Developers who take steps to improve the energy efficiency of their office buildings may boost the property’s value, gain a competitive sales edge, and improve the buildings’ performance, according to a new study by the Urban Land Institute called “Unlocking Hidden Value in Class B/C Office Buildings.” But developers don’t have to spend big bucks on high-end updates to unlock the savings, the study finds.
Class B and C office buildings that have been retrofitted with green features tend to save about 15% on energy costs, the study finds. Further, these buildings can see savings of 35% or more through larger expenditures that are paid back within three years, the study finds. On a 75,000-square-foot building, that could mean up to $46,000 in reduced operating expenses and a bump in property value up to $627,000, according to the study.
“Although Class B/C office tenants may not pay higher rental rates, owners are more likely to lease more quickly than competitors and retain those tenants during lease renewals when a space is more sustainable and energy-efficient,” the study notes. “For the ambitious owner looking to reposition a Class B or C office asset into an A property, incorporating energy efficiency measures into renovations provides an opportunity to add long-term value via new building systems and improved operational efficiency.”
The report urges developers to better understand available energy efficiency retrofits, start benchmarking building energy data, and learn local energy-efficiency regulations.
Building upgrades could include improving unit efficiency through a number of possible changes, such as by replacing old heating units or adding digital thermometers; data loggers (for checking energy consumption of specific equipment); leak detection tools; indoor air quality meters; infrared cameras; or installing window shading to reduce solar radiation and lower cooling requirements. “In a changing market with evolving tenant preferences, new energy efficiency technologies, and continued policy action to reduce building emissions, buildings implementing energy efficiency can stay ahead of the market,” says Billy Grayson, executive director of The ULI Center for Sustainability and Economic Performance.
Source: “Unlocking Hidden Value in Class B/C Office Buildings,” Urban Land Institute (2020)
