In this struggling economy, controlling costs and maintaining competitiveness are paramount, and real estate companies are going back to basics. Leading commercial real estate owners and managers are leveraging energy efficiency as one of the most cost-effective ways to reduce operating expenses and help tenants control costs.
A renewed focus on energy efficiency can support financial goals and maintain asset value while enhancing tenant attraction and retention. Because energy is the largest controllable operating expense for a typical commercial building, reducing energy costs has a significant positive impact on the bottom line. When implemented in a coordinated fashion, you can improve energy performance without spending capital.
Assess Building and Portfolio Energy Performance
“We find that management commitment is essential, and that a vital first step is to assess and benchmark energy performance,” says Jean Lupinacci, director, ENERGY STAR Commercial & Industrial Branch.
A helpful benchmarking tool is the U.S. EPA’s Portfolio Manager, which generates energy-performance ratings. The tool also generates financial metrics, such as energy costs per square foot, annual energy costs, and cost savings; inventories the greenhouse-gas emissions associated with energy usage; and tracks water consumption and costs. “The EPA’s energy-performance rating is considered the industry-standard metric for energy efficiency,” says Henry Chamberlain, president and COO at BOMA Intl., Washington, D.C.
Regularly updating energy-consumption data creates a mechanism to measure improvements and cost savings by comparing consumption and costs for different time periods; further, you’ll have a measure of your carbon emissions in the event that cap-and-trade legislation is implemented.
Portfolio benchmarking will help you compare properties to identify cost-effective opportunities. For example, immediate improvements to a lower-performing building will bring greater returns than looking to improve a higher-performing building.
Low Costs, High Returns
After assessing performance and identifying buildings to focus on, identify opportunities and implement changes that make sense for those buildings, such as …
Engaging Tenants. “Tenants control a large portion of your building’s energy consumption, so taking the time to engage them in energy-efficiency efforts right away can really pay off in terms of the building’s operating budget and tenants’ utility costs,” says Dennis Thurman, senior vice president of engineering, and national director of energy programs, for Houston-based Transwestern. Start by leveraging the EPA’s Bring Your Green to Work with ENERGY STAR campaign to show tenants how to reduce energy consumption immediately. Provide e-newsletters, pamphlets, and signage, and communicate in person to encourage tenants to take simple actions toward greater energy efficiency.
Operations and Maintenance. Operations staff should regularly walk through buildings, inspecting equipment to ensure that it’s functioning as intended, and checking all control equipment for proper programming. One engineer told the EPA that he found an error in his EMS programming that caused duct heaters to run during warm weather. Correcting the error led to $3,700 in annual energy-cost savings with no investment.
If you’re willing to invest money, take this process to the next level via retro-commissioning or recommissioning. According to the ENERGY STAR Building Upgrade Manual, commissioning projects for existing buildings have a median cost of $0.27 per square foot, but result in whole-building energy savings of 15 percent, with a simple payback of less than a year.
Janitorial activities typically account for almost one-quarter of a commercial building’s lighting usage. Opportunities to reduce that amount include team cleaning, where staff cleans one floor at a time, and lighting is turned on and off as janitors progress through the building. You can also engage janitors and security staff to turn off lights that were left on by tenants. If tenants are amenable, experiment with cleaning during the day when the lights are already on.
A comprehensive preventive-maintenance program establishes appropriate levels of maintenance to be performed at scheduled intervals. The time investment may be substantial, but the returns will also be large – and with a low upfront dollar investment.
Lighting. In some locations, lighting levels may be too high and can be lowered by delamping and disconnecting unused ballasts. Delamping may be accompanied by adding reflectors and new lenses to the fixtures, enabling the fixture to more effectively distribute light. One property reports that it reduced energy costs by more than $100,000 annually just by delamping.
Periodically check occupancy sensors and photocells; re-examine lighting controls to identify new opportunities. For example, reduce the minutes of inactivity after which motion sensors are programmed to shut lights off, or program parking-garage lights by zone to reduce the amount of lighting on at night.
Consider adding new lighting controls where possible. You may be able to install additional occupancy sensors in restrooms, supply closets, mechanical rooms, elevator cabs, and private offices; case studies from ENERGY STAR show that these devices pay for themselves in less than 2 years. Photosensors and dimmable ballasts can be installed indoors near windows, as well as on exterior lights, to take advantage of available daylight.
Another low-cost opportunity is a full-floor lighting sweep – adjust building lights so they’re not hardwired in the “on” position and can be turned off during EMS-programmed lighting sweeps. Also, periodically drive past the building at night to ensure that the programmed sweep is actually taking place, and that all non-emergency lights are included.
Perform a lighting survey to locate any remaining incandescent bulbs, halogens, or T12 fluorescent tubes. These inefficient lamps can be replaced with CFLs, LEDs, or 25- or 28-watt T8 fluorescents. If you’ve retrofitted with 32-watt T8 fluorescents, these are a big step up from T12s, but consider replacing them with high-lumen 25- or 28-watt tubes. Don’t overlook exit signs, accent lighting, elevator cabs, or other unique lighting applications.
