The Building Advisor

I found a great article in FacilityBlog2009 that documents the findings of a recent study on the commercial real estate market.

Battered by the U.S. economic recession, the commercial real estate market is struggling to maintain values across all property types and geographic areas, kicking a growing number of investors into survival mode as they painfully watch the value of their existing portfolios decline, according to investors and real estate professionals surveyed as part of the first quarter 2009 PricewaterhouseCoopers Korpacz Real Estate Investor Survey(R).

Commercial property investors are faced with tight credit, rent decreases, increasing vacancy rates and lowering asset values.  They are aggressively pursuing strategies to protect their asset value to survive the market and take advantage of a recovery forecasted for later 2010.  So, what are they doing?  They’re proactively signing leases and renewals and offering incentives and rent reductions.  Most are looking for ways to cut operating costs to survive.  “Tenants are in the driver’s seat, and landlords are in survival mode, trying to preserve revenue streams in one of the harshest ownership environments ever encountered,” said Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers. “

So why is their bad news good for you?  Easy, you can help them survive.  How?  By lowering their operating costs, specifically their energy utility bills.  Our research based on over 100 buildings tested throughout North America indicates that there are tremendous opportunities for energy savings in commercial buildings.  Our soon to be published research study, 2009 State of Building Performance, North America, indicates that by focusing on HVAC and lighting systems, service providers can help building owners substantially reduce their operating expenses.

Don’t be fooled by buildings with high EnergyStar™ ratings, recent recommissioning, Building Management Systems, and Facilities Management staff that claim everything is under control.  There are ALWAYS significant opportunities for savings, you just have to look.

So, if you want to help your customer survive over the next 18 mos and build a relationship that lasts for years, help them reduce their energy bills.  Use your service contracts to uncover No Cost/Low Cost ways to reduce their operating costs and uncover retrofit opportunities that have acceptable payback periods.  People tend remember those that help them in difficult times.

Here is a great article written by Lindsay Audin, President at EnergyWiz and published in Building Operating Management entitled, Selling The CEO on HVAC Uprades.

While directed at facility and building managers, it delivers just as much value to HVAC sales organizations who need to be able to translate retrofit projects into specific benefits with an emphasis on financial pay back.  Lindsay does a great job of outlining practical steps one should take to justify HVAC upgrades to senior decision makers, not a trivial pursuit in today’s economic environment.

In my conversations with mechanical HVAC owners, I find it is rare that their sales teams are calling on the final decision makers in retrofit projects.  More often than not, most sales teams are calling on facility managers, building engineers and/or property managers.  Getting around these gatekeepers will be the subject of a future blog.  In the meantime, ensure that if you are working through one of these types that they are well prepared to cover the areas in Lindsay’s article.  You, and they, will be more likely to get approval from the decision maker.

One other note, given the current economic situation, I would strongly recommend taking the “long view” with your customers.  That is, focus your preventive maintenance efforts on “low cost, no cost” opportunities to lower your customers’ operating costs.  Most of your customers are becoming aware of these types of energy savings available to them through BOMA’s BEEP program.   By focusing on these types of savings, you will earn trust and credibility with your customers, setting yourself up for future retrofit opportunities, hence the “long view”.   Everything I hear is that, depending on the customer, retrofit payback periods are compressing from 5 years down to as low as 1-2 years given the credit cycle we are in.  So, why not beef up your service business by incorporating energy services into your preventive maintenance business and get paid to uncover retrofit opportunities that may take some time to justify.

According to the 2009 PC Energy Report being published today by 1E and the Alliance to Save Energy, US companies waste 2.8 Billion dollars and emit 20 Million Tons of Carbon Dioxide per year by not turing off their PCs and other electronic devices at night.  This is the equivelent of 4 Million cars on the road and reflects a significant conservation opportunitity.

