June 30, 2016

Five Financial Reasons to Consider Energy Efficiency Upgrades in Your Commercial Buildings

Energy has its costs. And those costs can be substantial. According to the U.S. Department of Energy, commercial buildings in the U.S. alone spend in excess of US $132 billion annually on energy. DOE notes that as much as a third of that energy is wasted.

Improving the energy efficiency of your company’s office buildings, warehouses, and labs isn’t just about minimizing your environmental footprint.  It’s also about growing your bottom line by making an investment today that will pay off in spades tomorrow.

Here’s how:

1.   Reduced Operating Costs

Energy retrofits have a direct positive impact on the bottom line. Various surveys of different kinds of energy-efficient buildings back this up. For example, Energy Star-certified office buildings are 35 percent more efficient (and hence cheaper) to operate than standard office buildings, which translates into energy bills that are US $.50 per sq. ft. lower than non-certified buildings. A 2012 survey of 562 financial institutions found that the 92 LEED-certified buildings in the study generated a reduction in annual utility costs per employee of US $675.26. Buildings that undergo deep energy retrofits can register dramatically higher rates of savings. And depending on where you’re located, you can also benefit thanks to an array of tax credits, grants, and expedited building permits to implement deep energy efficiency upgrades and projects.

2.   Improved Tenant Retention

Managers of REITs report higher occupant comfort and higher occupancy rates among Energy Star-certified structures in the U.S.

3.   Higher Return on Investment

According to the U.S. Green Building Council, green buildings can garner as much as 20 percent higher rents from tenants. If your company owns a green building as space for your own employees, you can also experience the indirect financial benefit of increased employee productivity due to the positive physical and mental benefits of working in an environment with reduced indoor air pollution and more natural lighting. The Lawrence Berkeley National Laboratory reported green building retrofits reduce respiratory illnesses in employees by up to 20 percent and allergies by up to 25 percent, which also means fewer sick days.

4.   Market Differentiation

In a world increasingly committed to protecting the environment, an office building constructed or renovated to feature energy efficient design will appeal not only to tenants but to your customers.  According to a recent Nielson global survey on corporate social responsibility, 55 percent of respondents said they would pay more for products or services from a company committed to reducing its environmental impact and promoting positive social change.

5.   Improved Cap Rates

Given that increased energy efficiency helps you realize higher net operating income, greener buildings also have higher values in the marketplace. According to a report from DOE, a building that experiences increased net operating income as a result of persistent energy cost savings at a capitalization rate of 8.5 with a $.50/sq. ft. reduction in energy costs, will see a $5.90/sq. ft. increase in building value.

So as you look for ways to grow your company’s bottom line, don’t overlook the potential drain on income that inefficient buildings may be causing you. You may be able to significantly increase profits by decreasing energy use through deep energy-efficient retrofits!

Interested in learning more?