Over the years, having “utilities included” in monthly rent has had a positive connotation. Utilities included meant tenants didn’t have to worry about monthly fluctuation in their bills, and building owners didn’t have to deal with separating consumption data to bill each tenant differently.
However, this method has consistently lent itself to one of two problems. Either (1) the tenant overpays every month to cover potential expenses, or (2) the building owner underestimates how much to charge tenants and is forced to pay for any extra expenses.
Over the last few years, submeters have become increasingly easier and less expensive to implement, and they will continue to do so as wireless and web-enabled meters advance. Submetering allows you to break down your energy consumption by use or by space, helping you identify where and how energy is being used.
Utilities are the largest controllable expense for building owners. By breaking down buildings by space, you can identify what each tenant is using, and bill them based on their actual consumption, letting you remove utility bill charges from the expense column of your balance sheets. That way, tenants don’t have to over pay, and you don’t get stuck with unexpected expenses. This will actually raise your profit margin and increase your NOI, making the building more marketable.
Transparency will motivate tenants to pay attention and avoid wasting energy. Those who know they’ll pay less if they use less will, indeed, use less. Plus, tenants will be more satisfied knowing that they don’t have to pay their neighbors’ bills.
It’s like splitting the check when you go out to eat. Whoever ordered the $7 salad does not want to pay for their companion’s $30 steak and $14 glass of wine. Submetering provides people with the ability to pay for what they consume.
If a particular building is at 80% occupancy, and you use a gross tenant billing mechanism, then you as the building owner are responsible to pay for 20% of the utility bill. However, the 20% of the building that is left empty should not be using nearly as much energy as the occupied spaces. By separated occupied and unoccupied areas through submetering, you can more accurately bill tenants for what they use.
Submetering unoccupied spaces will also motivate you to reduce their consumption. By keeping an eye on the behavior of unused spaces, you can make sure that individual heating and cooling units aren’t running, refrigerators and electronics aren’t plugged in. According to a study conducted at The University of Virginia, 38% of building energy use comes from HVAC systems, and 5-15% of building energy waste results from unoccupied spaces being conditioned. You may not be able to “turn off” the unoccupied spaces, but you can certainly make an effort to keep their energy use as close to your building’s baseload as possible.
Submetering will be a great way to reduce consumption and bills, but the process isn’t worth while if you can’t easily bill tenants for what they owe.
Some of your tenant spaces are going to be submetered easier than others. It is quite possible that some of your tenants are already fully submetered (i.e. retail), while others are partially submetered but are still responsible for Common Area Maintenance (CAM) Costs. With streamlined tenant billing you can easily bill two tenants with different methods, based on the information you collect about their consumption.
Streamlined tenant billing starts with automated meter readings so you don’t need to copy each meter number by hand. Then you can set up your invoicing structure to support multiple forms of tenant billing, allowing you to decide who is billed based on submetered data, who is responsible for covering CAM costs, and how to split gross costs for tenants that do not occupy submetered spaces. Once this is set up, you can easily bill your tenants every month, quickly and accurately, making sure you get paid on time.