Commercial Energy Audits Increase AZ Real Estate Value

Oct. 19, 2012 - PRLog -- Big Green Zero® provides Arizona commercial energy audits to help business and building owners reduce their energy bills. In addition to reducing energy bills, implementation of audit recommendations frequently increases net operating income and, thereby, commercial real estate capitalized asset value.

White Paper Summary:
Arizona Commercial Energy Audits Increase Real Estate Value

This White Paper discusses how an Arizona commercial energy audit can reduce operating expense and thereby increase capitalized asset value.

Energy Expense in Real Estate

According to the Environmental Protection Agency’s Energy Star program, energy use is the single largest operating expense in commercial office buildings, representing approximately one-third of a typical operating budget. According to the U.S. Department of Energy (DOE), utilities are the single largest controllable cost in multifamily housing, typically ranging from 25 to 35 percent of overall operating costs.

A Commercial Energy Audit Reduces Expense

Big Green Zero has recently performed commercial energy audits of 80 commercial buildings. Throughout these studies, three findings have been consistent.

   ● First, simple energy efficiency improvements can reduce utility bills by
      20% to 40%.

   ● Second, a capital investment is often not necessary. Most energy efficiency  
      improvements can be integrated into the normal repair and maintenance
      (R & M) cycle and paid for through budgeted R & M expense.

   ● Third, the return on investment for an integrated energy efficiency/solar
      package often makes sense in cases where the ROI for solar, alone, does not  
      pencil.

Three Case Studies

The three following mini-case studies summarize results of recent Arizona commercial energy audits. The full text is available at http://www.biggreenzero.com/big-green-zero-news/

These studies identified opportunities to reduce energy cost ranging from 35% to 41%. If the required improvements are made with a one-time capital investment, the period required for return of investment will range from 4.3 to 8.9 years. However, if the recommended projects are completed and budgeted within the normal Repair and Maintenance cycle and budget, the period required for return of investment will range from 0.9 to 1.8 years.

Case 1 - Retail Building

[Chart omitted - see www.BigGreenZero.com]

Summary:

■Potential Annual Energy Cost savings $ 9,950
■Required Investment $43,100
■Time to Return of Investment in Years 4.3 (if one-time capital investment)
■Time to Return of Investment in Years 0.9 (if integrated into R & M cycle/budget

Case 2 - Industrial Campus

[Chart omitted - see www.BigGreenZero.com]

Summary:

■Potential Annual Energy Cost savings $ 91,500
■Required Investment $810,000
■Time to Return of Investment in Years 8.9 (if one-time capital investment)
■Time to Return of Investment in Years 1.8 (if integrated into R & M cycle/budget)


Case 3 - Institutional Campus

[Chart omitted - see www.BigGreenZero.com]

Summary:

■Potential Annual Energy Cost savings $ 67,200
■Required Investment $309,000
■Time to Return of Investment in Years 4.6 (if one-time capital investment)
■Time to Return of Investment in Years 0.9 (if integrated into R & M cycle/budget)

Notes for Case Study charts:

  1) Estimated based on replacement product manufacturer's information
  2) Estimate w ill be subject to results of requests for proposals
  3) Estimated Total % Energy Cost Reduction may vary by 4 to 5 percentage
       points from the calculated total.

Turning Energy Savings into Asset Value

As mentioned at the beginning of this White Paper, the Environmental Protection Agency’s Energy Star program reports that energy use is the single largest operating expense in commercial office buildings, representing approximately one-third of a typical operating budget.

ENERGY STAR data indicates that a 10 percent decrease in energy use can lead to a 1.5 percent increase in net operating income (NOI). On this basis, for a 200,000-square foot office building that pays $2 per square foot in energy costs, a 10% reduction in energy expense would translate into an additional $40,000 of NOI. At a cap rate of 8.0%, that energy cost savings would increase asset value by $500,000.

Extending this example, a 30% percent reduction in energy expense (which is typical of Big Green Zero's Arizona commercial energy audit findings), would increase asset value by $1.5 million.

An Exceptional Return on Investment

In Arizona, the cost of a commercial energy audit can be as little as $900. By translating energy cost savings into capitalized asset value, the return on a commercial energy investment can be hundreds of thousands of dollars.