When a building consumes less energy, it’s greener, it’s kinder to the environment. That’s nice. But the owners of commercial buildings – apartment towers, strip centers, warehouses – are more interested in a different kind of green: money.
They want energy improvements to save them dollars, big dollars, every year.
And here’s the good news: A growing number of commercial property owners are working with consultants and energy companies to reduce their yearly energy bills. They’re doing this by upgrading to LED lighting, an option that’s steadily growing more affordable; installing energy management systems; relying on programmable thermostats; and using motion sensors to make sure that rooms are lit at full force only when necessary.
For Adam Niederloh, program manager, and Barb Ohlsen, assistant program manager, with Minnetonka, Minn.-based The Weidt Group, this is especially good news. The Weidt Group consults with property owners across the Midwest – in addition to its office in Minnetonka, the company boasts offices in Midwest cities Madison, Wis., and Des Moines, Iowa – to help them operate more energy efficient buildings.
They’re finding that a growing number of these building owners are willing to spend money upfront if what they’re buying results in years of lower energy bills.
“Our goal is make sure that owners are aware that operating efficient buildings can bring them solid savings, year after year,” Niederloh said. “A lot of owners are already aware of this. That’s a good sign. But there is still some hesitation from some of them about the upfront costs. If we can show them, though, how quickly they can recover these costs, it becomes a lot easier to convince them to invest in efficiency improvements.”
Why it matters
The economy is in recovery mode. And the commercial real estate market in many Midwest cities is booming.
This doesn’t mean, though, that it’s easy today to make big money owning commercial properties today. Yes, rents have gone up in many Midwest markets. But expenses have risen, too. It’s still important for owners to squeeze as much profit out of their office buildings, apartments, retail centers and industrial properties as possible.
That’s where energy savings come in. Every dollar in energy savings goes right to the bottom line of a building owner.
For instance, when retailer Big Lots installed an energy management system from Siemens in its stores, the retailer began seeing its energy costs drop by 15 percent to 17 percent a year.
This is part of the reason why more owners are willing to invest in such high-tech energy solutions as demand response systems. These systems help buildings consume power at the most affordable times. Most utilities charge more for power used during periods of peak demand. A demand response system can help building owners consume more power during off-peak periods and less during higher-cost peak periods.
A recent report from Pike Research predicted that revenues from demand response services will grow from nearly $1.3 billion in 2011 to an impressive $6.1 billion in 2016.
The good news for building owners is that much of the technology that can help them reduce their energy bills is becoming more affordable.
Niederloh points to LED lights. Just two years ago, these lights were considered cutting-edge, and they came with the price tag that goes with cutting-edge tech. Today, though, the price of LED lighting has dropped, and more building owners are going with this type of lighting to cut their annual energy costs.
As the price of LED lights has fallen, it is taking building owners a shorter period of time to recoup the costs of installing them and begin realizing yearly savings.
“LED lights are now a more common request in our conversations with building owners,” Ohlsen said. “The owners know about them. They don’t consider them to be overly exotic any more. And that’s a good sign.”
Return on investment is key, of course, to convincing owners to invest their dollars in efficiency technology. If owners understand that they will save enough money each year to quickly recover their upfront costs, they are far more likely to install efficient lighting, thermostats and demand response technology in their buildings, Niederloh said.
“If the payback period is less, that does make these energy-saving investments more appealing to building owners,” Niederloh said. “This is a message that building owners have gotten. They understand now that it is possible to recover the costs of high-efficiency lighting, thermostats and other solutions in less time.”
A holistic approach
Consultants like The Weidt Group take a holistic approach to energy savings, working closely with their clients to reduce their yearly bills.
Every building is different, of course. So it’s impossible to take a one-size-fits-all approach. As Ohlsen says, The Weidt Group first evaluates the shells of each of their clients’ buildings. They then provide their clients with information on everything from how much energy they could save by boosting the insulation in their walls to how much they’ll reduce the burden on their heating and air-conditioning systems with higher-efficiency window glass.
Weidt Group pros will then take a closer look at how the building operates. They’ll determine if automated thermostats and motion sensors will save a significant amount of money. They’ll look at the impact that LED lights or high-efficiency fluorescent lighting might have on a property’s yearly energy consumption.
Some building owners might decide to invest in higher-impact systems, such as heat pumps or heat-recovery chillers, products that cost more upfront but might provide a bigger yearly return on their investment.
“It’s about finding the right strategies for each individual building,” Ohlsen said.
Officials at The Weidt Group are finding that commercial property owners are becoming more willing seemingly every day to explore ways to reduce their energy bills.
This holds true especially with new construction. As Niederloh says, it’s easier to include energy-efficiency measures when you’re building a new property from scratch. It can be more challenging to retrofit existing structures to make them more efficient.
“With new construction today, everything is on the table,” Niederloh said. “Owners recognize that they will have to swallow a first-cost pill. But they also realize that once they do, they’ll be able to take advantage of lower energy costs. There was a time when owners were hesitant to talk about energy saving measures. Now there is no bogeyman. They’re not scared to consider these technologies.”
And that can only be good news for the commercial real estate business as property owners continue their efforts to find ways to make a profit in a competitive industry.