CREJ - Property Management Quarterly - April 2016
Learning how to identify, prioritize and implement improvements for energy-conservation measures in commercial retrofit and new construction projects can be difficult. After eight years of daily research and practice assessing commercial buildings, I am still constantly learning about cutting-edge technology, new building codes and updated rebate programs. There are so many factors contributing to an understanding of energy-conservation measures, and this article will help shed some light on how and why it is important to stay on top of these opportunities. To the uninitiated, it can be a little overwhelming. Green building design for the global market is in growing demand. Taking advantage of lower operating costs, certification and documentation can provide: • Quality assurance, • Higher value at point of sales, • Higher occupancy rates, • Increased productivity, • Higher rental rates, and • A feeling of doing the right thing. “Globally, energy efficiency represents about 40 percent of the GHG reduction potential that can be realized cost-effectively,” according to the State of Green Business Report 2016 from GreenBiz.com. Savvy developers, building owners and property managers are intelligent investors who know how – and when – to deploy capital for the best return on investment. In many Colorado real estate markets, now is the time and energy-efficiency improvements are the how. How long you intend to hold onto a property should directly impact the specific types of capital improvements or investments made toward existing buildings and new developments. Following are three of the best ways to improve your building through energy-conservation measures. Lower Operating Costs When evaluating various energy-conservation measures, you must analyze the upfront costs, available incentives, ease of implementation, various technologies and the paybacks. The two main drivers of our need for ongoing energy-conservation measures education are technological advances and the ever-changing regulation and incentive climate. Staying on top of each of these is a full-time job, so having knowledgeable and trusted partners is imperative. Current incentives coupled with the decreasing cost of LED lighting technologies make lighting projects the most lucrative investment. So far, only 28 percent of the U.S. market has been penetrated by LED technologies, and the U.S. market is poised to be at 95 percent in the next five years, according to Maryrose Sylvester in “JPMorgan and Current Launch World’s Largest LED Upgrade.” There are dozens of grant, rebate and financing programs in each city that push projects to simple paybacks of only six months to five years. With the various tools and calculators available, many companies can offer simple lighting evaluations for free. For new construction projects, the incentives available for specifying more efficient materials upfront often will make them less expensive than, or equal in cost to, older and less-efficient technologies. And while not strictly associated with lower operating costs, proper lighting (even in parking lots, closets and basements) can improve the bottom line by making the area look and feel safer – resulting in higher occupancy rates and decreased liability issues. “Governors, legislators, regulators and citizens are increasingly recognizing that energy efficiency is a crucially important state resource,” according to an article on the American Council for an Energy-Efficient Economy website. Additional building system improvements and the average paybacks include: • Lighting, heating, ventilating and air-conditioning controls: one to five years • HVAC equipment: two to seven years • Solar: four to 10 years • Windows: five to 10 years Many of the faster paybacks are due to the incentives available. These savings can then be used for improvements on other existing buildings, new construction projects or building aesthetics. Certification Green building certifications, the big ones being Energy Star and LEED, have remained steady over the years and are a major reason for these improvements. Construction of green buildings appears to have plateaued, based on the number that have registered for and been certified by the U.S. Green Building Council’s LEED rating system. This can be read in two ways: One, that the growth of green buildings seen a few years ago – at least in the U.S. – has slowed. Or two, that building “green” has become the new norm and is therefore less interesting to early adopters and the sustainably minded. Due to the strength of the Colorado real estate market, many investors are looking at higher point-of-sale values and higher occupancy rates as ways to increase the value of their asset. Supporting those needs, building owners have reported that new or renovated green buildings command a 7 percent increase in asset value over traditional buildings, according to The World Green Building Trends 2016 SmartMarket Report. Documentation Most building systems, even when regularly maintained, reach the end of their useful life at 15 to 25 years of operation. Therefore, consistent maintenance and replacement of equipment is essential. As an owner or manager, if you do not have an updated equipment list or you don’t know the equipment’s rated useful life, you are missing valuable aspects of the “building value” equation. This information also will help with the operations and maintenance budget, as well as providing a useful maintenance tool for the next owner or manager. Another item, color temperature, is important to document, and consistency is key. Having multiple lighting color temperatures in a single office space can cause stress on the eyes and decrease productivity. This effect is multiplied by the use of proper HVAC commissioning and controls, which can help with productivity and improve employee, tenant and customer attitudes. New technology, codes and rebate programs are constantly evolving to make transitions for the commercial industry beneficial to owners, managers and tenants. Reduced operating cost creates the opportunity to improve net operating income for years, increase point of sale value and increase occupancy.