On top of that, saving this money would drop to the bottom line of a companies operating costs and in these tough economic times this is where the focus should be.  The idea of energy reduction as an operational focus for an organization is the triple win win win.  You save money, you help the environment and everyone involved feels good about it!

Why doesn’t it happen more?  The report states the obvious that most of the energy field already knows,  that employee’s do not feel any pain or awareness of the cost of the energy bill.  There is very little ownership and responsibility to use the resource wisely.  Showing employee’s how much energy their work habits are consuming and costing the company is a first place to start.  Effective management starts with knowing where you are at, and ends with actions to reduce usage to needed levels.

Lawrence Berkeley National Labs threw out a statistic that stated data center energy costs can be 100 times higher than those of typical buildings.  Another statistic thrown around by EPA is that data centers accounted for 1.5% of overall US electrical spend in 2006 and it is expected to increase by 1% or more by 2011.  Poor energy efficiency can obviously have a dramatic effect on the bottom line, reduce the competitiveness of the data center and may even reduce up time which is so crucial to the data world.

Typically data centers have been reluctant to participate in Benchmarking of energy performance through EnergyStar because they do not want to document how costly poor data center management and design is, and they fear the looming carbon tax through cap and trade.  It is understandable that the industry is concerned about being an open book for criticism given some of the real constraints on server rooms in terms of temperature control, power reliability and particulate reduction.  Being from an industry that needs data and servers to work flawlessly every minute of every day, we understand this, but every one already knows you are typically a high energy user.

The good news is that starting at Benchmarking and allocation of energy end uses within a building with data centers, we can understand how energy is used and begin to clean up the inefficiencies. Benchmarking is a tool for understanding across an organization and can serve these important purposes:

1. to establish a baseline of typical energy use
2. to provide comparison to similar facilities
3. to highlight improvement opportunities
4. to highlight maintenance and operating issues
5. to highlight best practices for future improvements

In this day and age it should be universally understand that awareness, i.e. know where you are at, always leads to a better place.  Energy cost reduction drops to the bottom line and in the case of data centers can reduce inefficient operation, provide more uptime and customer satisfaction, and positions you for the future where that energy savings translates to less carbon use and cash through trading on an open market.  Its almost like double-dipping on the profits from energy reduction.  How can that be bad?

Following up on the recent EnergyStar update last week, a couple of known changes are coming this summer that are very good news.  The EPA will be updating the EnergyStar service to include a rating for Worship Service halls, also known as churchs.  They will also be continuing the updates to the new 2003 Building Energy data known as CBECs, specifically for the building type Warehouse.

The Climate Change Congress 2009 in Coopenhagen Denmark came to an end on March 12th with some stinging messages for political leaders across the world in advance of their meeting in December in Coopenhagen to deal with the Kyoto Protocol expiration in 2012.

The group of almost 2000 scientists of world reknown are calling upon policy-makers to use all tools available to reduce dangerous emissions of greenhouse gases since these scientists have begun to observe their predictions of two years ago are coming true.

Temperatures, sea levels, acid levels in oceans and ice sheets were already moving “beyond the patterns of natural variability within which our society and economy have developed and thrived,” the Intergovernmental Panel on Climate Change (IPCC) said in a report released Thursday.

This is good news since we have an administration in place now that is dedicated to reducing green house gases while creating new “green” energy jobs in the process.  Hopefully Congress will get moving on the Carbon Dioxide Cap and Trade program so further incentives can be placed around reducing energy use in buildings.

We’ve written a lot in this blog about the economic challenges in 2009 and the impact to your business.  For mechanical contractors it means fewer new construction projects and pressure on your service business.  Now is the time to look at simple strategies that make your services more valuable to your customers.  It’s how you can keep your foot firmly planted in the door.

What’s the best thing you can do?  Show your customers how you can save them money.  What’s the easiest way to do that?  Bring them energy savings.  What’s the quickest way to deliver energy savings for your customers?  Focus on low and no cost changes to how their buildings are operated.

