No Matter the Property Type, It Pays to Invest in Energy Efficiency
- Jul 23, 2019
When the Institute for Market Transformation released a series of case studies examining the financial outlay and impact of energy efficient retrofits on a range of building types across the United States, it caught my attention. As the chief operating officer of a real estate company that owns an extremely diverse portfolio, I’m always interested in understanding which property types benefit the most from energy efficiency upgrades.
After looking at six projects across a variety of property types, the non-profit organization came to the same conclusion that has driven my company’s strategy for many years. While they may differ depending on property type, opportunities to realize serious savings through lower energy consumption and operational costs always can be found if you look hard enough.
Of the almost 5 million commercial buildings in the U.S., retail buildings account for the largest energy costs—nearly $20 billion each year, according to ENERGY STAR—and are responsible for the second largest percentage of greenhouse gas emissions. As we’ve learned in recent years in embarking on large-scale capital improvement projects at several retail developments throughout our portfolio, however, it’s usually best to focus on energy retrofits related to HVAC systems and lighting. By initiating LED retrofits to the buildings and parking lots, and upgrading HVAC systems to high-efficiency models, we’ve been able to not only increase the comfort of customers and employees but also achieve cost savings that enhance our bottom line.
The benefits of energy efficiency retrofits in the multifamily sector are well documented. In addition to operational cost savings, owners can expect to realize lower vacancy rates and higher property values, while residents benefit from lower utility bills, a healthier indoor environment, and increased comfort. What makes multifamily special, however, is that it’s sometimes incorporated into residential or commercial energy efficiency programs. At the apartment buildings we own in Hoboken and Harrison, we’ve been able to identify programs that drive deeper energy savings because the incentives and other aspects of the program are designed for the intricacies of the multifamily housing market.
With almost 60 percent of existing office buildings built prior to 1980, the sector is unique in the sheer number of opportunities it presents for deep, cost-effective energy efficiency improvements. In Bedminster, N.J., where we’ve owned a portfolio of office properties for decades, we’ve kept the buildings in best-in-class condition by making improvements such as installing variable frequency drive EC motors to reduce consumption up to 50 percent, and we’ve seen the impact in the form of reduced operating costs, improved tenant satisfaction, and other related benefits. Through the help of our energy risk management advisory firm, we were able to implement these projects successfully, driving down both our energy consumption and peak demand. In addition, the firm helped us secure Renewable Energy Certificates to offset a portion of the properties’ electricity loads, further reducing our carbon footprint.
Unlike an office or multifamily building, where usage patterns are less varied and it’s fairly easy to model energy consumption and normalize it against external factors, an industrial facility’s operational costs are dependent on weather, product variation and evolving production schedules. But while saving don’t always come as consistently as they often do in other sectors, it’s still possible to find ways to save money by retrofitting warehouse properties—it just requires more work and experimentation. For example, last year, we realized more than $130,000 in savings at two industrial properties by partnering with our energy risk management advisor.
It’s not easy to remain a champion of sustainability when dealing with the everyday challenges of real estate development. But by devoting the time and resources necessary to implement an energy efficiency strategy that is optimized by property type, you’re guaranteed to see a positive impact on your bottom line.
Kurt Padavano is principal & COO of Advance Realty Investors.