Energy is a main driver in the effective functioning of commercial real estate. It keeps the lights on, controls the climate, powers computers and other technology and supports performance.
Energy is also a challenging topic in the industry these days. A JLL report explained that demand is increasing – buildings account for 75% of U.S. electricity use, a figure forecast to rise to 25% by 2030. Older equipment wasn’t built for current extreme weather conditions, meaning more frequent outages and disruptions.
Additionally, owners and operators have had to deal with volatile energy pricing.
“Between 2020 and 2025, U.S. commercial electricity prices increased by approximately 33% after remaining flat for the previous five-year period,” according to the report, entitled “Smart Energy Economics to Cut Costs and Increase Value.”
While there isn’t a one-size-fits-all solution to address the problems, the JLL analysts did suggest short- and long-term strategies.
Activities for immediate impact included:
- Detailed utility bill audits. An in-depth view of utility payments can reveal overcharges and billing mistakes, totaling between 1% and 5% of a property’s annual spend. The report indicated that billing errors from meter issues, incorrect tariffs and clerical errors are becoming increasingly common.
- On-site reviews and retro-commissioning. Such actions can pinpoint inefficiencies that could be resolved through low-cost improvements. “After an audit, our clients typically reduce energy use by 20-30%, save hundreds of thousands of dollars a year on existing bills, and catch issues before they become expenses,” according to the report.
- Provider negotiations. The report indicated that reviewing and renegotiating contracts with providers could lead to better rates and returns. Options such as time-of-use pricing and long-term power purchase agreements could help reduce costs. The PPAs provide a fixed price for between 10 and 25 years, offering protection against future price volatility.
“Utility bill audits and energy assessments are clear entry points to pinpoint immediate efficiencies and savings, and lay the groundwork for longer-term success,” the JLL analysts said.
Speaking of the longer-term, the report suggested the following strategies:
- On-site energy generation. Distributed energy tools (think solar panels and batteries) can both provide energy to building owners and operators and generate revenue. Surplus energy can be sold to the grid, depending on local regulations. This can increase an owner’s revenue by 25%-50%, the report said.
- Battery storage. Energy batteries are becoming less expensive—the report said that the costs have decreased by 75% since 2015. It also allows owner/operators to store excess power for peak use while protecting against price spikes.
- Energy-as-a-Service use. Building owners can install and operate energy infrastructures, then sell energy to tenants through PPAs or community solar programs.
No matter the solution, the JLL analysts suggested that waiting wasn’t an option.
“Thinking proactively and acting decisively today is the best way to gain a competitive advantage,” the report said. “Owners will protect asset values and generate revenue, while occupiers will cut costs and avoid business disruption.”
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