The Importance of Multifamily Energy Benchmarking

Benchmarking utilities has become a way of life in multifamily.

Not long ago, the EPA introduced its Portfolio Manager, a repository for a commercial property’s utility consumption data for benchmarking. By 2014, the arduous task of establishing an equitable energy efficiency scoring system for multifamily properties had arrived and the EPA invited portfolios to track consumption.

Five years later, multifamily properties are not just being asked to benchmark – in some areas, it’s required. As we seek out new ways to protect our precious resources, local and state governments are mandating utility benchmarking for water, electric and natural gas usage.

“Benchmarking is the word in everybody’s vocabulary,” says Dimitris Kapsis, RealPage Vice President, Energy Management. “And property managers need to know that they will be held accountable if they are not keeping up with the times.”

But it doesn’t have to be as painful as it might sound.

Energy management is a significant piece of apartment operations

New York City and Seattle were pioneers in benchmarking energy and water consumption, and in recent years, several cities such as Atlanta, Philadelphia, Chicago, St. Louis, Denver and Los Angeles have jumped on board. Recently, the entire state of California joined the mandated group. The need to track energy and water consumption has intensified so much that many utilities companies are making it a part of their repertoire to share aggregate whole building usage data.

In New York City, multifamily buildings have to go through an energy audit every ten years and properties have to do some type of conservation project to meet city and state approval.

Multifamily professionals who aren’t voluntarily joining the crowd are in risk getting left behind and, in many cases, leaving money on the table. Energy management has become a significant part of today’s multifamily operational model.

However, benchmarking is just one piece of energy management that property managers should embrace, Kapsis says. Learning the lingo of supply energy rates in de-regulated markets can be difficult to understand and several obstacles can derail even the most well-intended energy management program. To top it off, required reporting is time consuming and may seem unnecessary.

Yet within the grit of energy management is a fruit worth bearing. Efficient water and energy management correlates directly to the bottom line, and many multifamily companies are reaping thousands of dollars in benefits by benchmarking, conserving, shopping for supply rates and understanding tax structures.

Kapsis, who has spent two decades in energy management, will lead a panel about lowering energy management expenses at the Crittenden Multifamily Conference March 25-27 at the Omni Mandalay Hotel at Las Colinas, Texas.

“Reduce Cost Through Energy Management Essentials” will show multifamily owners and operators how they can take advantage of competitive energy rates in de-regulated markets, employ energy conservation projects, manage utility tax exemptions and establish benchmarking compliance.

The panel features Mary Nitschke, Director of Ancillary Services at Prometheus Real Estate Group, Inc.; Lizza Castro, Regional Vice President of Prime Residential; Wes Winterstein, Industry Expert; and Zachary Goldman, Managing Principal & Director of Operations at TGM Communities. Each will share their successes using an energy management provider to navigate utilities.

Benchmarking utility data can lead to big savings

While it may sound like a bunch of red tape, multifamily energy benchmarking often changes the way properties operate for the better, Kapsis said. Data research and discovery can lead to significant savings through implementing conservation projects as simple as switching to water-efficient toilets.

Often, a property management company is faced with trying to convince ownership that the project is worthwhile.

“Sometimes you have to spend money to save money,” Kapsis said. “The initial shock of a project that costs $150,000 is scary for the owner when it could be used for something else. But you could save annual operating expenses of $40,000-$50,000 as a result of the project. It then pays for itself in just a few years.”

Working with a third-party firm that has vast energy benchmarking tools can make a big difference.

“You need somebody to gather the information, enter it in the correct format and analyze the information and provide you with a comprehensive analysis in plain English,” said Kapsis, who leads RealPage’s utility management solution. “Then, provide you with the opportunities to save, help you achieve those projects and monitor the effects to make sure it’s working.”

Kapsis recalls the late 1990’s, when very few multifamily portfolios had a system in place to efficiently manage utilities. Properties that absorbed water, electric and gas costs were more receptive to pay attention to bills. When residents paid the freight, there wasn’t as much interest.

Conservation and regulatory issues and mandates have changed that. So has the competition. A competitive advantage to drive new leases and retain others is offering residents lower utility costs through water and energy efficient fixtures and practices.

Apartment residents are demanding energy efficiency

In the 2017 Renter Preferences Study conducted jointly by Kingsley Associates and NMHC, respondents said they were most interested in apartments outfitted with ENERGY STAR certified appliances and many felt that it shouldn’t cost extra.

“More and more people are saying ‘this is the way my life should be’ and ‘apartments should be run this way, but I shouldn’t have to pay for it’,” said RE Tech Advisors’ Andrew White, who shared a deep dive into the survey at last year’s NMHC OpTech conference. He added that Renters in Class C properties show more willingness to pay for sustainability than any other property classes.

So times have changed, Kapsis says.

Depending on the location, there may be no way to avoid practicing good energy management fundamentals. The rent roll may even dictate it.

“Eventually, your property won’t be competitive because you and your residents won’t be able to keep up with utility expenses,” he said. “It will be a deciding factor. If you don’t do it, the market will make you do it.”

Learn more about RealPage energy benchmarking software.