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How to Reduce Non-Energy Building Operating Costs

Image of Clint Bradford
Clint Bradford

When building owners are looking to cut costs, the first place they often look is energy spend. And that makes sense: energy is an enormous expenditure in commercial buildings. But energy savings aren’t the only way to reduce costs. What’s more, many of the same mechanisms and tools used to reduce energy use—including system integration and advanced building analytics—can be used to identify other cost reduction opportunities.

From making smarter maintenance decisions to retaining tenants, there are many ways to control non-energy building operating costs. And it begins by understanding how your buildings work. 

What Is Your Net Operating Income?

To gauge the profitability of a building, you need to determine your current net operating income (NOI).

Net Operating Income = Real Estate Revenue - Operating Expenses

Operating expenses include repair costs, janitorial fees, utilities, insurance premiums, legal fees. Capital expenditures are not included.

It’s a simple formula that tells a big story: is your commercial building still worth running? 

Creditors and lenders are generally most interested in your NOI when extending loans or mortgages. But NOI also helps owners determine the overall financial viability of a building. It can alert you to the need for change, set cost-savings goals, and identify how much revenue you need to ensure your business is sustainable. 

Balancing cost reduction with increasing revenue can be challenging, particularly if tenants have energy demands that limit your ability to reduce energy costs. Finding other opportunities for minimizing building operating costs can allow you to realize your goals without compromising tenant satisfaction.

Tips for Reducing Non-Energy Building Operating Costs

Reducing costs doesn’t demand dramatic overhauls—there are many ways to control expenses that can add up to big savings. Two of the most valuable are smart submetering and proactive maintenance.

Smart Submetering

Billing tenants for energy use can be challenging. If a single meter is distributed across all tenants, accurately billing each individual may not be possible, and trying to get a read on outdated systems can be time-consuming, error-prone, and leave the door open to disputes. Advanced submetering options can simplify the process and ensure accuracy.

A smart submetering system pulls real-time data from existing submeters for up-to-the-minute energy usage information. Adding an analytics layer allows you to go beyond real-time readings for an even greater understanding of energy consumption, giving you a clear view of historical trends and reliable prediction of future use. This helps you create more sophisticated and accurate billing strategies rather than simply estimating use and baking it into rent, which can easily result in lost revenue or disgruntled tenants. 

With advanced submetering, you can ensure your costs are covered. But there are also auxiliary benefits:

  • Transparency: Your tenants will know that you are being open with them and not trying to overcharge. This transparency can be instrumental in building trusting relationships and protecting your reputation.
  • Future-proof installations: In each state and across the country, rules are getting stricter about how landlords report and bill for energy use. Sub-metered tenanting is already required in some cities and will be soon in others. Installing the right technologies today allows you to get ahead of regulations. 
  • Tenant guidance: Reducing energy costs is likely a priority for your tenants. With actionable insights from smart submetering systems and analytics, you can help them make positive changes.

By introducing advanced technologies, you can go above and beyond for tenants while protecting against unnecessary expenses.

Proactive Maintenance

Maintenance is often a significant expense in commercial buildings. Using an advanced analytics platform to streamline maintenance is an innovative way to control costs by allowing you to move away from a schedule-based maintenance approach.

When maintenance is performed according to a predetermined schedule, you hope that routine checks will catch anything that isn’t quite right. But that doesn’t always happen. Problems that emerge right after a routine check won’t get caught until something goes wrong (which often means “when a tenant complains”). And if everything is functioning as it should and nothing goes wrong, the check was a waste.

A proactive, predictive maintenance approach is made possible when building systems are unified and overseen by intelligent analytics. By continuously monitoring data from all connected systems, sensors, and devices, you can gain insight into not just individual pieces of equipment, but building conditions and the relationships between multiple variables. It’s a more complete view. 

This kind of view allows for the development of more precise alerts that tell you when something is beginning to go wrong, and advanced diagnostics enables faster discovery of the root causes of issues. This has significant benefits:

  • Earlier intervention and faster resolution
  • Minimized need for complex and expensive repairs
  • Reduced downtime
  • Less reliance on on-site workers
  • Extended equipment life

An intelligent analytics platform can also open up opportunities for automatic resolution of issues by making adjustments to setpoints. Not only can you avoid the costs of repairing expensive equipment, but you’ll be able to reduce service contracts. When manual intervention is needed, it can be targeted to where it is needed the most, and fixes can be validated to ensure you’re using your money wisely. That’s cost savings across the board. 

Maintaining and Increasing Revenue

Lowering costs is a great way to increase your NOI. But just slashing costs alone doesn’t always cut it. Today, tenants want clean, green, comfortable, and safe work environments. Integrating analytics in your building management system helps you offer just that. 

Using smart technologies to implement property management best practices, reduce your building’s carbon footprint, maintain thermal comfort, and streamline maintenance creates better experiences for occupants. Being able to provide objective proof of energy efficiency, excellent sanitation practices, and clean indoor air builds trust between you and your tenants. These elements are all critical to attracting and retaining the kind of tenants you want. 

Getting Help From the Experts

The deployment of smart technologies can transform the way your building functions and minimize the costs it incurs. But it is no small lift. Working with a team that has deep domain expertise helps you maximize your return on investment. 

At BuildingsIOT, our specialists work with you throughout the integration process to ensure everything is done in alignment with your business goals. Whether you are unifying legacy systems or constructing a new build, our Project Management and Customer Success teams offer guidance to cut costs across the board while optimizing the occupant experience. With a partner invested in your success, you and your tenants can get the most out of your building.

Buildings IOT offers innovative products and services that help you reduce building operating costs. To learn more, contact our team of experts today.

 

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