It has been over three weeks since the COVID-19 outbreak has been declared a national emergency. Three-fourths of Americans find themselves under some sort of lockdown imposed by local and state governments to prevent the spread.

The resulting economic disruption has forced commercial real estate owners and operators to be reactive to preserve cash flows. Many, regardless of asset class, are being inundated with requests for rent relief.

While managing these requests will be the primary focus for the foreseeable future, the expected dip in rental revenues creates pressure to shave operating expenses. This is made more difficult by the significant changes to occupancy, the additional cleaning requirements, and the reduced staffing on site to minimize infection risk.

Many office and hospitality assets are now only 10% occupied. According to the data across Enertiv’s client base, this should equate to at least a 60% drop in operating expenses. But buildings are not on auto pilot, conscious decisions must be made to realize this value.

In buildings that have a robust data infrastructure in place, these opportunities will be easy to identify and execute. However, technology is not a prerequisite and properties without analytics will still be able to benefit from these insights, even if it requires more work to execute.

1. Stop HVAC to Unused Areas

Both commercial and residential buildings have closed common areas and amenity spaces to reduce the potential to spread infection among tenants. Unfortunately, because new cleaning protocols and other emergency tasks have rightly been prioritized over optimization, many of these areas are still being served by HVAC units.

Likewise, whole floors have been shut down in office buildings. Even if the tenant is under a net lease, a portion of the cost of conditioning their space will be borne by the base building systems.

As conditions stabilize, time should be found to make sure that the systems serving these spaces are shut down.

Real-time transparency into which systems are running and which areas they’re serving makes the identification step easy. The only thing left is to turn these systems off via a building management system or manual controls.

If there isn’t real-time data in place, this can still be achieved by studying the floor plans and riser diagrams to see which systems serves the unused areas.

2. Ensure Quality Ventilation

Rooftop ventilation units are generally low priority for building operators. They are small systems that, when broken, don’t usually trigger an immediate flurry of complaints from tenants like heating or cooling systems.

However, air flow and ventilation will be more important than ever now and going forward. It’s important to make sure all systems are operational and working as intended.

Again, this is easier to do when there’s data. Any systems that are “baselining” should be brought back to operational as soon as possible. Ventilation units that have erratic performance data should be checked closely; this often indicates that there’s an issue with the fan belt, which means it’s not working properly even though it’s “on.”

This can also be achieved without data by physically inspecting ventilation units. The important thing to remember is that routine rounds often miss fan belt issues. Touch and visual inspections may demonstrate that the unit is running, but without shutting it down and inspecting the fan belt itself, there’s no guarantee it’s doing the job intended.

3. Utilize VFDs Where Possible

Variable frequency drives (VFDs) have impressive payback periods when utilized correctly to modulate the flow rate of pumps. While it’s likely impossible to get a vendor in the building to install new ones during the crisis, many buildings have VFDs already installed that are not being properly utilized.

One reason that these systems may not be used to their full advantage is because operators are wary of upsetting tenants and end up being far too conservative. A silver lining of having a mostly unoccupied building is that it is a low-risk opportunity to take advantage of previous upgrades to the building’s infrastructure.

4. Disruptive Preventative Maintenance

Low occupancy rates are also an unprecedented opportunity to perform high-value preventative maintenance that would otherwise be disruptive to tenants. This will pay enormous dividends in increased efficiency in the short term, as well as better uptime and longer equipment life in the long term.

This can include:

Sequentially draining and servicing all cooling towers
Bringing chiller plants and associated HVAC offline to conduct thorough preventative maintenance
Decommissioning and servicing all boilers
Replacing and/or switching to high-efficiency air filters; preferably HEPA (MERV 17 or higher)
Locking out chilled water and steam connections

Given the expected revenue shortage and the fact that building systems are being underutilized, it will be tempting to think that maintenance is a great place to cut costs. However, this is the opposite of how sophisticated operators are thinking.

Unlike utility costs, which are highly variable and accrue in real-time, a significant portion of maintenance and repair costs are the result of actions taken months or years earlier.

5. Prepare for Resumed Occupancy

Aside from the once-in-a-lifetime opportunity to perform high-value preventative maintenance, conscious effort must be made during the shutdown to avoid a nightmare situation when occupancy returns, and systems are turned back on.

Building systems are designed to be run consistently and when no one is occupying the building, the mechanical system will not take care of humidity. With systems at least partially decommissioned for an undetermined amount of time, there are important steps to take to ensure that mold and other issues do not arise.

Maximize outdoor air supply of HVAC system where possible, consider purges at night
Turn all faucets on and off every 2-3 days
Consider flushing entire building water system before re-opening, disinfect if necessary

The goal is to achieve the operating expense reductions outlined above while still maintaining sufficient temperature and humidity control to avoid mold growth. BOMA advises building temperatures to be kept between 55 and 80 degrees and a maximum humidity of 60%. Water systems must also be run consistently; water left stagnant can develop biofilm in as little as 3-4 days.

Conclusion

With operating expenses receiving more attention than ever, the decisions made in the coming weeks will have a direct impact on cash flows for months down the line. In addition, building operators responsible for unoccupied buildings must continue to remain vigilant to ensure that they do not endanger tenant health when occupancy resumes.

As we’ve seen, this work is made much easier (and maybe even possible in the first place depending on the workload of building operators) by equipment-level performance data and analytics. Not only does this data help identify which systems to turn off, it verifies the work has been done and constantly checks to ensure configurations are maintained. While seemingly small, this is an early sign of the divergence between digitized CRE portfolios and those who still run on analog systems.

While it may be difficult to have sensors installed during the lockdown, there are things that can be done to digitize operations today. For example, mobile apps can be used to capture all of the nameplates, O&M manuals, riser diagrams, floor plans and other critical information of a building and make it accessible in a digital format. This could be done today and allow operators to study documents at home while on staggered shifts.

When there are emergencies to handle, it is impossible to think about higher-order optimization. Hopefully, things have stabilized enough for operators to begin thinking about how to make serious cuts to operating expenses. Depending on how rent abatement negotiations go, it could make the difference for a property remaining solvent or not.

Enertiv is here to help. We are offering free, software-first solutions to digitize your operations in the near term.