How Energy Efficiency Upgrades Can Transform Vacant Properties into Profitable Assets

Before and After Energy Upgrade

The COVID-19 pandemic has irrevocably altered the commercial real estate (CRE) landscape. As remote work becomes a permanent fixture for many companies, particularly within the Fortune 500, vast amounts of office space have become underutilized or entirely vacant. Property management powerhouses like JLL, CBRE, and Cushman & Wakefield are grappling with this new reality, seeking innovative strategies to maximize returns on these properties.

While subletting and repurposing spaces are common approaches, there’s a burgeoning opportunity that remains underexploited: leveraging energy efficiency upgrades to reduce operational costs and enhance property appeal. Companies like EverWatt stand at the forefront of this movement, offering solutions that address both financial and environmental concerns.

Post-COVID Trends in Commercial Real Estate

• Surplus of Office Space: With a significant portion of the workforce operating remotely, companies are downsizing their physical footprints. This shift has led to increased vacancy rates, particularly in urban centers.
• Evolving Tenant Demands: Prospective tenants now prioritize flexibility, health and wellness features, and sustainability in their workspace choices.
• Financial Pressures: Property owners face mounting operational costs amidst decreased rental incomes, pushing the need for cost-saving measures.
• Sustainability and ESG Goals: There’s a heightened focus on Environmental, Social, and Governance (ESG) criteria. Buildings that align with these values are more attractive to tenants and investors.

Challenges Facing Property Management Firms

• Decreased Rental Incomes: Underutilized spaces mean less revenue, straining the financial viability of properties.
• Increased Operational Costs: Aging infrastructures with inefficient systems lead to higher energy bills, exacerbating financial pressures.
• Market Competition: With an oversupply of commercial spaces, differentiating properties becomes crucial to attract tenants.
• Energy Efficiency Upgrades: A Strategic Solution

Current attempts to address said challenges:

• Reducing Operational Costs: Upgrading to energy-efficient lighting and HVAC systems can significantly lower utility expenses, improving net operating income.
• Enhancing Property Appeal: Modern, sustainable buildings attract quality tenants who are willing to pay premium rents for energy-efficient spaces.
• Meeting ESG Criteria: Energy upgrades contribute to sustainability goals, making properties more attractive to investors focused on ESG.
• Accessing Incentives: Government programs and utility rebates can offset the costs of upgrades, enhancing return on investment.

EverWatt: CRE’s secret weapon for squeezing ROI out of cratered occupancy

EverWatt – DOE certified energy services company

EverWatt stands out not only for its expertise in energy solutions but also for its commitment to diversity and sustainability. As a full-service, minority-owned, Department of Energy-certified energy services company, partnering with EverWatt aligns your investments with both diversity and sustainability goals. Every dollar spent with EverWatt supports diversity initiatives and sustainable outcomes, with materials and subcontractor partnerships traceable to tier-three diversity levels. This underscores EverWatt’s dedication to impactful supply chain inclusion, making it an ideal partner for companies aiming to meet ESG (Environmental, Social, and Governance) criteria.

Scalable and Innovative Solutions

Originating from San Francisco’s tech hub, EverWatt brings a tech-forward scalability to energy contracting. The company leverages advanced lighting and building controls designed for easy installation and remote programming support. This approach minimizes on-site labor and maximizes efficiency, allowing for quick deployment across multiple properties. EverWatt’s innovative solutions include self-testing emergency exit lights, which further reduce costs by eliminating manual testing requirements. Such innovations not only lower operational expenses but also enhance safety and compliance.

Precision in Energy and Carbon Measurement

EverWatt’s energy solutions are backed by rigorous, bank-level underwriting through Investor Confidence Project (ICP) financing. This ensures precise energy savings projections, giving property owners and investors confidence in the return on investment. The company delivers customized data reports tailored to specific needs, whether for financial statements, board presentations, or marketing materials. This level of detailed reporting enables stakeholders to make informed decisions and effectively communicate the benefits of energy upgrades.

Expertise in U.S.-Wide Rebates and Incentives

Navigating the complex landscape of rebates and incentives can be challenging. EverWatt possesses extensive knowledge and intellectual property that can isolate and identify available rebates and incentives based on product type, utility, location, class of business, tax status, and more. This expertise ensures that property owners maximize their return on investment by taking full advantage of available financial incentives, thereby reducing the net cost of upgrades. By partnering with EverWatt, property management firms like JLL, CBRE, and Cushman & Wakefield can tap into a wealth of benefits:

• Diversity and Inclusion: Align with diversity goals by working with a minority-owned business committed to supply chain inclusion.
• Innovative Solutions: Implement cutting-edge, scalable technologies that reduce operational costs and improve building performance.
• Financial Precision: Rely on precise energy savings projections and customized reporting for better financial planning and communication.
• Maximized Incentives: Benefit from expert navigation of rebates and incentives to enhance ROI.
• Sustainability Leadership: Meet and exceed ESG criteria, making properties more attractive to tenants and investors focused on sustainability.

Case Study: Revitalizing a Vacant Office Building

• Scenario: A Fortune 500 company vacates a 200,000-square-foot office building in a major city.
• Challenge: High operational costs deter potential tenants in a competitive market.
• Solution: EverWatt conducts an energy audit, revealing that upgrading the lighting and HVAC systems could reduce energy consumption by 40%.
• Implementation: Energy-efficient LED lighting is installed, along with smart HVAC controls and improved insulation.
  • Cost Savings: Operational expenses decrease by $500,000 annually.
  • Increased Tenant Interest: The building attracts tenants seeking sustainable office space.
    Higher Rental Rates: Enhanced features allow for a 10% increase in rental rates.

Strategic Advantages for Property Management Firms

• Competitive Differentiation: Properties stand out in the market with modern, sustainable features.
• Long-Term Value: Energy-efficient buildings have higher valuations and longer economic lifespans.
• Tenant Retention: Improved comfort and lower utility costs contribute to higher tenant satisfaction and retention rates.

The post-COVID era presents both challenges and opportunities for the commercial real estate industry. By embracing energy efficiency upgrades, property management firms can transform underutilized assets into high-performing properties that meet the evolving demands of the market. EverWatt’s expertise in energy solutions provides a pathway for these transformations, offering a strategic advantage in an uncertain landscape.

Property owners and management firms must adapt to the shifting dynamics of the commercial real estate market. Energy efficiency upgrades are a viable and strategic solution to enhance property value, reduce costs, and attract quality tenants. With companies like EverWatt leading the way, the path to revitalizing underutilized properties is clear and attainable.

By integrating these strategies, property management firms can not only navigate the challenges of the post-COVID landscape but also emerge stronger, with more resilient and profitable portfolios.