In many commercial buildings, air passes freely between conditioned and unconditioned spaces where pipes and ductwork penetrate walls and ceilings, underneath doors to the outside, and at dampers. Regularly check for these gaps and seal or weatherstrip them to immediately reduce heating and cooling costs. Also, consider conducting a thermal scan of the envelope to reveal more in-depth opportunities to repair air leaks or areas of thermal transmission.
Thermostats. Thermostats provide numerous opportunities to improve energy performance. Simply tweaking temperatures can reduce whole-building energy savings by 2 to 4 percent per degree by which setpoints are raised or lowered during the cooling and heating seasons. Talk with tenants to see if temperatures are comfortable, and experiment with adjusting temperatures by a few degrees.
Ensure that vacant space temperatures are set back significantly, or that HVAC equipment is turned off, if practical. Set temperatures back at night and on weekends as well – by at least 10 degrees – using your EMS or programmable thermostats, if you have them (or manually, if necessary).
In addition, limit access to thermostats located in tenant spaces, or program your EMS to allow tenants to make adjustments only within a specified range. If tenants can make frequent adjustments, energy costs will fluctuate wildly and systems will work harder. Be sure that building engineers reset temperatures to optimal setpoints each day so that tenant adjustments are only temporary (if the EMS isn’t doing this automatically).
Have operations staff compare thermostat readings with the actual space temperatures (as measured by a handheld temperature gauge). If necessary, recalibrate thermostats so their readings equal the true space temperatures. The EPA estimates that calibrating thermostats can produce whole-building energy savings of up to 3 percent.
Finally, take a closer look at the thermostat on your water heater. The EPA recommends setting water-heater temperatures to 120 degrees F. as opposed to manufacturer-set temperatures of 140 degrees F.
HVAC hours. Evaluate opportunities to reduce or eliminate unneeded HVAC and lighting by conducting a census to determine when tenants actually use the building. For example, though Saturdays may be part of their lease hours, how many tenants are really working? “We’ve looked across our portfolio for opportunities to reduce energy consumption and have found reducing weekend hours to be one of the most cost-effective ways to accomplish this. We’re working with clients to provide weekend hours upon request rather than across the board,” says Nicholas Stolatis, director, strategic initiatives, TIAA-CREF Global Real Estate, New York City.
There may be similar opportunities to scale back hours during the week. At the very least, ensure that, if a tenant requests after-hours air one weeknight, hours are reset to normal the next day. In addition, experiment with starting up HVAC systems later or powering them down earlier. Chances are good that you’ll be able to reduce HVAC operating hours and still maintain comfortable temperatures.
VFDs and VAVs. With varying levels of demand placed on HVAC systems, motors and fans don’t necessarily need to run at full speed all the time. Variable frequency drives (VFDs) and variable air volume (VAV) devices regulate motors and fans as necessary. Some of the earlier practices will further reduce building loads, making it important to match systems with variable speed technologies. The cost of installing these devices can be recouped quickly – in as few as 2 years, as suggested by ENERGY STAR case studies.
This is by no means the entire list of opportunities for energy reductions, but they’re some of the simplest, most cost effective to implement. Even better, they’re proven to work, based on the experiences of thousands of building owners and managers.
Look for more opportunities in A Practical Guide to Energy Management: Enhancing the Bottom Line, a report from the Institute of Real Estate Management (IREM), Chicago. You can also explore additional options by conducting an energy audit and developing an action plan based on the results. Contact your local utilities to see if they offer free or discounted audit services; many will waive the audit fee if you implement some of the recommendations following the audit.
Further, utility incentives and rebates can make equipment upgrades and retrofits even more financially attractive, potentially moving some measures from the “expensive” category to the “low-cost” category. “Utility incentives enable landlords to work proactively with tenants to reduce energy use in buildings with triple-net lease structures, where tenants pay their own utilities. The utility dollars often help convince tenants to pay for the retrofit in cases where the landlord may not pursue a given capital project because the benefit would flow disproportionately to the tenant,” says Christian Gunter, assistant vice president for Responsible Property Investing, Kennedy Associates Real Estate Counsel LP, Seattle.
For summaries of programs in your area, visit the Database of State Incentives for Renewables & Efficiency, which covers not only state incentives, but also those offered by local municipalities, utilities, and the federal government. The ENERGY STAR Directory of Energy Efficiency Programs is another resource for financial and technical assistance.
To get started, leverage free ENERGY STAR resources, such as an online training session, Best Practices to Improve Energy Performance, and a best-practices checklist. Once you’re ready to evaluate low-cost upgrades, browse the ENERGY STAR Building Upgrade Manual, which provides actionable information and technical details about five recommended stages of upgrades. Portland Energy Conservation Inc. also offers a range of tools and guides.
“Strategically staging improvements is important – the early savings from low-cost measures can buy you some leverage to invest in larger improvements,” says Brenna Walraven, managing director, national property management, USAA Real Estate Co., San Antonio, TX. “But, by reducing energy loads first, you may reduce the size of the new equipment you need to purchase, further reducing expenses in these tough economic times.”
You will see tangible results – a real drop in energy costs and, along with that, an increase to net operating income, asset value, and tenant attraction and retention. But, there is no true end to this process. Owning or operating an energy-efficient portfolio is a cycle of continual assessment and improvement, and requires an ongoing commitment.
Alyssa Quarforth is ENERGY STAR® program manager for commercial properties at the U.S. EPA.