FEATURE ARTICLE, JULY 2006

ENERGY MANAGEMENT GENERATES VALUE
BEEP, BOMA’s new operational excellence program, educates the commercial real estate industry on energy efficiency.
John Sutton

Sutton

The statistics are staggering. Buildings today account for 40 percent of energy consumption in developed countries, according to the Organization for Economic Co-Operation and Development. The commercial office building industry spends approximately $24 billion annually on energy costs. Representing one-third of a typical of-fice building’s operating expense, energy is the single largest controllable cost.

But it’s just not the cost impact. If all members of the Building Owners and Managers Association (BOMA) on a national basis reduced energy consumption by 10 percent, that would be equivalent to reducing global warming gases by 40 billion pounds, or removing 4 million cars from American roadways.

BOMA is taking action with a new operational excellence program called BEEP (BOMA Energy Efficiency Program). In partnership with the U.S. Environmental Protection Agency Energy Star program, BEEP’s objective is to educate building managers and the commercial real estate community on energy efficient best practices, actively document success through recognition programs and communicate the value of successful management to the industry and stakeholders.

The reformation of energy usage also includes new construction. In March, the World Business Council for Sustainable Development (WBCSD) announ-ced it was forming an alliance of leading global companies to determine how buildings can be designed and built so they use no energy from external power grids, are carbon neutral and can be built and operated at fair market values.

The WBCSD wants to stop the energy drain by transforming the way buildings are conceived, constructed, operated and dismantled. Its stated goal reads that “by 2050, new buildings will consume zero net energy from external power supplies and produce zero net carbon dioxide emissions while being economically viable to construct and operate.”

Energy management is fast becoming a priority of commercial real estate on all levels. While solutions are being developed for future buildings, there are plenty of opportunities to increase efficiencies in existing buildings. Ac-cording to the Rocky Mountain Institute, most commercial, industrial and institutional facilities could save up to 90 percent of the energy used for lighting, fan and pump systems. There is an opportunity to save up to 60 percent of the energy used to heat and cool buildings and run office equipment. Overall, most commercial and office buildings use 10 to 30 percent more energy than necessary.

BEEP is educating building managers on how they can enhance energy efficiency with low- and no-cost methods. Solutions include reflective blinds, staging when building components are turned-on to minimize spikes in energy, and installing sensors that control lighting. Many investments, including installing high-efficiency lamps, may cost more than traditional lamps, but the ROI can be definitively calculated.

Financial analysts and institutional investors understand the energy-value connection. As an un-avoidable cost center, energy usage impacts the value of commercial properties. Based on a recent BOMA Experience Exchange Report, cutting a building’s energy usage by 30 percent has the same bottom-line benefits as a 3 percent increase in rental income or a 3 percent increase in net operating income (NOI).

The more energy expenditures are controlled, the more profitable a building is to operate. In one recent example, a seven-story, 108,650-square-foot office building performed a lighting retrofit costing $8,000 after rebates. The result was energy savings of $67,000 and a payback of out-of-pocket expenses in less than 2 months. When the property sold, brokers were able to garner an additional $1.5 million in value due to these efforts.

In the United States, commercial and residential buildings use one-third of the energy consumed and two-thirds of all electricity. Buildings produce roughly a third of carbon dioxide emissions and other emissions that harm air quality. Government regulations are not turning away from the problem — fines and restrictions are tightening.

To create value now, the commercial real estate industry must adopt and implement a new set of standards focused on managing energy. The BEEP program is helping the real estate industry create strategies for energy conservation. When energy efficient technologies, systems and tactics are leveraged, everyone wins.

John Sutton, FMA, is assistant vice president of corporate services for Texas Guaranteed Student Loan Corporation and is the past-president of the Building Owners and Managers Association (BOMA) Austin, Texas, affiliate.

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