Going green is more than a matter of protecting the environment. Green technology benefits multifamily investors by helping them develop environmentally friendly homes that are less costly to operate and reduce the operating costs of existing communities. In many cities, property owners must meet local green building standards but they can often take advantage of government incentives. Green properties are gaining in popularity with residents and owners alike, as both can take pride in their environmental friendliness and the money they save.
Environmentally Friendly Homes with Green Tech Benefit Multifamily Investors
There is a myriad of ways in which green tech can be incorporated into a multifamily property. Energy-efficient construction materials, appliances, and building systems allow developers to operate at a high level of efficiency, positively impacting property valuation. Existing communities may need retrofitting and system upgrades to achieve this effect. Because of the continual evolution of efficiency measures, existing communities are likely to provide investors with opportunities for energy savings even if they are new.
These opportunities can vary in size and cost to implement. For example, installing aerators in faucets requires a small initial investment but can result in immediate savings. Energy-conserving motion detectors that turn lights on and off when they are not in use are also relatively inexpensive and simple to install, as are programmable thermostats, ceiling fans, and energy-efficient lighting. High-efficiency bathroom fixtures and kitchen appliances are larger expenses, but result in correspondingly higher returns. Major capital investments may be needed to improve efficiency through weatherization of the exterior or by upgrading major systems, such as the HVAC system, but these large upgrades provide the largest energy savings.
Technology and data analysis can combine to improve operational efficiency. A smart HVAC system, for example, can identify a malfunctioning component long before the problem could be noticed by a person. On a larger scale, energy management software can gather data from all the building systems and use that information in conjunction with data from other systems; weather forecasts can automatically adjust the HVAC system; and sensors in the plumbing system can spot leaks quickly and prevent serious structural and property damage. These technologies make it possible to optimize energy usage and operating costs far more efficiently than humans can alone. How many computers does it take to change a light bulb? How many to recognize a leaky roof? Smart green tech can be well worth the cost.
Don’t Underestimate the Role of Humans in Green Tech
Two of the most powerful green tools for multifamily property management are largely manual: the audit and the benchmark. Auditing is a straightforward process: An energy efficiency expert examines a building, targeting areas for potential energy savings, and then presents recommendations for improvement. Benchmarking, however, may be a less expected method of saving energy.
From 2012 to 2015, the State of Minnesota conducted a study involving 500 multifamily buildings with master electric and water meters. Half of the buildings made up a control group and the other half were provided with automatic collection and analysis of owner-paid utilities data, access to online benchmarking software (EnergyScoreCards), and support from a dedicated account manager for two years. The results of the study revealed that the buildings that received the services reduced energy usage by 5 percent and water usage by 30 percent, without any other technical or financial incentives. Those buildings also increased their participation in electric rebate programs 9 percent more often than the buildings in the control group.
This is a graphic illustration of how data can have a significant impact on approaches to energy saving. Benchmarking is an inexpensive and non-intrusive way for local authorities to influence property owners’ behavior. Sixteen U.S. cities, including Seattle and Austin, and two states have set benchmarking goals and made it mandatory to disclose the energy usage of buildings. The aggregated information is used by building owners to identify sources of waste in their properties and address conservation issues on their own.
States and municipalities are becoming more active in setting environmental standards that affect multifamily communities. Many of these initiatives are prescriptive, but others are incentive-based. A full list of state policies and incentives shows that they range in number from 14 in West Virginia to 229 in California. Numerous federal agencies have incentive programs as well.
Meeting local energy-efficiency standards, selecting the appropriate green strategies for environmentally friendly homes, and organizing financing can be difficult. Professional property management can help investors meet these needs to their full advantage.
At CWS Capital Partners, we are a fully-integrated multifamily real estate investment management firm that offers everything from due diligence and risk management to transaction support and property management. We specialize in assisting our clients with 1031 exchanges, acquisitions, repositioning, and development. We also own and manage luxury multifamily investment communities in major markets around the country, and we employ a team of experts who can help you hone your investment strategy.
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