Building Engineer Blog

Real estate investors routinely order a Property Condition Report in order to understand the condition of the asset that they are purchasing.    The Property Condition Report should illuminate any immediate repairs or deferred maintenance issues and should provide a schedule of capital replacement reserves.   But the Property Condition Report only addresses what is broken and what will need to be replaced.   What about the opportunity to save money?

An Energy Audit in conjunction with a Property Condition Report will illuminate how a building should be performing.    Often the Energy Audit will discover multiple aspects of a buildings energy management program that are suboptimal and can easily be corrected.     Energy Audit will also give the user a list of potential energy efficiency investments and will rank these investments in terms of payback period—often several opportunities with sub-3-year payback periods are indentified.

The Energy Audit and Property Condition Report go well together as they are addressing the same systems.   The Property Condition Report may schedule the replacement of a roof mounted HVAC system in year 8 of the replacement reserve as that is the end of its useful life; however, the Energy Audit may make a case for not using an old inefficient system until it fails; rather, the building owner may receive an positive return by replacing it sooner.

My company, Partner Engineering Science, and our sister company Partner Energy routinely provide these services in tandem.

Energy Audit, Real Estate Due Diligence , Energy Audit, PCR Energy, Property Condition Assessment, Property Condition Report

Energy Audits should be a standard part of building due diligence.  When you buy a car you know its fuel effiency, why not understand the same about the commercial building that you are buying?    Commercial building energy efficency can vary widely.   Two building of similar age and construction often vary as much as $1.00 per square foot per year in energy costs. 

Of course, the cost of energy is in the operating expense, so why pay $1,000 to $3,000 for an energy audit?   What you cannot see in the operating expenses is the opportunity to reduce.   Often a poorly preforming building can be brought in-line with its peer buildings for a minimal investment and these savings contribute directly to the building’s Net Operating Income.

In California there is another reason to do it:  the results of a basic energy audits will be a required disclosure item duirng leese, sale, and financing transacitons in 2010 for non-residentail buildings per AB 1103.    AB 1103 requires that non-commercial buildings are enrolled in EPA’s portfolio manager program and that the 1 to 100 rating given by EPA Portfolio Manager is given to the prespective tenant, buyer, or lender.

Commercial Building Inspection, Energy Audit, Real Estate Due Diligence AB 1103, Commercial Building Energy Audit, Energy Audit, Energy Disclosure