Energy Comparisons

We live in a world of increasing interest in saving the decreasing quantities of energy we have available. As the supply of energy drops, prices go up and customers become more concerned with reducing energy use. But what does ‘reduce” mean? It is a term that needs a comparison, a benchmark, to have value.

American Utility Management (AUM), www.aum-inc.com, Oak Brook, Ill., has released a report on how multifamily property owners can reduce energy use and cut operating costs by benchmarking utility usage against a qualified pool of comparable properties. The whitepaper shares the results of a benchmarking statistical study conceived by AUM and conducted in collaboration with Georgia Tech, www.gatech.edu, Atlanta, Ga.

Using AUM's data, Georgia Tech developed an algorithm which compares and contrasts multifamily properties, ultimately allowing owners to identify cost savings. The algorithm takes into account a wide range of variables unique to this property class including such nuances as common space, size of swimming pools, and other high-intensity energy amenities, geography, climate, and even a property's orientation to direct sunlight.

Energy savings represent the greatest possible opportunity for multifamily property owners to reduce costs at time of tremendous stress in the real estate industry. According to AUM, the multifamily industry spends more than $53.5 billion a year on energy. Additionally, the EPA reports that utility costs represent the single largest controllable cost in an apartment community--typically accounting for 25% to 35%. Reducing energy use by 15% in a typical 250-unit master-metered community will increase net operating income and increase asset value by more than $1 million (using a 6% capitalization rate).

Properties in the population are relatively ranked and each property receives a relative efficiency score, with the most energy-efficient receiving 100% . The scores of remaining properties are specified in direct comparison with respective peer properties to determine sustainability.

The company used this information in the development and implementation of AUMScore, a multifamily energy benchmarking tool that will enable property owners to compare their properties' energy usage across their own portfolios and across the multifamily industry.