June 5, 2017 | Alex Harry

Fresh coffee isn’t the only thing brewing at The Coffee House, which serves the Case Western Reserve University community in Cleveland, Ohio. Located in a 9,233-square-foot, three-story commercial building owned by Case Western, The Coffee House is also percolating energy savings that should make a significant dent in its annual utility bills—thanks to the combination of an energy audit and win-win sustainability clauses added to its lease.

When we think of commercial buildings in the U.S., we often picture gleaming sky-high office buildings in major cities. However, small commercial buildings like the one The Coffee House occupies—generally defined as structures of 50,000 square feet or less—account for an astounding 94 percent of U.S. commercial real estate (CRE), and close to three-quarters of those buildings are 10,000 sq. ft. or smaller.

These buildings, which range from retail shopping centers to local dentist offices to warehouses, are frequently owned and leased by small businesses, and are an integral part of our society. Yet when it comes to improving  their energy performance, they have proven to be the most difficult to engage. On the demand side, there is a host of reasons for this disconnect, including a lack of small business owner and tenant expertise to manage energy upgrades, more restricted access to cash or debt, and skepticism about returns on investment.

One main reason of note is that owners and tenants of smaller buildings are not typically part of dynamic CRE membership organizations that offer building efficiency programs and financing guidance, such as the Institute for Real Estate Management and the Building Owners and Managers Association. This isolates a large portion of the market from opportunities that companies owning or occupying space in larger buildings are given. As noted in CBRE’s most recent National Green Building Adoption Index, small office buildings are unsurprisingly less likely to obtain green building certifications such as LEED or ENERGY STAR, which offer competitive advantages in the marketplace. Despite these drawbacks, however, small building owners and tenants are often connected to local chambers of commerce that can provide a welcome conduit to energy- and water-saving solutions.

Pathway to Small Business Energy Action

Chambers of commerce traditionally are important community leaders and resources to small businesses. Expenses are a major concern for small businesses and profit margins are razor thin, and saving on utility expenses helps increase profits, preserve business longevity, and sustain local economies. By starting the energy conversation within chambers of commerce, it  can yield greater energy efficiency uptake and results in the small business market, as proven by the Greater Cleveland Partnership and its small business arm the Council of Smaller Enterprises (COSE) in Northeast Ohio.

For example, as part of a pilot initiative spearheaded by COSE and the Institute for Market Transformation (IMT), our organizations worked with The Coffee House to strategize how it could reduce its annual energy spend down from more than $18,000 per year. COSE conducted a thorough energy assessment and identified 13 prime energy-conservation measures (ECMs) as candidates for implementation, including reduction of plug loads through controls, and upgrading their lighting. If all of the ECMs were executed, the facility could save $2,950 a year on utility and operations & maintenance expenditures, while yielding a simple payback of 2.9 years.

This total investment was too much to bear up front, however, IMT was able to help The Coffee House integrate some energy-saving efforts into its 10-year lease renewal, resulting in some efforts being scheduled for early implementation and the others providing a roadmap to future savings.

Image: The Coffee House at 11300 Juniper Rd. in Cleveland, Ohio. 

Stories like The Coffee House’s are playing out across the country, thanks to an increasing number of chambers who realize the economic and environmental opportunities that investing in energy efficiency and renewables offer, and are providing technical and financial guidance to their member businessess. The opportunity for improvement in the small commercial building sector alone is significant. A 2015 study by the National Institute of Building Sciences estimated the retrofit market for small commercial buildings at $35.6 billion, assuming a 30 percent improvement in performance for buildings constructed before 1980. Small building retrofits would also improve the resilience of the nation’s built environment, as well as take pressure off America’s aging electric grid, according to the study.

Small Business Energy Initiative

To build on this opportunity, IMT launched the Small Business Energy Initiative in collaboration with COSE in Cleveland, the Traverse City Area Chamber of Commerce in Traverse City, Mich., and the Chapel Hill-Carrboro Chamber of Commerce in Chapel Hill, N.C., to transform their small business members into energy-minded ones. The three-year initiative, funded by the U.S. Department of Energy, kicked off in 2016.

With chambers of commerce as the conduits, the initiative’s target audiences include tenants and small local landlords in retail, office, and light industrial buildings. IMT is working with each chamber to create  tailored, sustainable energy efficiency programs that focus on best management practices for green leasing, energy efficiency, financing, education, and energy auditing. After the three-year funding ends, the target chambers will continue their programs developed under the initiative with their memberships.

Creating a Sustainable Model

The project achieved some significant milestones in its first year. IMT convened workshops in each locale with small business owners, local government employees and leaders, energy efficiency vendors and utility representatives. Over 200 businesses received an energy audit or energy walk-through evaluation, and three businesses had their leases reviewed for energy efficiency opportunities. To date, over 350 businesses have been engaged across all three regions.

This September, IMT and COSE will host an energy efficiency symposium for chambers of commerce. The one-and-a-half day seminar will help 10 chambers become a go-to source for small business landlords and tenants looking to achieve energy-saving results in their leased building, thereby creating a sustainable model for improvement and high performance, along with added potential for non-dues revenue. To learn how to join or participate, please contact me at alex.harry@imt.org.


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Program Area(s):

Real Estate

Meet the Author

Alex Harry

Former program manager for private sector engagement

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