Real Estate Advisor: Should I improve energy efficiency in my industrial properties?

Energy costs associated with industrial properties — such as warehouse, distribution or storage facilities — can add up fast, making a significant dent in your bottom line. According to the Building Owners and Managers Association (BOMA), energy accounts for about 15% of operating costs for the industrial property sector, with an average cost of $0.68 per square foot. So, many industrial property owners are taking a new look at energy efficiency measures.

Bundle of benefits

Improved energy efficiency comes with a bundle of benefits. In addition to the obvious environmental positives, it can slash operating costs, extend the life of building systems and boost asset values by maximizing performance. Certain energy improvements may also produce significant tax breaks.

Enhanced energy efficiency can also make an industrial property more attractive. Properties with improved lighting, upgraded HVAC systems and similar improvements tend to draw new tenants and encourage existing ones to renew their leases.

Improvement measures

According to BOMA, the top five measures for improving industrial property energy efficiency are:

  1. Upgrading parking lot and exterior lighting to highly efficient fixtures,
  2. Installing occupancy sensors and lighting controls,
  3. Reviewing temperature setpoints and making seasonal adjustments,
  4. Installing dock shields or dock shelters to reduce outside air infiltration, and
  5. Using high-efficient motors for material-handling conveyors and installing controls to run only when needed.

BOMA also recommends the Environmental Protection Agency’s (EPA’s) ENERGY STAR Portfolio Manager®. This interactive management tool can help you manage water and energy consumption, benchmark your energy performance rating against similar companies, and earn EPA recognition. An energy performance rating of 50 indicates that a property performs better than 50% of all similar buildings nationwide, and buildings with ratings of 75 or more can qualify for the ENERGY STAR label for superior energy performance.

Portfolio Manager can also help you set investment priorities. For example, it allows you to evaluate the relative costs associated with a given level of performance, your cumulative investments in upgrades and your annual energy costs. A built-in financial tool makes it easy to compare savings across the properties in your portfolio and calculate cost savings for particular projects, too.

Within your grasp

When it comes to the value of industrial property in today’s market, many aspects are beyond your control. Energy performance, however, is firmly within your grasp. Taking steps to improve that performance can produce benefits now and for many years down the road.