Johnson Controls, 2011
17. Lux Research, “Driven by High Rents and Values, Green Buildings Market Grows to $260 Billion,” October 29, 2014

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