March 21, 2019
By Dennis Kaiser
Savvy property owners tend to operate the most efficient portfolios, whether in a booming market, or one that faces challenges. Now that the lengthy recovery has extended beyond what market cycles typically run, smart commercial real estate owners naturally have, for some time, been weighing every budget dollar. That encompasses everything from lease roll-over expenses to restroom hand towel costs.
Los Angeles-based EcoSmart Solutions, Inc. has shifted the operating expense discussion to power usage. The company has found substantial efficiencies can be achieved through LED lighting retrofits. Electricity charges rely upon usage of kWh (kilowatt hours) consumed, thus, LED systems that consume up to 80% less than traditional systems deliver a host of benefits. These range from cost savings, to improved performance, to workplace safety.
Most initial decisions to execute an LED retrofit start with money. In 2015, lighting accounted for 20% of the electricity used in the commercial sector in the United States. The U.S. Department of Energy has estimated that if every commercial building in the country converted to LED, the savings would be roughly $30 billion annually. Clearly, the savings for building owners and tenants can add up. EcoSmart Solutions’ Nathaniel Baer says the energy cost associated with lighting can be reduced by 80%.
Challenge: Why LED?
“Usually, the reason a client takes a meeting with us is because they are interested to learn how much money they can save,” said Baer. “The reality, however, is that we wholeheartedly believe that the other benefits – improved property aesthetics, productivity, and safety – are much more valuable to any project than the operating savings are.”
It is surprising to consider how much of a nuisance non-LED lighting systems are. Traditional bulbs and fixtures have lifespans between 5,000 and 7,500 hours, and rely on ballasts, which are a very outdated piece of technology. As a result, maintenance and engineering staffs are constantly tasked with purchasing and replacing bulbs and ballasts, and keeping inventory of replacements that will inevitably be needed. When buildings fail to accomplish this in a timely manner, they are left with an unsightly, uneven distribution of color, because non-LED’s rapidly diminish in their light output. Even worse is that they change color as they do so.
Conversely, premium LED bulbs and fixtures have lifespans between 75,000 to 150,000 hours. Further, they do not require ballasts in order to operate. This improvement eliminates the need to constantly purchase and install new bulbs and ballasts several times a year as they go out. Additionally, they do not diminish in brightness or color over time. As a result, buildings are left with an even distribution of light and color throughout.
As far as safety is concerned, LED’s provide a dramatic improvement, predominantly due to their increased brightness. According to the U.S. Department of Labor, roughly three million preventable U.S. workplace accidents occur each year, and poor lighting is to blame for most of these accidents. In commercial buildings, office workers often complain that they feel unsafe due to dim lighting in parking structures, and also complain of headaches in the office due to fluorescent lighting.
In today’s highly-competitive world, EcoSmart has gone to great lengths in order to separate themselves from the pack. The majority of companies in the industry subcontract their labor to other electrical contractors, so that they can focus their efforts on marketing, sales and analysis. EcoSmart, on the other hand, has full-time electricians on staff, who perform 100% of the labor on jobs. This way, they cut out a substantial amount of unnecessary cost – the profit margin of another contractor. Further, because EcoSmart’s crews are doing nothing but lighting retrofitting, they are incredibly efficient and rapid, which further drives down the cost.
Similarly, most other contractors in the space purchase from lighting and electrical distributors, which also adds an unnecessary level of cost to the end user. Nevertheless, it is standard industry practice because distributors are convenient to work with, carry stock, and are often protected by their manufacturers who choose to only sell to distributors, and not to contractors. Conversely, EcoSmart has secured key factory direct relationships with several manufacturers, which significantly drives down the cost of their projects.
Also, highly important are the special trade designations that EcoSmart has secured with the major utility providers in Southern California. These allow EcoSmart to receive rebate and incentive payments directly from the utility providers. As a result, EcoSmart is able to count on future rebate payments, and reduces the amount owed by the property – at the beginning of each project. This represents a tremendous benefit over a contractor who secures a rebate to be received by the property – who would have to pay the full contract amount up front, and then wait for the rebate themselves.
“It’s hard enough to enter into someone else’s place of business and get them to retrofit their property. If you want to earn their business, you need to make the proposition so effortless that they have little to object to,” says Baer. EcoSmart further accomplishes this goal by offering financing, allowing a project to be paid for over 24-60 months. Usually, the monthly operating savings are greater than the monthly payment for the project.
EcoSmart’s process begins with a complementary lighting analysis. This analysis consists of a detailed walk through, and allows EcoSmart to generate a comprehensive proposal for the project. The proposals outline the annual operating savings a project will achieve, the proposed scope of work in each area of a building, the increased lumen output (brightness) in each area, the appropriate rebate/incentives that can be secured, and the out-of-pocket cost. In some cases, the available rebates are so large that the client does not have to pay at all.
Once a project is approved, the utility provider is contacted and brought in for a pre-inspection. This is done to ensure that the kWh savings are accurate, and therefore that the rebates and incentives that have been applied for are appropriate, given the savings. Following the inspection, the project is approved by the utility, and then installation can begin. Once it is complete, all of the old lights and lighting material are hauled away and recycled.
Considering the vast array of benefits, and the extraordinarily low cost, it is a wonder how the vast majority – roughly 80% of businesses – have not yet converted to LED. Typically, businesses do not place an LED lighting retrofit high on their priority list; usually, it doesn’t appear on that list at all. All things considered, when it comes to improving a building or business, it can never hurt to shed some light on the topic.
*Pictured Goodyear Tire distribution facility where EcoSmart completed a retrofit in 2015.
For comments, questions or concerns, please contact Dennis Kaiser