Jun 17, 2014

Utility Benchmarking Tips to Reduce Occupancy Costs

By Don Catalano


CRE, Occupancy Cost, CRE Occupancy Cost, Commercial Real Estate, Corporate Real Estate, Commercial Real Estate CostGiven that utilities are a major part of your company's occupancy cost, reducing them can directly impact your bottom line. However, reducing utility cost isn't is as simple as just telling your employees to put their computers in sleep mode and to have them turn off the lights at night, although those are good starts. To really understand where you're consuming power, you'll have to look deeper into your building operations and build some benchmarks


Step One: Building Benchmarks

Your average utility expenditure across your portfolio tells you relatively little, since utility costs vary widely. However, you can build benchmarks by dividing your portfolio up and then looking at utilities on a per square foot basis:

  1. Group your locations by type, so all of your warehouses will go together and all of your offices would be in a separate group.

  2. Group locations for each utility on the basis of where they are similar. An office in New York should use the same water give or take as one in San Francisco, but they will have different heating bills. Your New York office will probably use the same amount of heat, give or take, as one in Greenwich, though.

  3. Divide the rate of utility utilization both by square foot and by employee.

For instance, you might use 12 kWh of electricity per square foot in one office and 200 kWh per employee. 


Step Two: Comparing Benchmarks

Once you've built the benchmark, you can look at them to find outliers. When you have offices that have very high energy utilization per employee, it can be a sign of space that is built in an inefficient fashion. A location with high utility usage per square foot -- and high occupancy cost-- relative to other offices that should have similar consumption is one that needs investigation. 


Step Three: Borrowing Ideas

Along with identifying your least efficient locations within a given cohort, you can also identify those that are efficient and are generating lower occupancy costs. Spending some time with those locations' property or facility managers may give you some insight as to what is working particularly well there.

Step Four: Implementing Best Practices

You can then take those best practices and translate them to your other locations. Fixing inefficient management practices can help you to lower occupancy cost without having to make significant capital expenditures. 

Step Five: Going Deeper

When your benchmarking identifies inefficient sites that have solid management practices, your utility consumption problem is likely more systematic. Sometimes, it can be something as simple as malfunctioning equipment that has gone undetected. In these cases, you can make small tweaks and lower your occupancy cost. In other cases, the systems themselves are inefficient. In these cases, you might have to weigh making capital expenditures to improve your lighting, HVAC, insulation or whatever other system is failing. 


Capturing the Data

If you occupy nothing but Energy Star buildings, you may be able to use the Portfolio Manager program to help you build a baseline and analyze your building. It can also help your company earn points towards Energy Star certification.

Another option is to use your own building or real estate portfolio management software for benchmarking. Tools like REoptimizer® typically include the ability to create detailed entries for all of your occupancy cost line items and then to generate benchmarks on a per-building and on a portfolio-wide basis. This lets you analyze with a great degree of granularity. 


Here are a few other articles to check out:

Six Amenities to Look for in Office Space

10 Must-Know Commercial Real Estate Terms

Choosing The Right Office Layout for Your Company


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Don Catalano

Don Catalano