Improving the efficiency of your commercial property offers a clear financial advantage. Studies have shown that green buildings command higher rents and have lower vacancy rates. They have higher selling prices and increased asset valuations. Overall, their operating costs are below those of traditional buildings.
There are a number of ways to “green” a commercial property, but the property’s windows are one feature that should absolutely be addressed. Updating old or aging windows to energy-efficient systems can instantly reduce energy and operating costs, improve tenant comfort and satisfaction, and help property owners achieve efficiency certifications.
But just how much of an impact on net operating income and asset value can reduced energy spending have?
According to one ENERGY STAR estimate, a 10-percent decrease in energy use for a 200,000-square foot building that spends $2 per square foot in energy costs would boost the property’s net operating income by $40,000 annually. Further, ENERGY STAR estimated that if the property’s cap rate was 8 percent, this level of energy savings could potentially increase net asset value by $500,000. The good news: Retrofitting commercial windows with energy-efficient options can reduce energy costs by 10-to-40 percent.
How Energy Efficient Windows Help Reduce Operating Costs
Commercial windows account for roughly one-third of heat loss or heat gain in commercial properties, which has a significant impact on overall operating costs.
For example, in cooler months, inefficient windows are prone to heat loss, which increases overall heating loads. Conversely, in warmer months, inefficient windows allow more solar heat to enter the building – called solar heat gain – resulting in increased cooling costs.
Insulating windows or replacing commercial windows can help to substantially offset this thermal transfer. This is especially true in cooler climates like the Northeast and Mid-Atlantic, where heat loss through the window can dramatically increase HVAC costs in the winter. In fact, properly designed fenestration systems can reduce overall energy costs – including HVAC and lighting costs – by 10-40 percent. Additionally, one survey found that green buildings have operating costs about 9 percent lower than non-green buildings.
Additional Financial Benefits of Commercial Building Efficiency
- Lower Vacancy Rates, Higher Rents: Businesses today demand green work environments, and they’re willing to pay more to lease “greener” office space. In fact, according to a 2014 CoStar study, green-certified buildings in Los Angeles achieve higher rents and have 4-percent lower vacancy rates compared to traditional properties. Updated windows can help owners achieve these types of green certifications.
- Increased Asset Valuations: Replacing commercial windows and other greening initiatives help to boost valuations. For example, the 2012 World Green Buildings Study, found that building asset value increased by 6.8 percent for green properties. In effect, green buildings have resale values about 5-35 percent above traditional properties.
- Improved Tenant Recruitment, Retention: Clients prefer green office buildings, and therefore, updated windows and efficiency can be a powerful marketing tool for building owners. Green buildings and properties with green attributes like energy-efficient windows have better lease-up rates and better retention rates.
Updating the windows on your commercial property – whether replacing them, retrofitting them with new efficient glazing, or adding window films – can instantly boost net operating income and asset value. Yet, this is just one example of how the ROI of replacing the windows on your property. As a part of a larger greening initiative, or as a strategy to reduce energy costs, window replacement may help your property command higher rental rates, achieve better retention, and reduce vacancy rates.
Want to know how replacement commercial windows can benefit your bottom line? Contact Aeroseal today to receive a FREE estimate and learn about your options.