Beyond the bill

As the custodians of large and diverse property portfolios, property managers face a continuing challenge as utility expenses rise higher and higher. Not only do these costs erode profitability, but uncontrolled utility usage is at odds with sustainable resource management. However, property managers can utilize management tools and conservation strategies to turn the tide on escalating costs, enhance operational efficiencies, and cultivate a more sustainable approach to resource usage.

The traditional approach to managing utility expenses has primarily been a defensive game, as management companies respond to monthly bills that can be convoluted with fees and overcharges. Many property managers tend to fixate solely on the utility bill’s total cost, a narrow view that overlooks opportunities for strategic improvement.

Start with systems

Ebony Landon, CPM^®, JBG SMITH

Every property manager knows there are practical ways to reduce usage, improve efficiency, and save money. For example, many managers have already replaced incandescent bulbs with energy-saving LED bulbs. Ebony Landon, CPM^®, senior vice president and director of operations at JBG SMITH in the Washington, D.C., area, points out that their properties have made that investment. “We are always actively looking at ways to reduce our utility consumption and implementing technology and systems that will assist with that,” Landon says. “When we look at a building’s major components, we make sure they’re energy efficient and operating efficiently. When considering a retrofit, we calculate how much a replacement will save us in the long run. One of the biggest things that we do across our portfolio is making sure that all our lights are retrofitted. Next, we tackled all our plumbing fixtures,” replacing and retrofitting old fixtures across their portfolio and adding aerators to decrease usage.

Charles Cayce, CPM^®, CSM, RPA, LEED Green Associate, InvenTrust Properties

Managers of retail properties face different challenges when it comes to tracking and controlling utilities. Charles Cayce, CPM^®, CSM, RPA, LEED Green Associate, is regional vice president of property management and property sustainability for Downers Grove, Illinois-based InvenTrust Properties, which owns several grocery-anchored retail shopping centers. “Typically, the landlord pays for the parking lot lighting, which is then billed back to the tenants through common area maintenance. So, it’s imperative for us to be mindful and do those things that can control or, more importantly, reduce our energy consumption.

“We have fronted the money in most cases, to upgrade our parking lots to LED,” Cayce says. “These lighting fixtures will have between a five-and 10-year warranty. Our lighting maintenance costs decrease substantially because high-intensity metal halide bulbs typically have to be replaced every two years. [An LED fixture] is basically a 10-year product with no maintenance and between 55% and 80% energy savings. Those energy and maintenance savings are passed right back to the tenants.”

A strategic stance on bill life-cycle management

Property managers must ensure they are tracking and analyzing utility data with precision—understanding consumption patterns, peak usage times, and the qualitative factors that may contribute to inefficiencies, such as outdated systems or tenant behavior.

It’s equally crucial to establish robust processes for the end-to-end management of utility bills, from receipt to payment. This includes implementing utility management software to centralize data, automate payment schedules, and flag anomalies for manual review. Such digital interventions streamline operations, reduce the risk of missed payments or late fees, and empower property managers with insights that lead to quantifiable savings.

Leading software solutions allow for aggregating utility data from various sources, enabling comparative analysis across properties and over time. This bird’s eye view is instrumental in detecting aberrations that may signal underlying operational issues.

Kimberly Joseph, Atria Senior Living

Kimberly Joseph is the sustainability manager at Atria Senior Living and works out of the corporate offices in Louisville, Kentucky. Her company uses bill-pay vendors to handle utility expenditures across their 350 properties nationwide. “We use a third party to process those utility payments, first and foremost,” she says. “But they also have a database that will separate not only the cost, but the usage, which gathers data across all of our communities. And then we also import our utility data into ENERGY STAR Portfolio Manager.”

Embracing utility expense reduction as an imperative

By fostering a culture of conservation through education and incentives, property managers can leverage behavioral changes to reduce utility expenses substantially. Implementing initiatives such as tenant sustainability guides, awareness campaigns, and incentive programs can transform how tenants interact with energy systems within the property.

