Commercial real estate companies agree that sustainability is a business issue. We want to conserve energy and manage costs and do so with outstanding building operations management. In addition to being the right thing to do for clients, tenants, and the communities we serve, it is cost-effective and practical — reducing carbon emissions and other environmental impacts while directly affecting the bottomline.
In alignment with that approach, firms must develop a sustainability strategy focused on energy management as the first step to green. Because energy is the largest controllable operating expense in commercial buildings, a small reduction in energy expenses has a significant impact on a building’s bottomline and can greatly enhance the overall value of a property.
Transwestern’s involvement in energy management originated during the 1999 California energy crunch. To combat rising energy costs, we began tracking energy use at our managed buildings in Southern California and implemented smart energy management strategies to reduce consumption. Realizing the value this brought to those properties, we expanded our efforts to other regions around the country. Those first Southern California buildings used Energy Star to track and evaluate energy performance. Nearly 10 years later, Energy Star resources are still used across more than 43 million sq. ft. of our office portfolio.
A program of the U.S. Environmental Protection Agency (EPA), Energy Star helps businesses and individuals to save money and protect the environment through strategic energy management. Using Energy Star’s Portfolio Manager, a baseline can be established for each asset. This allows users to understand energy consumption compared with similar buildings, track operating costs and savings, and set reasonable targets to reduce consumption along with the associated environmental impacts.
Combining Energy Star guidance with hands-on expertise, companies can develop a series of best practices to apply across multi-tenant office properties. These may include annual engineering audits of each property, in which buildings are reviewed for opportunities to improve performance. The implementation of no- and low-cost operational adjustments that include green cleaning, recycling, reducing or eliminating weekend operating hours, and a commitment to recycle at least 30% of all construction waste. Standard practices for capital improvement programs should emphasize the most efficient equipment while considering the environmental impact, ownership objectives and payback periods.
Another aspect of a firm’s approach to energy management should be to actively participate in industry initiatives, such as BOMA International’s sustainability programs. In 2007, BOMA issued the 7-Point Challenge to reduce the real estate industry’s use of natural resources, dependence on non-renewable energy sources, and waste production. Organizations that commit to the challenge aim to reduce their portfolios’ energy consumption by 30% compared with an average portfolio, by working collaboratively with building management, ownership, and tenants.
What ties all of these efforts together are the results they achieve for clients — both financial and environmental. As of 2007, more than 200 of Transwestern’s buildings had earned or qualified for the Energy Star label, which recognizes superior energy-efficient buildings across the country.
One example, the Atrium — two 10-story high-rise office towers totaling 397,143 sq. ft. in Orange County, Calif. — has been under management since 2000. The energy efficiency improvements paid for themselves in 39 months through a 40% annual energy savings, which increased potential asset value by nearly $2.2 million.
At Marathon Oil Tower in Houston, we took advantage of both operational improvements and equipment upgrades to achieve 22% annual energy savings and $386,000 in annual operating expense savings. Two major initiatives involved lighting. First, a lighting audit identified opportunities to reduce unnecessary lighting after-hours and on weekends; the low-cost operational adjustments to lighting schedules resulted in savings of 420,000 kWh per year. Additionally, a lighting retrofit resulted in a yearly reduction of 2,100,000 kWh.
In these properties and others, results accrue primarily due to optimizing day-to-day operations and maintenance. Remarkable energy and cost savings can be achieved for clients by first targeting operational strategies with little to no additional cost, and combining those with cost-effective equipment upgrades.
Operations are very important to successful energy management and success in this arena is directly correlated to the skill and passion of team members who operate our buildings daily. Since the energy efficiency of properties is literally under the control of these management teams, building property managers and engineers must be equipped with the expertise they need to maintain successful energy management programs.
As proof of the value of this comprehensive approach, Transwestern has reduced energy consumption by an average of 20% to 30% in properties actively engaged in our sustainability program. Further, following these efforts can distinguish our industry in the marketplace as one that is committed to sustainability through energy efficiency and as providers of enhanced commercial real estate services that positively impact the bottomline and the environment.
Larry Heard is CEO of Houston-based Transwestern, a full-service commercial real estate services firm.