Smart building-energy investments positively impact net operating income and asset value from both a cost and a revenue perspective. The challenge has been knowing which investments make the most sense for a specific building.
As in any other industry, successful real estate firms seek the fine-line balance between investment and return in their portfolios. Traditionally, that effort has been primarily focused on the fiscal health of the buildings.
However, accelerating public awareness of the impact of building-energy performance makes finding that balance more complicated than ever—and more important. As noted in the excellent and well-researched “The Business Case for Green Building,” published by the World Green Building Council, improving energy performance is demonstrably linked to higher asset value, lower operating costs, and better workplace productivity and health.
Still, the economic side of the investment equation remains the dominant factor. In general, the capital budget is used to maintain and strategically refine a cost/benefit equilibrium throughout the building or portfolio lifecycle. It is very difficult to maintain this critical balance when capital investments do not support the long-term growth of asset values.
Investments in energy efficiency are no different. While these projects go a very long way toward supporting cost and revenue goals, they are not easily measured by the standards we use to evaluate more traditional investments. Knowing that a new chiller will operate more efficiently is not the same as knowing how the equipment will interact with other building systems, whether the chiller generates the highest return on energy investment dollars or, most important, how this investment compares with other capital needs as measured by traditional investment metrics.
What’s ultimately needed to meaningfully invest capital in building performance is the means to evaluate energy investments by traditional investment measures. For example, it is fairly safe to say that a lighting upgrade has a reasonable investment return. But beyond that, how far do we go? How do we gauge the recommendations from professionals in the field? How can businesses evaluate a building energy investment against other demands for scarce capital and responsibly protect their stakeholders?
With over 35 years of commercial real estate and finance experience, I understand the business importance of these questions. I also understand that as good as some of the available analysis tools and services may be, they focus only on slices of the overall picture of a building and the broader real estate strategy.
Consequently, in building our LeenOps Lifecycle Platform™, we have created a resource that considers both the economic and the environmental sides of the question. For the unique situation and business circumstances of any given building, it provides owners with decision support that includes the financial return of optimized energy investment strategies along with the energy/environmental impact over the building’s lifecycle.
Armed with this information, real estate owners can be certain that the investment they make is the single best option in light of their business goals.