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Long-term Building Operating Cost Reduction Strategies

Image of Clint Bradford
Clint Bradford

There are countless ways for commercial property owners to lower their building operating costs. These expenses can include property taxes, insurance premiums, utilities, upkeep of infrastructure like HVAC and other systems, repairs, renovations, or payments to contractors who contribute to the upkeep and operations of the structure. Reducing costs can be achieved through hiring expert tax accountants, renegotiating contracts, passing some of these costs on to tenants, or investing in infrastructure to reduce these expenses.

A good property manager will analyze all of a building’s expenses to identify areas ripe for savings. A building automation system (BAS) can help a building owner determine how to save in a number of ways. In fact, an intelligent BAS with analytics has the ability to continually collect data via connected smart devices and use machine learning to spot patterns. Once lighting, heating, cooling, water usage, and other elements of a building’s operating costs are understood, some of these costs can then be reflected in lease agreements, mitigated through cost-saving infrastructure, or a combination of both. 

What Are Building Operating Costs? 

To reduce the costs of a building’s operations, these expenses must first be defined. The day-to-day and other expenses involved in running a building constitute building operating costs. These can include:

  • Custodial services to keep common areas clean and well-maintained, which may also extend to leased areas. 
  • Insurance against risks like fire, theft, and liability. 
  • Maintenance for and replacement of any mechanical systems that require regular upkeep, including HVAC, heating, lighting, and other building systems. 
  • Property and other taxes paid on the structure.
  • Property management fees and salaries paid by the building owner to a company or individuals to maintain and operate a building. 
  • Security and safety measures that may include guards or security companies, along with alarms, cameras, and other monitoring systems that keep tenants safe and their leased spaces secure. 
  • Shared capital expenses like IT and other upgrades, roof repairs, elevator systems, and other expenditures as defined by the lease. 
  • Supplies for common areas like lightbulbs, shared toiletries, window glass, carpeting, and other items or material used to keep occupants comfortable and the building well-maintained and in good working order. 
  • Utilities such as electricity, sewage, and water.  

Once building operating costs have been established, building owners and managers can look at ways to achieve savings by minimizing these expenses. 

Energy: Identifying Opportunities for Savings

When building owners and facilities managers want to cut building operating costs, one of the first places they should look is the building’s energy expenditures. One of the core functions of an intelligent BAS is regulating energy usage. As Sanjeevv Bhatia, CEO of the Netherlands-based SB Group, says:

While high energy use is often accepted as an unavoidable operational expense, it is also the best area for cost reduction. Typical annual savings on energy consumption can be as high as 30% with a well-maintained (BAS). Smart upgrades to legacy building management systems accrue cost savings from day one, and offset the capital expenditure involved in a relatively short period. With open protocol solutions, real estate businesses can take advantage of the best (property technology) features in the market. Rather than only relying on outdated legacy hardware, newer systems can automate, inter-connect, and consolidate a multitude of automation systems for a more efficient, smarter building system.

The analytics and system integration required for an advanced BAS also offer opportunities to reduce costs beyond energy conservation. The key to developing long-term cost-reduction strategies lies in identifying which systems can most benefit from automation. 

Making Data Meaningful

A good place to start when looking for ways to reduce building operating costs is year-on-year data regarding energy usage. In an intelligent BAS, this data comes from data gathered by smart meters and devices connected to each other through the Internet of Things (IoT), which is then analyzed by analytics software. Using historical data coupled with real-time data, an analytics platform with machine learning capabilities can determine the amount of energy a building uses by time period, season, and system and predict future demand. Advanced software can also identify opportunities for improvement and provide pragmatic recommendations to enhance efficiency.

Combined with smart controllers, this approach can result in savings of 10-60 percent across all its systems. 

Demand-Based Systems

According to a 2017 study by the American Council for an Energy-Efficient Economy, introducing smart technology in commercial buildings can significantly reduce energy consumption. The study shows on an annual basis, this includes:  

One of the key ways these technologies make such reductions possible is the opportunity for demand-based strategy; by understanding how, when, and why energy is used, you can make changes that enhance efficiency without compromising the occupant experience.

UCI: A Use Case

At the University of California, Irvine, stakeholders determined that one of the best ways to mitigate building operating costs involved reducing energy consumption in university laboratories. As the largest consumer of energy on the UCI campus, these labs required robust and precise ventilation, with many operating around the clock, regardless of occupancy, to ensure spaces were kept free of harmful air pollutants. This led to extraordinarily high energy use. 

Analysis of air quality data revealed that labs could reduce the number of air changes without compromising the safety of occupants. During normal operations, the lab now reduces air changes by a third, while reducing it by half when unoccupied. The result is improved efficiency and lower operating costs.  


As an alternative to fully demand-based systems, some building owners choose to leverage lease agreements that put tenants in charge of their own consumption. This can be achieved through submetering each area of the building. Smart submetering pulls real-time data to provide deep visibility into a building’s energy usage, showing historical trends that allow for reliable prediction of future energy consumption. Rather than baking energy consumption into asking rents, building owners can empower tenants to control their own consumption expenses—whether actual or predicted. Allowing tenants to control their own consumption means they are more likely to prioritize energy conservation while lowering building operating costs. 

Predictive & Preventive Maintenance 

Building owners can limit maintenance expenses by using an advanced analytics platform that identifies issues before they become major—and expensive—problems. This preventive maintenance approach also minimizes downtime and keeps tenants comfortable while ensuring systems are performing as efficiently as possible. 

An avoided cost analysis can help you determine whether the cost for a unit of energy is reduced by lowering demand or by adding supply. This can be applied to building maintenance as well. Using predictive analytics, many building owners see that immediate but smaller expenditures will likely prevent the greater cost of more major repairs that results from deferred maintenance. 

Implementing Green Initiatives

Building owners who adopt environmentally friendly practices often see meaningful savings in operating costs, especially over the long term. Upfront investments in infrastructure like solar panels, green roofs, or more efficient equipment can pay off over a building’s life span. 

Using onPoint for Building Operating Cost Reduction

onPoint is an advanced analytics platform created by controls experts. This innovative software can play an instrumental role in understanding how your building performs and making smart changes that reduce operating costs—both energy-related and non-energy related. From energy efficiency to maintenance to submetering, onPoint provides invaluable guidance and opens up new opportunities for cost savings, now and tomorrow.

Buildings IOT offers the services and technologies you need to reduce building operating costs. Contact our expert team to learn more.



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