Time is on my side

Even as rents climb across the country, so climb utility costs. It’s inevitable as energy supplies ebb and flow, regulations shift and consumption becomes a trend of sharp spikes. Now is the time for apartment owners and operators to get ahead of these costs. And it begins with simple knowledge.

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Multifamily buildings are the last big game on the horizon. Single-family homes, offices, and factories have been tracked and surveyed for their energy use for years, even decades. In homes and in the commercial space we have accrued data on electricity consumption, water use, gas; there are even trend reports on trash and recycling. Data abounds for these sectors. After all, you must know the metrics of behavior before you can advise on improvements for savings. You can’t manage what you don’t know, goes the old adage.

Lack of data is one reason it has taken so long for local and federal programs, rebates and utility incentives to reach the multifamily industry. Things are beginning to change, but the delay has much to do with split incentive. In layman’s terms: renters. The very dynamic of renting has precluded owners, even the renters themselves, from knowing their own energy patterns and how they compare to others.

We’ve found that even the simple act of knowing what one is consuming in the way of electricity and the like, causes consumption to drop, a lot; statistics suggest as much as 30 percent or more. The good news is that the clouds are clearing on data collection, multifamily analytics and even incentives for conservation.

With a vested and collaborative momentum toward the big data of utility consumption across the multifamily industry, it is certain to yield greatly needed knowledge and comparative analytics for actionable steps toward conservation of our resources and profits.

Quantitative data infers probabilities and will give way to even better standards within apartment operations. But there is still no accounting for an owner’s knowledge.

Low-flow toilets, aerators and showerheads are easy steps toward real savings at a property level. These are investments made by the owner, so how does the owner reap a return if the unit’s utility consumption is billed directly to the renter? In several ways, fiscally and otherwise.

Very often a property’s overall utility use affects the tier level or rate at which they are billed for water usage. Higher use by residents means higher cost to irrigate the grass in the common areas. As well, renters know what they pay each month for utilities. They also know it’s taking a greater and greater piece of their expendible income each month. An apartment with costly utilities is not a competitive model.

Water savings will become even more critical in drought-ridden areas of the country where restrictions and penalties are implemented to curb use.

The cost of electricity has risen steadily for decades and shows no indication of slowing down. Simple measures to save on common area electric consumption include energy-efficient lighting, lighting controls, variable speed motors for pools and spas, and photovoltaic solar. With a simple cost analysis of any of these retrofits, an owner can easily derive the return on investment on your capital outlay for each initiative undertaken.

Low-flow aerators and showerheads, central hot water controllers with variable speed circulating pumps and thermal solar for both central domestic hot water and pools are great ways to save on gas costs. Keep in mind that not all utility reduction programs have a cash outlay, and with the growing number of rebates and incentives by utility companies, local and federal agencies, and lenders, the list is growing.

There are a number of such programs that provide great, short-term return on investments. And the cost reduction experienced by reducing utility consumption is generally never-ending. It’s the gift that keeps giving. Such savings also naturally increase net operating income and capitalization rates.

Resident retention is an added bonus as the green movement continues to permeate the hearts and minds of the country. Prospects will seek out sustainable, earth-conscious apartments with less impact on the environment, and ultimately select the property with the least impact on their wallets due to lower utility bills.

Take away: a utility review of your properties is mission critical. You will do it today, or be compelled to do it tomorrow by rising costs. A prudent review will include:

  1. Water and energy survey on sustainable opportunities
  2. Cost / benefit analysis including applicable rebate and incentives
  3. Approval and installation
  4. Post measurement and verification

Such a review not only gives you field advantage ahead of your competitors, but starts the clock on cost containment, and increased capitalization value today.

Author: Steve Dorman