September 20, 2017 | Brian Maw
How Operational Excellence Leads to Asset Value [Infographic]

Transcript


How Operational Excellence Leads to Asset Value

Total Avg Operating Expenses (Opex): $8.55 / sq ft

  • Utilities: $2.35 / sq ft
  • Administrative Costs: $1.59 / sq ft
  • Repairs & Maintenance: $2.11 / sq ft
  • Cleaning: $1.52 / sq ft
  • Security: $0.70 / sq ft
  • Roads/Grounds: $0.27 / sq ft

Utilities $2.35 / sq ft: Correcting the top 13 top faults in commercial buildings results in 16% energy savings on average

Top Faults

  • Duct leakage
  • HVAC system operates continuosly during unoccupied period
  • Lighting system illuminating space during unoccupied period
  • HVAC system improperly balanced
  • Improper refrigerant charge
  • Economizer dampers operating incorrectly
  • Insufficient evaporator airflow
  • Improper controls setup/commissioning
  • Control component failure or degradation
  • Software programming errors
  • Improper control hardware installation
  • Air-cooled condenser fouling
  • Valve leakage

Repairs & Maintenance $2.11 / sq ft: In industrial real estate, preventative maintenance activities were found to be wasting 25% of every dollar spent

Inefficient Preventative Maintenance

  • 19% are a waste of time
  • 30% are carried out too frequently
  • 80% of costs are spent on activities with a frequency of 30 days or less
  • 30-40% of costs are spent on assets with negligible failure impact

Administrative Costs $1.59 / sq ft: Automation in tenant billing leads to 10% savings in accounting costs

Savings Driven By Eliminating:

  • Manual meter readings
  • Excel versioning
  • Paper invoicing
  • Paper record keeping
  • Redundant data entry
  • Complexity with move-ins/outs

Asset Value Driven by Opex Savings.

Opex savings have an outsized effect on asset value.

At a 4% Cap Rate, Opex savings produce a 25x return on Asset Value