Now delivering low and no cost services might not sound all that attractive as a service provider since one can correctly assume that the there will be low or no revenue associated with said services.  That’s true, but it’s still a good deal for you.  Why?

1. You get to keep your service agreement.  Right now, service agreements are gold.  Spend a few extra minutes on each PM call focused on finding ways to save your customer money.  You’ll prove your value many times over and strengthen your long-term relationship with those customers.
2. You’ll lay the foundation for larger projects in the future.  By positioning yourself as the go-to guy on energy and actually delivering real savings you’re building trust and credibility.  When the economy turns around and capital spending thaws in the future that trust will serve you well.

How to get started?  Here’s a link to some low and no cost energy saving tips by the EPA’s ENERGY STAR program and BOMA.  Train your techs on what to look for, follow up to make sure they get done, and by all means tell your customer what you did and how much money they will save because of it.

On March 3rd, the EPA unveiled the top 25 cities in America that have the most EnergyStar Rated buildings. The list is headed by Los Angeles, San Francisco, Houston, Washington, D.C., Dallas-Fort Worth, Chicago, Denver, Minneapolis-St Paul, Atlanta and Seattle.

“Energy Star buildings typically use 35 percent less energy and emit 35 percent less greenhouse gases than average buildings,” said EPA Administrator Lisa P. Jackson. “EPA commends all of these cities and all of the others, as well as countless individuals, who are now using more energy efficient appliances and dwellings. They are saving energy, saving money and protecting our environment.”

To see the full list click here:  http://energystar.gov/buildinglist

In other EnergyStar news, they have made some changes to the choice of buildings that can have a rating by condensing the very confusing list of of hotels into one category and also sneaking in multi-family housing.  Once they update their documentation of default parameters and issue guidelines on these changes, we will let you know.

Millions of dollars for the creation of green jobs have been included in the recently passed economic stimulus.  What exactly is a green job and how do you know if your company can benefit from this part of the stimulus?  In other words, if you think your company does “green” work, you should be able to benefit through some sort of incentive money to hire and/or train employees.  This should include any company that helps buildings become more energy efficient.

NPR has a story about a couple of residential contractors who could benefit.  But, what about commercial contractors?  Exactly how does this play out?  If you’re a commercial buildings contractor, how can you take advantage of this?

One of Portland’s leaders in green building, Mark Edlen of Gerding Edlen, recently spoke with Vice President Joe Biden about green jobs in the commercial sector.  In the article in the Portland Business Journal about that meeting, Edlen provides some insight as to how this could play out, mostly from the new buildings perspective.

“Leaders among mechanical contractors can help their clients by becoming leaders in energy management, green building, and sustainable practices.”  That is the message from a recent article in ACHR News.

Contractors who are making the connection for their clients between their maintenance service and cost savings are going to be viewed as value-added partners.  Some call it their Green Program, others their Energy Saving Maintenance Plan.  The general idea is the same – “Since mechanical systems account for most of a building’s energy consumption, it’s not uncommon to find that the energy savings alone will sometimes pay for most, or even all, of the cost difference between a basic maintenance program and a green maintenance investment, says Ed Sokol of Grodsky Service (Massachusets, Connecticut.) That’s step 1 – adopting the proper mindset, a marketing mindset which speaks to the core benefits of services.

Step 2 is identifying and getting in front of the building’s decision makers, and learning the financial language they use when considering proposals for service or projects.  This is more important than ever.  Typically the right person is the owner, CFO or VP of finance, purchasing manager, or facility manager.

And step 3 is to make energy assessments, energy analysis, or building performance assessments part of every day business.  Building owners or managers need to have their contractor understand how their building uses energy and how it could use less of it through adjustments in operations and maintenance, as well as equipment upgrades and other measures.  Without a tool to guide this effort, you’re shooting in the dark.

Put these 3 together and you have a mechanical service department that is truly serving the needs of your clients.