Lighting consumes about 18% of the electricity generated in the U.S. with another 4% to 5% used to remove the waste heat generated by those lights.
In commercial buildings, lighting accounts for close to 71% of overall electricity use in the U.S. with approximately 35% of the cost of electricity used in a commercial building consumed by lighting.
With those statistics, it’s obvious a reduction in lighting costs will reduce the net operating cost of a building.
That reduction is, of course, easier said than done but well worth the effort.
Not only is it good environmental policy, achieving greater energy efficiency provides a significant opportunity to create numerous strategic benefits, including improvement of a building’s visual quality, reducing glare through better lighting distribution, increasing a property’s competitive market positioning, thereby attracting and retaining tenants through better lighting and sustainability and, speaking from the appraiser’s point of view, enhancing property value.
The process of retrofitting a property’s lighting is complex.
It requires experts in the fields of lighting and design, with each component, from offices to lobbies, elevators, hallways, stairwells, below grade space and garages, analyzed for the appropriate lighting solution. Those solutions have evolved as more property owners undertake retrofits.
As one example, new LED technologies have made this type of lighting, once considered too costly for commercial use, much more feasible.
There are also incentives for undertaking an energy efficiency program including the EPAct of 2005 designed to encourage investment in energy-efficient building systems.
Extended in 2008 for five years through December 31, 2013, it includes a tax deduction of 60 cents per square foot each for lighting, HVAC and building envelope energy reduction. (Most tax deductions under the EPAct have been for lighting.)
Achieving greater energy efficiency is also no longer optional for property owners uninterested in absorbing the capital expense.
New York City Local Law 84 requires benchmarking of energy use and for buildings to achieve an Energy Star rating.
Local Law 85 requires buildings to meet the most current energy code for renovation or alteration projects. Local Law 87 requires that base building systems that use energy be audited and retro-commissioning performed. Local Law 88 requires that lighting systems be upgraded to ECC (Energy Conservation Code) standards.
Energy Star ratings involve more than lighting retrofits, and acquiring an Energy Star designation positions a building as environmentally responsible — an excellent marketing status with a return on investment.
Energystar.gov provides in-depth guidelines, case histories, links to computer simulations and policies for building “Green”.
As an appraiser, our interest is focused on the financial results of lighting retrogrades, as well as property designations and ratings, as they affect property value.
While appraisers concentrate on hard data, the best of us combine art and science in valuations, the art including perception of how good citizenship attributes of sustainability and energy conservation contribute to property value.
As the only New York City commercial property appraiser with a LEED-AP, the equation of sustainability and value is an area of expertise.
There is no doubt that sustainable buildings that are LEED certified, have earned the Energy Star designation, and otherwise demonstrate environmental and energy responsibility are preferred by both tenants and investors.
They have better occupancy rates and higher sales prices. According to the Green Building Council, new construction green buildings demonstrate increased occupancy by 6.4% and rents by 6.1% over non-green properties.
Updated existing buildings increased occupancy by 2.5% and rents by 1.0%. Additionally, operating costs in green new construction are lower by 13.6% and in green retro-fit existing buildings by 8.5% relative to non-green properties.
So how much does retrofitting your lighting cost? Results on the investment would say the benefit from reduced operating costs and increases in tenancy, rents and sales prices far outweigh the cost.
With the December 2013 extension of the EPAct tax deduction fast approaching, building owners should speak with their accountants and financial advisors to see how best to write off the cost of new lighting in 2013 rather than having to depreciate it, and better position their building with a sharper competitive edge toward maximizing property value.