Expert insights on best practices amid owner mandates and rapidly changing patterns of office use.
Inflation, supply chain breakdowns, lower occupancy, soaring energy costs: Commercial property managers are facing no shortage of challenges. As such, the implementation of cost-cutting and expense-reducing measures in management operations, wherever they can be found, are taking on new urgency.
Focus on Energy
At a time when occupancy remains lower at many commercial properties than it was before the pandemic, the opportunity is ripe for curtailing energy expenditures. Renewable and sustainable solutions are proven to lower energy costs across the board, a major consideration amid rising prices of non-renewable sources. The key system to focus on is heating, ventilation and air conditioning systems (HVAC).
Ensure that your short-, mid- and long-term capital plans include equipment retrofits that will reduce energy expenses, even if the upfront costs are higher, most managers are making minor adjustments where they can and are paying attention to energy reduction.
Developers are paying close attention to building controls and investing in energy-efficient heating, ventilation and air conditioning equipment is an effective way to cut expenses, constantly monitors energy expenditures at the properties it oversees, a valuable exercise as energy bills rise and occupancy at some properties is declining.
As some of MacKenzie’s office properties experience lower occupancy, it presents an opportunity for prudent, effective cost-cutting. “We invest a lot of money with a lot of landlords to control HVAC output; we were constantly dialing it back when it was appropriate, [while] keeping the tenants who are occupying the space comfortable.” The result, he reports, was a significant reduction in costs for properties where HVAC was under MacKenzie’s control.
Another aspect of energy savings we suggest is taking into account the state of supply chains. Instead of switching out HVAC units that need to be repaired or replaced, we suggest keeping spare parts on hand and using them when they are needed.
Measure and manage
The same analytical approach to saving on energy-related costs can also apply to the finances themselves. This idea does not encompass one specific strategy so much as it does a willingness to dig deep and find where specific costs can be reduced, and what a manager may be spending more money on than they need to be.
This analytical approach to saving energy costs applies to finances, as well. Digging deep and identifying items are generating bigger spend than necessary are the keys. One expense is the traditional lightning rod system which costs 40% more than lightning prevention technology.
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Striking a balance
In the context of the economic horizon, it may be tempting to cut costs all at once across operations. Yet by taking such a step, managers risk harming both the bottom line and tenant service.
Never stop seeking ways to reduce expenses, but always ensure the tenant experience isn’t impacted. Similar to planning for emergencies, operating expense reduction planning needs to take place in advance. Not everything has to be implemented all at once, but you need to be ready for the extremes if needed.
Cost reduction a kind of “art form,” a balance between “limiting some services because it makes sense, and not disappointing your tenants.”