Commercial Real Estate: Incentives for Efficiency

While the cost savings from retrofitting commercial properties for energy efficiency are clear, it is still a challenge for building owners to find workable financing to make these upgrades. When investments in energy use reduction produce such attractive returns in direct savings and increased property values, how can progress in the commercial real estate (CRE) market be slow-moving?

The CoStar Group, a CRE information company, reported in May that while “numerous studies have shown that ENERGY STAR and LEED-certified buildings can attract higher rents and increased demand from tenants, which can lead to higher income and sale prices,” most commercial building owners have to find the money for conservation improvements on their own internal balance sheets.

In addition, companies looking at cutting-edge conservation technology will find that making the case to lenders is more difficult because of the lack of historical data evaluating the cost-savings from new products and processes.

But financing is available if you know where to apply. In a recent report issued by Anthony J. Buonicore, PE, BCEE, QEP, managing director at Buonicore Partners LLC, entitled, “Energy Efficiency Retrofit Financing Options for the Commercial Real Estate Market,” the author laments the fact that more mainstream options attractive to business are not available. At the same time, he points to emerging options including “lease/lease purchase agreements, ESCO (energy service company) financing, energy service agreements, government loan programs, PACE (property assessed clean energy) programs, and on-bill utility financing.”

These options offer funding terms that overcome barriers to energy efficiency upgrades faced by many commercial real estate owners, and several are available to Minnesota businesses. We may also see that as overall business lending restrictions ease in an improving economy, CRE owners may find financing easier to obtain.

For more information about financing options and rebate incentives available for your property contact Energy Smart today to find out how your company can qualify.