FEATURE ARTICLE, OCTOBER 2004

TAKING THE HIGH ROAD TO LOWER ENERGY COSTS
Boost energy efficiency and raise environmental awareness in the commercial real estate investment industry.
Dennis Thurman

Thurman

In managing commercial real estate properties, it is important to understand the value of energy efficiency, not only in reducing the operating costs for tenants and owners, but in bringing a balance to the environmental issues confronting our world. Through a combined network of property managers, engineers and leasing personnel, successful real estate management companies set stringent standards for energy efficiency and stress the importance of the U.S. Environmental Protection Agency’s (EPA) Energy Star program, which works to reduce global greenhouse gas emissions through diligent energy control measures.

Energy concerns have increased through the years as deregulation issues hit states like California, plummeting it into electric shortfalls and blackouts. Throughout the Golden State, customers of local utility companies have had to look more closely at areas of energy reduction than they did in the past. While the current crisis has eased, the commercial sector still bears the brunt of the energy costs and will continue to for years to come.

As more western states move into the deregulation market, they no doubt will experience some of the growing pains California suffered. Hopefully, these states will have learned from California’s troubling setup — too few power-producing plants forcing a reliance on outside sources to cover the energy shortfall. Because these other states have the ability to meet more of their power needs internally, they should not experience the increase in electricity costs that California incurred.

The commercial real estate industry has many methods to identify and implement energy control measures. While energy management can be challenging, new technology and resources become available every day. Internet-based tracking and metering systems are becoming the norm for real-time monitoring of energy usage. By reducing energy consumption, the industry can reduce the demand for energy production and thus reduce energy rates. This also decreases air pollution and operating costs while increasing tenant retention and improving asset value.

Property management firms must stay committed to improving energy management practices at the real estate assets they oversee. By implementing concentrated, first-class energy procedures and continuing to raise operating standards, everyone in the industry can help in the recovery of our valuable resources and assist in cleaning up the environment for generations to come.

A variety of tools can be used to track and quantify the energy consumption of a commercial real estate portfolio. Below are a few of the tracking methods and tools that can be implemented:

• Energy Star’s benchmarking software “Portfolio Manager”;

• Customized monthly utility tracking sheets and customized whole-building energy-saving matrices;

• Metering and commissioning reports;

• Annual utility incentive spreadsheets from the various service areas;

• Annual energy and mechanical audits;

• Participation in local and national real estate energy committees.

Initially, commercial real estate users can take advantage of low-cost/no-cost types of building tune-ups to help reduce energy consumption at their properties. These tune-ups include establishing a regular inspection process for cleaning lamps and fixtures, turning off lighting and HVAC on unoccupied floors, examining the hours of operation and the temperature settings of HVAC equipment, making sure that the HVAC equipment is not firing up at peak-load periods, instructing personnel to close interior shading devices to reduce night heat loss in winter and minimize solar heat gain during summer, insulating between heated/cooled spaces, reducing elevator operation according to occupancy requirements, regularly calibrating HVAC thermostats, routinely checking the operation of all time clocks and establishing night-group janitorial cleaning.

Most of these tasks, which generally cost less than 5 cents per square foot, should be considered maintenance issues rather than capital investments. Utilities make up 30 percent of a building’s operating expenses, and every dollar invested in energy performance is equivalent to a $2 to $3 increase in asset value at a 10 percent cap rate.

Generally, lighting retrofits, which reduce maintenance time and improve lighting levels, can cost from $1 to $1.25 per square foot when occupancy sensors are used in conjunction with tube and ballast replacement. With the incentives available and the energy saved from the upgrades, the payback is achieved in a relatively short amount of time.

Energy control measures not only help a company’s bottom line, they also reduce pollution. Reinforcement of energy efficiency standards is crucial to maintaining good practices and equipment. Whether through the EPA’s Energy Star portfolio software or preventive measures, striving for energy efficiency and sustainability is more than just a business responsibility.

Dennis Thurman is vice president of engineering services for Transwestern Commercial Services’ western region.


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