Energy optimization is seen as a profitable area of investment. Renovations or new constructions that “go green” promise an expected full return-on-investment (ROI) within three to five years and significant real estate value increases. However, the ROI of sustainability is about more than just shaving off a few dollars from your utility bill.
In an article for National Real Estate Investor, Joseph P. Derhake outlines why the ROI of Sustainability is More Complex Than You Think. Here are three of the not-so-obvious reasons why energy upgrades are worth the investment.
Inefficient building operations in the form of outdated heating, ventilation, and air conditioning systems represent about 41 percent of the energy used for a commercial building. Many states currently or soon will require benchmark reports on the energy performance of such buildings that no longer meet modern building codes. Updating appliances, modernizing a building, or simply having the technology for better visibility into energy usage may make you exempt from the significant time and money requirement for reporting performance.
State government and utility companies offer incentives for building owners pursuing lower utility usage and reduced carbon emissions. Many states offer property tax incentives of up to a 35% savings on property taxes. Utility companies likewise encourage renovations by covering most, if not all, of the improvement cost, such as replacing insulation.
Identifying areas of improvement and committing to specific energy efficiency changes is a requirement for additional benefits through green lending companies. The discounted interest rates, preferred pricing, and additional loan proceeds equate to a savings of up to 0.4% in interest. Once a renovation is complete, the reduced operating costs alone facilitate a payback period of mere months. This loan could have the added effect of increasing property value by up to 7%.
Benefits Beyond Operating Costs
The focus of energy efficiency benefits often goes toward reduced utility costs. While lowering utility bills is a significant reason to make energy upgrades, the impacts of sustainability on a business go beyond that. Increasing the energy efficiency in buildings can increase building value, open doors for financing, save money, and help avoid compliance issues. There are an increasing number of factors making energy upgrades logical and worth the investment.
If you want to take advantage of the benefits of sustainability but aren’t sure where to begin, take a look at these 3 steps to prioritize energy efficiency projects using benchmarking.