Getting Commercial Customers to Invest in Energy Efficiency

A two-step approach to get commercial customers to act on energy efficiency

Utility Dive, July 18, 2017

Many utilities struggle to engage their customers, especially hard-to-reach markets such as commercial real estate (CRE) customers. It’s not unusual, but why is this the case? Doesn’t it make sense to just implement energy efficiency measures when they are presented to you?

To put it simply, one of the underlying barriers to this resistance has to do with language. This previous Utility Dive article listed 3 ways to identify energy savings in leased offices: run market segmentation analyses, address gaps in efficiency programs, and determine new program offerings to address specific customer needs. Now we will explore a two-step recipe to better translate energy efficiency benefits for the various needs of each CRE stakeholder.

Step 1: Reduce Utility Jargon and Identify Customer Pain Points

In the energy efficiency world, we think in terms of kWh and therms. So when utilities speak to their CRE customers using utility jargon, it’s no surprise that it doesn’t resonate. If messaging is tailored to each of the stakeholder types in a CRE building, we can then reach true customer engagement.

Typically, every CRE building has four groups of stakeholders involved in the energy efficiency decision-making process, each with differing priorities, motivations and pain points. Here are examples of the day-to-day mindsets of the players in a CRE building:

Building Owners are motivated by increases to the asset value of the building and don’t want their building valued under other similar buildings in the market. They usually have the final say and decision-making power for large capital upgrades.

Property Managers care about providing value to both the owners and tenants by keeping operating expenses down, and keeping leases renewing. They are the owner’s trusted source in capital upgrades.

Tenants focus on reducing their operational costs and improving staff productivity and retention. Depending on the lease structure of the building, tenants could be responsible for fully or partially funding their tenant space upgrades and improvements.

Facility Engineers are the boots-on-the-ground individuals that ensure the building is operating smoothly and efficiently every day. The engineers are crucial in providing technical guidance and information to the owners, managers, and tenants on energy efficiency measures for the building.

Step 2: Convey Meaningful Non-Energy Benefits

By now, many stakeholders understand that saving energy equals saving dollars. But to many, the dollars saved are not enough to justify the effort that goes into implementing the measures. This is when communicating non-energy benefits is helpful. Non-energy benefits are the indirect outcomes of energy efficiency.  Here are a few common benefits that resonate with building stakeholders:

Increased asset value of a building is important to owners and managers with regards to the sale of the building or new tenant advertising — giving owners the chance to increase rental rates. According to a report by McGraw Hill Construction, green buildings claim up to a 20% lease-up rate premium above average. Asset value increases as a result of reduced O&M costs from energy savings, which increases the net operating income (NOI) of the building. The higher the valuation of the building, the more the building can be sold and tenant spaces can be leased for.

Improved tenant retention can aid in avoiding lost rent money via reduced tenant turnover. One study in San Diego showed overall vacancy rates for green buildings are 4 percent lower than for non-green buildings. Lower energy costs from energy efficiency upgrades can increase the probability of tenants wanting to stay in the building and renew their leases, in turn benefitting the manager and owner.

Increased productivity of tenants will benefit a company’s bottom line. Improved ventilation from a new air-handling unit, for example, can improve tenant comfort and in turn make tenants more productive. Analysis shows labor productivity typically rises by about 6–16% in energy efficient buildings. The benefit of increased productivity has the potential to encourage tenants to fund efficiency upgrades.

Motivations vary based on asset class and location too. A property manager at a LEED Certified, Class A office building in a downtown area will likely have different needs than a Class C mixed-use building in the suburbs. Many of these non-energy benefits are intertwined and each resonates with various stakeholders in a different way. When promoting energy efficiency, it’s important for utilities to identify and understand their customer first, and then tailor non-energy benefits specific to the stakeholder’s motivations.

Waypoint is a proven leader at successfully connecting utility upgrades to commercial real estate (CRE) customers by using these tips. Understand your customer. Test your knowledge with this short quiz to see how much you know about non-energy benefits of energy efficiency, and the CRE industry’s considerations that come into play for decision-making at waypointbuilding.com/nonenergybenefits and contact us for more information.

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