Energy costs—amounting to between 16 percent and 25 percent of a property's total operating budget— continue to be a thorn in the sides of multifamily owners and developers. Since paying utility bills is a given, some owners and operators might just decide to fix only what's broken (like the HVAC or a hot water heater when a malfunction occurs), and try to make up for rising energy costs by banking on leasing units and focusing on customer service. That's a big mistake.
“Energy costs are continuing to rise. No one I know thinks they are going to go down,” said Mark Gentile, manager of product management for NWP Services Corp., an Irvine, Calif.- based company that provides energy monitoring and billing solutions to multifamily clients. “It's very important to have a plan, and tracking your costs is really the first step. Benchmarking is vitally important.”
Gentile recommends that apartment owners and operators have a system in place that can track previous energy usage and compare that with current energy consumption. “You could potentially realize some large cost savings, such as a leaking pipe under your foundation, just by tracking your utility costs and monitoring that.”
The shift to energy consciousness
In addition to tracking energy consumption, it's important to realize that a shift is going on in the multifamily industry, from focusing almost entirely on yield management to focusing on energy management. A sound energy plan is a draw for potential residents.
“[Potential] residents are talking to property managers about the energyefficient strategies that are being used and their costs, just like someone would looking to buy a home,” said Jim Charles, vice president of product management, development, and engineering with NWP Services Corp.
The shift is already happening on the affordable housing side of the industry. The Department of Housing and Urban Development (HUD) has mandated that housing authorities look at energy costs at their properties and explain to HUD why utility costs at their developments are higher than the regional average, said Charles.
Involving your property managers
With all this in mind, property managers need to be up to speed on the overall strategy. They've been focused on increasing occupancy and customer service instead, added Charles.
That's not to say that property managers need to be in charge of the utility management program, but they should know how to look for signs that something might be amiss at the property and know that someone is monitoring whether they are doing that.
“It's not a feasible expectation to have the on-site people become the experts,” said Chris Oates, principal with Germantown, Md.-based Ideal Energy Solutions, an energy consulting firm, adding that that's where consultants can fill in. “They do need to know how to use the resources that consultants provide.”
If a property manager knows she is going to get a call from the corporate office next month about energy usage, she's likely to keep better tabs on it. “Creating an awareness that people are monitoring energy consumption is a good thing,” said Oates. “Things can be fixed before they become major issues.”
Awareness means involving maintenance staff as well, since sometimes they can see things that others, like utility company workers, for example, miss.
“You'd think that utility companies would tell you when you have meters that aren't working, but that doesn't always happen,” said Charles. “That's not good when you are getting a utility bill in arrears.”
Sometimes making sense of the energy management chaos means appointing someone to take charge of the whole kit and caboodle.
“There are only a few companies that actually put someone in charge of energy management at the property level as an energy czar,” said Charles.
Added Gentile, “Having a czar makes sense. Have one person be responsible and take ownership of the entire energy management program.”
That person may be a consultant. It may be someone directly employed by the apartment owner or operator. That person will always be busy, since energy costs are variable. Seasonality is another important consideration of an energy management program, and a czar can pick up on that instead of worrying about how to keep units leased.
For example, one year it may have been an unusually cool summer and the property didn't use nearly as much energy as the previous year. When doing a budget, a property manager or other administrative personnel might look to that year to forecast costs for the upcoming year. The next year might see summer temperatures spike back to normal. Without someone to specifically track utility usage and consider seasonality, it would be easy to exceed budget goals.
The bottom line? With renters becoming increasingly eco-conscious and energy experts expecting utility prices to only go up, it's important to have a sound energy plan. That may mean appointing someone to rule over it all.