It also helps when corporate managers foster a sense of ownership among the frontline property managers. Joseph mentions that she encourages property managers to promptly report any problems that might impact a utility bill, plus she is willing to go to bat for homegrown conservation projects.

“I’ve had the pleasure of working with a lot of proactive people,” says Joseph. “I had a maintenance director last year who is in a fairly drought-stricken area of Southern California, and he got the community on board with a new low-water landscaping project. It filtered up to the regional vice president, and many people supported it, but they didn’t know how to get it presented and approved. When they turned it over to me, I was able to pull the water data, and based on the information the landscapers gave us, I could show how much we would reduce our water use by using native vegetation and landscaping that was not water-intensive.”

Not only was Joseph willing to back her manager’s idea, but she brought the information to top stakeholders. “We were able to show the owners that there were some incentives available from the local water district and demonstrate, between the water savings and the incentive, how quickly the project would pay for itself and continue to show water bill savings, as well as actual water savings,” she says.

The power of professional audit services

For property managers put off by the complexity of utility expense reduction, professional audit services can offer clarity and actionable insights that might otherwise be overlooked.

These services encompass extensive data analysis to verify the accuracy of invoicing, benchmarking against industry standards to gauge performance, and customized strategies to minimize costs. While they may require an initial investment, the return on this partnership is worth the upfront expenditure through realized cost savings and enhanced efficiency.

Stephen Todd

Stephen Todd, who is known as “The Energy Guy,” develops strategies to reduce energy expenses without capital investment. “The best practice for me is to focus on one asset at a time, especially if the owner or manager has concerns—for instance, if a building has aging equipment,” says Todd. “I want to evaluate about 18 months’ worth of consumption and do a high-level baseline and benchmarking. I utilize ENERGY STAR Portfolio Manager to easily communicate with other stakeholders. The evaluation provides meaningful comparisons, and we get a score from one to 100. The higher the ENERGY STAR score, the more efficient the building.

“When we talk about energy savings, it’s more accurately defined as avoided energy cost,” Todd explains. “We use software tools to understand how a building consumes energy over time. Then we are able to determine how much weather-normalized energy consumption the building was expected to consume versus actual billed usage. The difference is the ‘avoided cost’ or what would have been spent versus what was. The obstacle we face is that the actual cost of utilities keeps going up. You might have a building that consumes the same amount of energy year over year. But from an accounting standpoint, you’re spending 15% more because the actual cost of electricity has gone up 15%. So, when we try to reduce energy expense, sometimes we look back and say, ‘Year over year, the actual energy expense went up 3%,’ but it would have gone up 17%. Therefore, the difference between those two—that’s the avoided cost.”

Sustainable future

From Fortune 500 companies to small, local businesses, organizations that have implemented proactive utility management processes have reported significant reductions in their operational costs, while contributing to a more sustainable future.

One example comes from a property management company that integrated a sophisticated utility management service into its operations. By leveraging the service’s data analytics capabilities, they could identify anomalies in billing, adjust their operations to align with more cost-efficient practices, and negotiate favorable terms with utility providers.

Landon uses a third-party payer and data analysis firm to help JBG SMITH manage utility costs. “We use a company called Conservice to pay our utility bills,” Landon reports. “Conservice also reports on utility usage at our properties, so we’re looking at the costs on a per-day basis to manage those utilities at our properties.”

The data from this third-party service is also used by JBG SMITH’s own Tenant Service Center, which directly manages each building’s centralized services. “Because we have that type of centralized service that manages utility use daily, we can take the data we have from Conservice and look at what happened during those periods to understand where the costs or usage are coming from. We also use that data to negotiate our utility rates for electricity.”

Utility expense management is undergoing a sea change, transitioning from a passive cost center to an active locus of value creation. In addition to the best practices covered here, new technologies like AI and digital twin, applied to HVAC, elevators, and other building systems, are helping buildings achieve even greater utility savings and energy and water reductions than ever thought possible. This transformation demands a forward-thinking approach that employs both technological and human interventions to achieve cost savings and responsible usage. Property managers who embrace new paradigms will not only secure a competitive edge in the market but will also contribute meaningfully to the global need for resource conservation.