Sustainability Benefits Commercial Real Estate in Idaho

This article was originally posted to Idaho Business Review on January 8, 2019

By: Amber Bieg, Kelsey Jae Nunez, Deborah Hiller LaSalle and Sharon P. Grant

As a property manager or business owner, a key question often is: How do I increase profit without a huge upfront investment? While market forces and good marketing can drive up revenue, often the easiest way to increase profit is to reduce costs. It turns out that doing good for the environment, such as reducing water use, energy consumption, and waste, saves significant money in the commercial real estate sector. And it’s more than just fixing leaks. According to several federally funded studies, commercial building managers who implement energy efficiency improvements save an average of 35 percent on electricity.

“Sustainability” is gaining traction in Idaho’s business sector, as demonstrated by increased social impact reporting (see Simplot’s sustainability report on industrial energy reductions), carbon emissions targets (see Idaho Power’s Sustainability Report) and renewable energy goals (such as Clif Bar’s goal for 100 percent green power). Sustainability focuses on doing good for the world – meeting the needs of the present without compromising the ability of future generations – while ensuring profit. Companies like Clif Bar have found that a solid commitment to sustainability improves operational performance, employee retention, reputation and overall business integrity, which in turn increases revenue.

How to start? For most property owners, a logical approach is to start with operational changes. During the 2013 Boise Kilowatt Crackdown competition, 47 buildings identified 390 capital and operational improvements to save energy and money. The common themes that emerged as opportunities for improvement were:

• Controls and equipment are not operating as intended.
• Exhaust fans are running when spaces are unoccupied.
• Temperature setpoints and other settings need to be optimized.
• There is still a lot of inefficient lighting out there!
• Envelope air leakage is higher than expected.
• Most building managers are not tracking how much energy their building used.
• Building managers are not taking full advantage of Idaho Power tools and services.

Participants learned from these outcomes and became strategic about capital improvements. For example, when Oppenheimer Development Corporation (ODC), one of the largest property managers in Boise, needed to replace a chiller in a downtown office building, they took advantage of an Idaho Power program that can cover 75 percent of the cost to develop an energy model and analyze building energy use. They purchased a new, more energy efficient and technologically advanced chiller that was one-third smaller. That saved upfront costs and long-term operational costs. According to Coby Barlow at ODC, “We are still taking advantage of the energy model as we consider upgrades. It is tough to bite the bullet all at once. We are just now implementing the remaining recommendations (five years later).” The energy savings in this building have totaled approximately 20 percent so far.

Saving energy directly impacts the bottom line, and there is a strong nexus between water and energy use. In Idaho, delivering water to tall buildings takes energy to pump. Often water and wastewater treatment are two of an industrial user’s or municipality’s biggest energy expenditures. Applying that knowledge to office buildings means that switching to low-flow fixtures and using less water (especially hot water) results in direct savings on operating expenses for water AND energy.

Cost savings also come from managing properties in a way that produces less solid waste. The management of the waste and disposal all costs money. And, with an increasingly interconnected global world, there’s no more ignoring the fact that there is no such thing as “away.”

In 2017, China stopped accepting recyclables from the U.S., placing an increased burden on domestic landfills, where dumping rates range from $25 to $120 per metric ton. It costs money to deal with waste, which is why a growing number of companies are starting to look at zero waste programs to stop waste before it is generated. The key to saving money while reducing environmental problems is to design systems that are easy to use and build new cultural habits in workplace buildings. Easy opportunities include having water refill stations and encouraging employees to bring in reusable water bottles.

The supply chain is another target area for savings. Bring skepticism into decisions about what products are brought into facilities and offices. Do those products need to be there? Why? How much does it cost to dispose of them? Can they be delivered in reusable packaging? Are there local suppliers available to reduce the need for superfluous transportation, minimize resource consumption, and support the local economy?

By supporting suppliers that share a commitment to environmental stewardship, building managers promote the sustainability that the commercial world desperately needs. For example, Beth Israel hospital in New York City saved $800,000 per year by implementing waste reduction practices, with a key focus on supply chain management.

Property managers do not have to be in this alone and should consider partnering with tenants to pursue sustainability. Tenants can take on responsibility for switching to low-energy light bulbs, reducing wasted standby power, replacing outdated appliances and electronic equipment, and reducing water and waste. And in addition to these first steps, what really moves the needle is the shifting of values and perspectives, so that all building occupants are acting with environmental awareness.

Changing your tenants’ values might sound like a major endeavor, and when compared to changing a light bulb to a more efficient alternative, it is. But the effort is worth it because, ultimately, changing the context in which humans naturally make choices returns better results. And it’s not as complicated as it may seem at the outset. There are a number of ways to start bringing tenants on board:

•  Leverage an existing campaign, such as Energy Star or Idaho Power Energy Efficiency kits and tips for businesses.
•  Set efficiency goals or consumption limits that tenants are required to hit or incur surcharges.
• Ask tenants for ideas and input, giving them a stake in sustainable solutions.
• Incentivize if necessary; reward and positively promote sustainable behavior.
• Use recognition as a powerful tool to motivate tenants to take efficiency and other sustainability actions.
• Test ideas for tenant engagement in one property and/or with tenants most likely to be receptive, and replicate the success at other properties.

Taking advantage of opportunities for positive interaction with tenants around efficiency and sustainability may help retain tenants, as well as boost the environmental performance of the building. Additionally, once you’ve got your property on the track toward true sustainability, you may find that you begin to attract tenants that are good stewards, not just to the planet, but to the property you manage – creating ongoing positive feedback loops in the property management sustainability cycle.

Once you’ve decided that it makes sense to explore the profit incentives associated with sustainability, create a strategic plan that targets the low-hanging fruit first that provide immediate cost savings – enabling sustainability initiatives to pay for themselves. Then utilize the skill sets of your team to optimize the benefits of your program. These are the tactics sustainability consultants develop while finding ways to help save money by improving building and operational efficiency through reducing energy, water and waste.

Because human habits run deep and resist change, even when it’s for the better, many organizations hire sustainability consultants to help design behavior change and system change programs that ensure solid sustainability traction. It’s highly beneficial to work with a sustainability expert to develop a strategic roadmap to sustainability to help identify priorities, low-hanging fruit and ultimately optimize profit, while becoming a better steward for the community.

Warm Springs Consulting is led by managing partners Amber Bieg (MBA), Kelsey Jae Nunez (JD/MPP, LEED GA), and Deborah Hiller LaSalle (JD). The company’s focus includes strategic and organizational planning, sustainability strategies, economic feasibility studies, comprehensive waste assessments, greenhouse gas inventories and renewable energy integration. 

Sharon Patterson Grant (LEED AP BD+C, CSBA) is the owner of Eco Edge, which provides research, analysis and outreach on energy codes, as well as training and facilitation.