Key Benefits of Energy Efficiency in Commercial Buildings
For most commercial buildings, energy use is the single largest operating expense, representing approximately one-third of typical operating budgets. By becoming more energy efficient, commercial building owners and its business occupants can increase profits, reduce operating expenses, increase property asset value, and stretch operating budgets much further.
For example, in a 100,000 square foot building that pays $2.00 in energy per square foot annually, a 20% reduction in energy costs will directly translate into an increase of profits by $40,000. Using a capitalization (“cap”) rate of 8%, this can also increase the property value by $500,000, and within a typical payback period of 1 to 2 years.
In addition to these financial benefits, many studies have found that energy efficient buildings can actually produce intangible benefits that outweigh the direct energy savings 3 to 5 times over. These benefits are monetized by factors such as increases in employee productivity and increased sales from an enhanced “green” corporate image.
The obvious financial benefits of saving energy and lowering energy costs are widely recognized and commonly a primary driver for performing energy efficiency upgrades. Many corporations and real estate firms are now actively investing money back into their buildings because they realize the true business opportunity that exists with saving energy.
The following is a list of common financial benefits:
- Increases profits
- Reduces energy expenses
- Faster payback on investments
- Higher ROI
- Hedges against rising energy costs
- Stretches operating budgets
- Increases building value
- Increases competitive differentiation
- Qualifies for tax incentives
- Risk reduction for building owners
Another key driver for energy saving improvements is the substantial operational benefits that result from upgrading and modernizing the building shell and mechanical systems. These benefits are also easily quantifiable, such as reduced equipment maintenance and increased building control.
The following is a list of common operational benefits:
- Reduces operation and maintenance (O&M) costs
- Modernizes the building and mechanical systems
- Increases equipment life and reliability
- Reduces downtime caused by equipment failures
- Improves operational efficiency
- Increases building automation and control
Energy efficient and environmentally sustainable buildings are highly desirable for reasons beyond just reducing energy usage and generating dollar savings, due to the “intangible” benefits. Although it is difficult to quantify the exact dollar amount associated with these intangible benefits, it is certainly agreed upon by most business owners that an increase in employee productivity or decrease in work absenteeism has financial value.
The following is a list of common intangible benefits:
- Enhances the “green” and sustainable image of the business
- Increases employee productivity
- Improves building occupant comfort levels
- Enhances customer loyalty
- Decrease in work related injuries
- Increases employee morale and satisfaction of the company
- Decreases work absenteeism due to “sick building syndrome,” asthma or other respiratory ailments
- Reduce the physical manifestations of indoor air quality problems like mold, mildew and noxious emissions which negatively affect building occupants’ health
Source: US Environmental Protection Agency
How to Realize the Benefits of Energy Efficiency
The first and most important step that any size building owner should take is to work with qualified Energy Service Company to develop a comprehensive and holistic Energy Management Plan to reduce energy costs and operational expenses. Not all buildings are alike so this plan must be custom tailored to your specific property, corporate goals and desired outcome to ensure maximum value and cost-effectiveness.
Learn more about our 4-step process, or for a no-cost custom Energy Management Plan, call us today: