Most owners and operators have been hammered over the head by vendors promising energy cost reductions, often as a wide range of percent reductions.
It seems like if you just added them up, you could save 175% on your energy costs!
Of course, some solutions require significant capital investment, others require teams to adopt entirely new processes.
As owners and operators continue to shift from growing their portfolio to maximizing efficiency in existing assets, understanding where there is the biggest opportunity within existing workflows is paramount.
In a year when utility costs have risen by 10% on average, focus needs to be on what can be done, right now, to bend the curve of these controllable operating expenses.
#1 Maximize Tenant Utility Recovery
Landlords that bill back tenants for their share of utilities often do so as an afterthought.
It’s assumed that the process is done correctly when, in our experience, audits almost always identify errors in billing methodologies.
In one recent example, an 11 building campus was underbilling tenants by over one million dollars annually.
To combat this, operators should ensure accurate meter readings, vet billing methodologies used, and review how rates are calculated from utility bills.
Technology is very helpful for both the first and third steps here.
Meter readings can be performed on a mobile app instead of clipboards. Potential typos are flagged in real time and every reading is stored digitally.
Utility bills can be automatically scraped by software, as well as analyzed for variances that need to be verified by humans.
In truth, vetting billing methodologies is primarily a human endeavor, and should be done by trained professionals. Software providers like Enertiv generally provide this as a standard procedure when onboarding.
#2 Charge Correctly for Overtime HVAC
Landlords are happy to grant approval for HVAC to be kept on for tenants who need it outside of normal schedules.
However, while many charge for this convenience, they are often significantly underestimating their costs.
In our experience, overtime HVAC rates are usually calculated correctly at first and not adjusted over time.
In a recent example, a property was undercharging by 45%, equalling over $80,000 a year.
Ideally, operators should calculate the true cost of running HVAC, so that tenants can be billed the appropriate amount
However, this can be a painstaking analysis using spot checks of amperage readings and complicated calculations in spreadsheets.
On the other hand, it’s remarkably straightforward with real-time energy monitoring.
Simply select the times and spaces you want to analyze and the software does the rest.
#3 Correct Performance Drift
Operating buildings is complicated.
Overtime HVAC is requested one night and never changed back. Third party vendors mess with configurations. Fire alarms go off and reset equipment schedules. Tenant comfort is over compensated for.
There are many reasons for the phenomena of “performance drift,” where a building’s efficiency degrades over time.
Performance drift has been shown to result in a 10-30% loss of system efficiency over a one to two year period
Leading portfolios leverage real-time monitoring to correct for these issues the moment they occur.
Real-time monitoring not only collects data from each piece of equipment, it analyzes that data and transforms it into insights.
These are granular and prescriptive recommendations on exactly how to optimize schedules and set points, as well as balancing tenant comfort with more advanced strategies like airside economization.
Conclusion
Utility costs (and utility recovery) are not preordained. They are a direct result of the workflows and technologies adopted by on-site teams and third party vendors.
At a time when portfolios are shifting from growth to efficiency, utilities should be one of the areas closely inspected.
That said, it is almost impossible to run a modern portfolio as efficiently as possible without the support of technology.
Software eliminates errors, calculates the true cost of operations, and corrects for issues that typically aren’t seen by humans.
The alternative is operating expenses outpacing rent growth and poor ESG scores.
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