Energy costs associated with industrial properties — such as warehouse, distribution or storage facilities — can be significant. According to the Building Owners and Managers Association (BOMA), energy accounts for about 15% of operating costs for the industrial property sector, with an average cost of $0.68 per square foot.

Because it is so significant, many wise industrial property owners are taking a new look at energy efficiency measures.

Bundle of Benefits

Improved energy efficiency comes with a bundle of benefits. In addition to the obvious environmental positives, it can slash operating costs, extend the life of building systems and boost asset values by maximizing performance. Certain energy improvements may also produce significant tax breaks such as Section 179(d).

Enhanced energy efficiency can also make an industrial property more attractive to tenants under triple net leases, or investors in properties. Improving lighting, upgrading HVAC systems and similar improvements tend to draw new tenants and encourage existing ones to renew their leases.

Improvement Measures

According to BOMA, the top five measures for improving industrial property energy efficiency are:

  1. Upgrading parking lot and exterior lighting to high efficiency fixtures;
  2. Installing occupancy sensors and lighting controls so that lights go off automatically by zone when no one is in the space using them;
  3. Reviewing temperature setpoints and making seasonal adjustments;
  4. Installing dock shields or dock shelters to reduce outside air infiltration; and
  5. Using high-efficiency motors for material-handling conveyors and installing controls to run only when needed.

BOMA also recommends the Environmental Protection Agency's (EPA's) ENERGY STAR Portfolio Manager®. This interactive management tool can help you manage water and energy consumption, benchmark your energy performance rating against similar properties and earn EPA recognition. An energy performance rating of 50 indicates that a property performs better than 50% of all similar buildings nationwide and buildings with ratings of 75 or more can qualify for the ENERGY STAR label for superior energy performance.

The Portfolio Manager software can also help you set investment priorities. For example, it allows you to evaluate the relative costs associated with a given level of performance, your cumulative investments in upgrades and your annual energy costs. A built-in financial tool makes it easy to benchmark savings across the properties in your portfolio and calculate cost savings for particular projects, too.

Within Your Grasp

When it comes to the value of industrial properties in today's market, many aspects are beyond your control. Energy performance, however, is firmly within your grasp. Taking steps to improve that performance can produce benefits now and for many years down the road.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.