Why Energy Efficiency in Buildings Is Increasingly Attractive to Tenants

For many years now, a revolution has been taking place in the way real estate owners approach energy efficiency for commercial buildings. Where economic policy and the demand for sustainability have created the impetus for energy efficient buildings, owners and managers are realizing that sustainable buildings also attract more high-quality tenants.  

Why does energy efficiency attract more tenants? There are a handful of benefits of energy efficiency in commercial buildings: 

• Lower energy consumption 

• Improved occupant comfort 

• Brighter, more attractive lighting 

• Better air quality 

• Sustainability concerns 

By enacting energy efficiency practices, building owners can provide their tenants with these benefits and attract new tenants to their spaces.  

Energy Efficiency Provides Essential Cost Saving and Sustainability Benefits 

Energy efficiency for commercial buildings is no longer optional; it is essential. In recent years, the cost of energy has grown at unprecedented rates that are having negative impacts on business growth. That means commercial tenants are more concerned with efficiency than ever, as lower utility bills can make or break their success. Building owners who can offer their tenants a higher level of efficiency can stand out among competitors by ensuring tenant operating costs benefit from their lease agreements.  

This is especially important since the 2020 COVID pandemic, when the commercial real estate (CRE) market took a massive hit. Remote work became the new normal, and office occupancy plummeted. Though office work has bounced back a bit since its all-time low, the commercial building sector has not fully recovered.  

According to an analysis by McKinsey:

“By 2030, demand for office space [will be] as much as 20 percent lower than it was in 2019, depending on the city. In this scenario, by 2025, office attendance is higher than it was right after the pandemic but still lower than it was before the pandemic, and the amount of office space demanded in most cities does not return to pre-pandemic levels for decades.” 

At the same time, a significant number of people have moved out of major U.S. cities, impacting foot traffic at metropolitan stores, which is now 10 to 20% below pre-pandemic levels and causing many retail businesses to fail. 

That means, for commercial building owners, it can be harder to attract and retain tenants. But offering unique benefits in your building through improved efficiency can be a game changer.  

In addition to the financial benefits of energy efficiency for commercial buildings, tenants today want to be able to tout that they operate in “green” buildings that actively pursue sustainability efforts throughout their technical infrastructure. Whether in the installation of cost-efficient LED lighting, smart-monitored climate control and HVAC systems, or solar panels, tenants and investors alike are looking for their buildings to have a positive effect on the community and the environment. This is a huge selling point that can attract better tenants, including restaurants, medical offices, and advertising firms as well. 

Studies make one fact clear: the building sector boasts the greatest potential to reduce greenhouse gas emissions compared to all other emitting sectors. Understanding the industry’s footprint, coupled with the rise of green buildings and third-party benchmarking standards, has moved sustainability from the fringes into the mainstream of commercial real estate. 

Green buildings—those which are environmentally responsible and resource-efficient—are estimated to consume 30-50% less energy than non-green buildings. Green buildings also use an average of 40% less water, emit 30-40% less carbon-dioxide, and produce 70% less solid waste. 

Enhance Commercial Building Profitability with Energy Efficiency 

Commercial building owners traditionally see their properties in terms of profit and loss, with higher rents delivering higher capitalization rates. Upgrades that increase real estate energy efficiency can contribute additional profits in many areas—some easy to identify, others that may be identified by partnering with an energy management company. 

Certain sustainability efforts, like the use of energy-efficient lighting and environmentally friendly building materials, can reduce expenses by up to 30%, according to the Morgan Stanley Institute for Sustainable Investing. 

Plus, today’s workforce seeks out socially responsible workspaces, meaning buildings that tout sustainability have a significant competitive advantage. Many tenants will pay higher rents for sustainable properties and are happier in them, leading to higher retention rates, which directly impacts revenue.  

Commercial building efficiency strategies can also include: 

• INNOVATIVE HVAC SYSTEMS: Energy-efficient HVAC systems reduce energy costs and create a cleaner, more comfortable environment in offices and stores. Ultra-high efficiency HVAC systems can cut energy costs related to the environment by up to 70%.  
• WATER CONSERVATION: Most businesses are wasting water through inefficient taps, toilets, and more. Simple upgrades can cut water usage and costs for owners and tenants. 
• DEMAND MANAGEMENT: Building owners can use additional strategies to reduce peak demand charges. Simple and effective measures include avoiding the use of high-power electrical equipment at hours when electricity consumption is already high. 
• RENEWABLE ENERGY: Solar panels can generate clean renewable energy that eases utility costs, and they can be visual proof that your building is implementing green practices.  
• BATTERY STORAGE: Lithium-ion batteries can combine with a renewable generation system to store excess energy. This can ensure a backup power source is available to keep operations running, even during adverse events like heat waves or storms.  

Every commercial real estate organization is unique. One trait CRE organizations share, however, is the unwavering desire to provide a great experience for their tenants. 

Take the Lead in the Community Through Energy Efficiency in Building Design 

There are other ways in which active and ongoing sustainability efforts benefit successful commercial real estate operators. 

Promotion of energy efficient buildings is not just relegated to property advertising or even ongoing public relations efforts. Successful CRE organizations and energy management companies are giving courses and informational sessions to the community, educating real estate agents, agencies, maintenance companies, and others in the principles of sustainability. 

Through these sessions, CRE operators are increasingly being seen as leaders in these fields. Participants learn about opportunities, market demands for sustainability, and how to advise their own clients on energy efficiency for commercial buildings and the financial benefits of it. Participants can also earn continuing education credits toward state certification requirements. 

Commercial building energy efficiency is increasingly of interest to policymakers as well. A well-educated industry can be seen as helping state and local governments accomplish mutual and vital goals all citizens are concerned with. 

Save time and money by outsourcing your commercial building energy efficiency upgrades. 

With more and more businesses interested in real estate sustainability, smart operators and investors are developing environmental strategies that will differentiate them from competitors and allow them to attract this increasingly sustainably minded set of future occupiers. They are educating themselves about efficient technologies and trends, smart monitoring and management and learning how they impact operations, climate control, lighting, and—most importantly—profits. They increasingly are seeking out third-party energy management companies to assist them in these areas. 

Budderfly is one such solution. We help commercial property owners upgrade their energy infrastructure with a suite of innovative technology solutions and equipment. We install industry-leading LED lights and HVAC systems, on-site solar panels, water conservation tools, and more. We deploy state-of-the-art smart monitoring systems in dozens of points of usage throughout each building to track energy usage and savings. We provide ongoing monitoring and maintenance to simplify operations and keep costs low. Well-made components remain in place for years without the need for replacement, saving even more on costly repairs. 

While the environmental benefits of green leasing speak for themselves, integrating sustainable smart monitoring solutions into operations is reflected in lease agreements in commercial buildings. Energy efficient buildings improve returns on investment, lessen landlords’ carbon footprints, increase CRE operator’s profitability, and ultimately improve the loyalty and well-being of highly desirable tenants. 

The value proposition is enormous. To learn how Budderfly can set your company on the road to leadership in commercial real estate, contact us today.