While the environmental and financial benefits of energy management are well-known, most commercial real estate owners and managers do not see energy management technologies as a way to improve tenant relationships.
Why Energy?
In commercial office buildings, energy usage is the single largest operating expense, accounting for around one-third of operating budgets, according to Energy Star. Yet office buildings waste up to one-third of the energy they consume.
When the Landlord Pays for Energy
If the landlord bears some portion of the costs for energy, such as heating and cooling, there is a strong incentive to get tenants to improve energy efficiency.
As a method of market differentiation, a landlord could offer lease terms that can be reduced if the tenant lowers their energy usage. If the landlord is using an energy analytics software solution (EAS), they will have the visibility to understand the process improvements and ideal energy efficiency measures that their tenants could deploy to reduce energy costs. Using this analysis, the landlord can estimate the annual energy savings that they will experience and calculate a reduced rent amount for the tenant where some of the savings are passed through. Further, using EAS the landlord would can measure and verify the actual savings that an energy efficiency measure is providing versus the original estimate.
When Tenants Pay for Energy
If tenants are responsible for all energy costs, landlords could still take the step of outfitting the building with energy efficient hardware and software to help tenants save money. Doing so can be a smart long-term business practice, similar to the way commercial real estate managers add other amenities like new appliances in order to get tenants to renew leases or to raise prices for future tenants.
“Not updating or upgrading a building or its systems (on the inside and the outside,) is a prescription for lower rent and an excuse for a tenant to move out,” writes property management company Bluestone & Hockley.
Helping renters lower their monthly costs by improving energy efficiency is a win-win as you’re helping your tenant improve their profitability while increasing the value of your real estate asset at the same time.
To start using energy efficiency as a way to improve tenant relationships, see the Artis Energy 8 Step Process to Develop and Implement an Energy Management Strategy for Your Business on our recommended approach.
Request a complimentary energy efficiency assessment to find out how Artis Energy’s RTIS® energy analytics platform can provide you with the visibility and insight to transform energy from a fixed cost into a distinct competitive advantage.