If you work in commercial real estate property management and leasing, you will likely understand that the energy costs are increasingly a big part of property performance.
Energy costs will impact property outgoings for the landlord and for the tenant. Those costs have to be balanced and controlled so they do not drag down the other factors of property performance. All things being taken into account, occupancy costs in leasing any property greatly impact the decisions of tenants.
Tenants will make their occupancy choices in shortlisting buildings that are energy efficient and ‘cost controlled’. It directly follows that the older inefficient buildings will become redundant and less attractive to occupants.
Vacancies happen in older buildings
Vacancy factors are now rising in older buildings as tenants look to relocate into better quality occupancy. The landlords and owners of older buildings are seeing vacancy factors rise; the only way they can handle such an investment change is to look at extensive refurbishment and or a material change of use. Many landlords are not positioned to handle the change.
Some landlords are not sufficiently ‘cash positive’ to control that new property strategy. You could say that there is a good degree of listing and change opportunity in this ‘redundant’ segment for the astute commercial real estate agent or broker.
The property cycles
So now we are now at an interesting point in the property cycles where many CBD buildings were constructed pre 1980 at a time when energy and communication was not such a ‘critical issue’ in building construction. Now that we move away from the ‘Global Financial Crisis’, the economies of the developed western world are strengthening as are the city based businesses.
Companies and local businesses are looking for efficiencies in building services and amenities as they purchase or lease new space. Occupancy costs are being closely assessed. Are you the specialised property consultant to help with all of this?
There are many things to track and measure as part of monitoring the energy consumption and overall efficiencies. The landlords and tenants that you work with will make their property choices on a number of important facts including ‘energy’.
What’s the attraction?
Any energy efficient building is likely to be more attractive to tenants from letting perspectives. That then leads to lower vacancy factors and improved income stability for landlords.
Here are some specific property facts to check and investigate as you work with the challenges of commercial leasing and or property management:
- Energy as a percentage of occupancy costs – Understand the energy costs per unit of area in a property. Also assess the energy costs averages per building type in the location. You will soon see if a building is ‘energy redundant’.
- Lighting initiatives – Most buildings today should be ‘retrofitted’ with energy efficient light fittings and tubes. That strategy should apply in tenancy areas as well as common areas.
- Plant and equipment cycles – The building plant and equipment operations in any building should be adjusted for seasonal climatic savings, tenant occupancy, and energy off peak costs.
- Energy buying power – In most cities today, there are many ways for property owners and tenants to buy power from different suppliers. Property owners and or tenants should be investigating the purchase of energy from reliable and yet cost effective energy suppliers. Savings can be made when considerations are given to peak energy loads, and load shedding as part of property operations and plant performance.
- Common area power – The use of energy in common areas will be a drain on property outgoings. It directly follows that all uses of energy in common areas should be reviewed for efficiency.
There are many strategies that evolve from these initial investigations. Understand the properties that you work with from energy and occupancy cost perspectives. It will help you with your leasing efforts.