By Matt Werner and Sarah K. Abrams
Executives and facility managers across the commercial and industrial sector have, until recently, mostly looked at energy efficiency as a reactive maintenance proposition. They saw their obligation as one to keep the lights on and core equipment operational with little data or insight into energy consumption. The default mentality was: “If it ain’t broke, don’t fix it.” Although this mentality is changing, energy efficiency projects are still typically conducted on a site by site basis requiring a slow audit, bid, and budget approval process, which delays savings and increases both costs and operating risk.
As in most industries, the real impact comes with scale. In the case of energy efficiency in particular, achieving scale across distributed real estate assets is where efficiency can really drive more significant and faster returns to the bottom line.
Here are the five key factors to keep in mind when considering operating expense forecasting and the energy performance of the buildings your company operates:
- Think portfolio-wide. Get out of the “site by site” evaluation rut, and leverage the buying power of replacing equipment at scale. Such an approach will also allow managers to proactively drive savings and reduce risk of disruptive downtime or ad hoc maintenance events across the portfolio. One example of a risk is the R22 refrigerant (Freon) ban, which could result in escalated HVAC replacement costs after 2020.
- Define the metrics that matter. Operating expenses impact a number of business units and stakeholders. Decide and then outline what metrics would drive a successful program for your company. For example, reducing downtime from failed HVAC/RTU units is important for reducing operating expenses, as well as improving customer experience and employee productivity.
- Dive into the data. Gather as much data as possible to arm your partners with utility-specific and equipment-specific information. For example, consider working with a partner to take stock of inventory by type and equipment age while gathering any historical data on maintenance expenses incurred.
- Offload performance risk. Explore new financing models that transfer risk and upfront capital investment. Internal capital budget approval process can delay execution and reduce savings. Since time is money, every day spent operating inefficient equipment means missing out on cash for your bottom line. There are a number of new turnkey service models that enable companies to bypass the legacy procurement and lengthy capital budget approval cycles. For example, CBRE brought in an Efficiency-as-a-Service provider, Redaptive, to roll out Iron Mountain’s energy efficiency program across a portfolio of 70 buildings in 30 states driving significant savings for the company.
- Measure and communicate savings. The actual savings from efficiency upgrades can be hard to isolate since utility bills don’t track consumption at the equipment level. Fortunately, new IoT-enabled equipment level measurement devices are increasingly more cost-effective and can streamline reporting and verification of actual savings and the impact on your operating budget.
The most effective energy efficiency retrofit improvements are projects that have a strategic plan and align with a business’s energy and savings goals. This is why it’s important to define metrics, closely track data, and offload performance risk to ensure the highest impact on your business.
Werner is Chief Operating Officer, GWS Americas, at CBRE, and a 25-year veteran of CBRE Global Workplace Solutions. He has held executive roles across all aspects of the business, including sales, solutions, transitions, and on-site account management. Werner is also responsible for Facilities Management line of business strategy, products, platforms, and innovation.
Abrams is Senior Vice President, Global Real Estate, at Iron Mountain, where she leads a global team responsible for the company’s 88 million square-foot, 1,450-facility, industrial real estate portfolio across 57+ countries. She served on the firm’s REIT Steering Committee during its conversion to a public REIT and led the relocation of the firm’s global HQ in 2014. Previously, Abrams served as President of Fidelity Real Estate Company, the corporate real estate division of Fidelity Investments.
* CBRE Alliance Director for the Iron Mountain account, Neil Harding, and Vice President of Global Facility Management for Iron Mountain, Dan Anninos, also contributed to this article.
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