Turning sustainability into NOI

Jeffrey Palmer

Sustainability in real estate has matured from a values-driven initiative into a core financial strategy for property managers and asset owners. The conversation now includes not only how to reduce environmental impact, but also how sustainability initiatives can improve net operating income (NOI).

But making that connection requires more than good intentions. It demands operational discipline, data rigor and a clear understanding of where sustainability intersects with revenue and cost control. As Jeffrey Palmer, vice president of responsible investments at GID, explains, “You have to be able to share ideas in the lens of financial models. Otherwise, it’s a little difficult.”

Across the industry, leaders are proving that sustainability can deliver measurable financial returns, often faster and more reliably than expected.

The fastest path to NOI

Juliette Apicella

While large capital projects often dominate sustainability conversations, some of the most immediate NOI gains come from operational improvement. Juliette Apicella, director of sustainability at Gables Residential, points to a category she describes as “fast, repeatable NOI” opportunities, many of which require little to no capital investment.

“Optimizing system run time, making sure heating, ventilation, and air conditioning (HVAC) systems are running on the schedules they should run on … those changes aren’t marginal, they’re material,” she says.

Simple, but powerful

Across a portfolio, small inefficiencies compound quickly. Systems running longer than necessary, lighting schedules misaligned with occupancy or irrigation systems overwatering landscapes (or watering the sidewalk) can quietly drive up operating expenses.

“When you repeat them across a portfolio, these things can really add up,” Apicella says.

Common high-impact operational fixes include:

• Adjusting HVAC schedules and temperature setpoints
• Reducing runtime for fireplaces, lighting, and amenities
• Optimizing irrigation systems to avoid overwatering
• Monitoring and correcting equipment overrides or drift

Even seemingly set-it-and-forget-it water features can become hidden cost centers. Apicella highlights autofill valves—systems designed to maintain water levels in pools or fountains—as a frequent source of waste if not properly managed.

“We’ve built routine checks into our operating cadence specifically because of what they cost when they are ignored,” she says.

A focus on common areas

In multifamily properties especially, the most controllable costs—and therefore the most direct NOI opportunities—are in landlord-managed spaces, Palmer notes.

These include:

• Hallways and lobbies
• Amenity spaces (e.g., gyms, coworking areas, lounges)
• Exterior lighting and landscaping
• Mechanical systems serving shared areas

Because tenants drive much of the in-unit energy and water usage, focusing on shared spaces allows property managers to directly influence operating expenses.

The ‘low-hanging fruit’ that still delivers

Despite the rise of advanced technologies, foundational upgrades continue to offer strong returns. Both Palmer and Apicella emphasize LED lighting as a cornerstone investment, particularly with controls like motion and daylight sensors that can lead to additional savings.

These projects deliver:

• Immediate energy savings
• Reduced maintenance costs due to longer lifespans
• Relatively short payback periods

Apicella notes that while timelines can vary, many capital efficiency projects—including lighting and water retrofits—typically achieve payback within two to four years, while operational fixes can pay back in as little as three to six months.

And if lighting is the easiest win, HVAC systems are often the most impactful.

“Conditioning mid-rise and high-rise properties is tough to do,” Palmer says, as well as expensive when systems are inefficient, since aging or poorly controlled systems can drive excessive energy consumption and increase maintenance costs.

Replacing or upgrading HVAC systems, particularly at end of life, is a common strategy. But increasingly, property managers are focusing on how systems operate, not just what equipment is installed.

Creating smarter buildings

Rather than relying solely on capital upgrades, leading operators are using technology to optimize performance in real time.

Building controls and smart systems

“Building controls have a lot of impact on operating expenses,” Palmer says.

Modern tools like smart thermostats and system management platforms allow teams to:

• Prevent systems from overworking
• Smooth energy demand spikes
• Improve consistency across properties

For example, advanced HVAC management platforms like Parity can reduce the “ramp-up” effect when systems turn on, lowering both energy use and equipment strain. “It prevents it from running too hard, which helps manage expenses and maintenance,” Palmer explains.

If building management systems were already installed when the building was built, “it’s really important for us to find new overlay technologies that help us better manage HVAC or other individual pieces of equipment that would otherwise require entire overhauls,” he adds.

Smart water management

Water efficiency is another area where technology and operations intersect.

Apicella’s team deploys smart irrigation systems that use weather data or soil sensors to deliver precise watering, as well as submetering systems that track usage at the unit level.

“Submeters are one of our most effective leak-detection tools, as they turn an invisible problem into an actionable one,” she says.

Water and gas leaks can significantly inflate utility costs if left unaddressed. Early detection and rapid response can prevent unnecessary expenses and avoid property damage. In many cases, these fixes require more operational awareness and preventative maintenance than capital investment.

Submetering can also help property managers accurately bill residents for usage and reduce owner-paid utility burdens while acting as a lever for resident engagement since residents can see how much water they use.

Proving the payoff

Even the best sustainability initiatives will struggle to gain traction without clear financial validation.

Both Palmer and Apicella emphasize rigorous data practices as the foundation for connecting sustainability to NOI.

Start with accurate data

“If your information is not accurate, you’re on shaky ground,” Apicella says. “We’re working with Yardi’s Energy Suite to report accurate actionable data to our asset management and operations teams.”

Palmer says GID invests in building a robust data stack, including central hubs like the Abisko platform for utility data analysis and HappyCo for identifying maintenance trends. This foundation consists of:

• Complete and validated utility data
• Third-party data verification
• Consistent tracking across properties, using tools like unique general ledger (GL) codes to isolate spending

Conservative ROI modeling

To build credibility with asset managers and investors, assumptions must be grounded and realistic. Apicella describes a conservative approach that includes using actual baseline consumption and utility rates, and validating vendor projections independently against historical performance.

Regulations as a catalyst, not just a constraint

Building performance standards (BPS) are reshaping how property managers approach sustainability and NOI.

“These standards are introducing a real financial risk because of penalties and compliance costs,” Apicella says.

But they also strengthen the business case for investment, says Palmer, who notes that avoided fines can be factored into ROI calculations, helping GID pursue projects they might not have before.

“The more proactive you can be, the better,” Apicella says, noting that benchmarking, audits, and implementation can take years to complete. So early action is important.

Sustaining results

Sustainability-driven NOI gains are not one-time wins. They require consistent monitoring and engagement.

Gables, for example, uses a structured monthly cadence:

• Tracking energy and water data
• Issuing variance reports to property teams
• Maintaining a “watch list” for underperforming assets

“We push that variance report to employees every month, and teams are really paying attention,” Apicella says.

This creates accountability, builds operational awareness and ensures that gains are sustained over time.

A new operating model for real estate

The connection between sustainability and NOI is no longer theoretical—it’s operational.

From optimizing HVAC schedules to tracking utility data to avoiding regulatory penalties, today’s property managers are embedding sustainability into the financial fabric of their assets.

The most successful approaches share a common thread: They treat sustainability not as a separate initiative, but as a core component of asset performance.

Or, as Palmer puts it, it all comes down to alignment: “You have to have dollars and cents to back it up.” For those who do, the payoff is clear—lower costs, stronger revenue, and more resilient, valuable properties.