Tapping Technology to Improve Energy Efficiency in the Multifamily Sector

A Q&A with Martin Levkus of Yardi Energy

Yardi Energy focuses on energy management and sustainability for real estate, including commercial, retail and residential buildings. Yardi offers several products as part of the Yardi® Smart Energy Suite, most of which are built into Yardi Voyager® property management software, offering its clients a unique experience utilizing a single stack of products to effectively manage assets, analyze energy costs and deliver energy savings. Yardi® Utility Billing and Yardi® Utility Expense Management helps with the recovery of utility costs from residents and vacant units, and automates paperless utility payables processing. Yardi LOBOS® and Proliphix includes HVAC energy optimization software for commercial and retail buildings. Pulse Energy provides real-time energy data aggregated by a built-in algorithm for visibility into energy load to manage energy use, performance, and occupant engagement. Yardi PowerShopping® energy procurement services leverage energy management and risk management strategies to negotiate competitively priced electricity, gas, oil and green energy sources on behalf of property operators.

We sat down with Martin Levkus, Director at Yardi Energy, to learn more about the energy initiatives he’s seeing in the multifamily sector.

Interview Highlights

Yardi Energy works with both commercial and multifamily buildings, which has provided Levkus with an interesting perspective on sustainability in the real estate space. He says the multifamily sector lags behind the commercial sector when it comes to sustainability due to a difference in who pays the bills (residents in the multifamily sector versus property owners in the commercial sector) and a lack of quantifiable whole-building data in the multifamily sector.

Still, Levkus has seen sustainability in the multifamily sector go through three phases of evolution. First was the submetering units to make residents directly responsible for consumption costs, second was educating residents on how to lower their consumption and third entailed views of whole building data to measure performance and compare buildings for energy trending, benchmarking and most recently tracking ENERGY STAR® scores.

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Levkus also believes that we have reached a turning point when it comes to sustainability in the multifamily sector. More states are mandating energy benchmarking, and we have a new generation of environmentally conscious renters. Together, these factors make energy efficiency improvements more compelling. Against this backdrop, however, multifamily building managers must collect more energy data and make better use of it to improve visibility into consumption and help determine the impact retrofits will have on performance.

Fortunately, says Levkus, there is plenty of innovative technology available to help. Specifically, he points to Internet of Things devices like smart thermostats that can make regulating energy consumption smarter and easier for residents and property owners alike. He also cites the value of new meters that can provide real-time visibility into utility data to help buildings proactively identify and correct any issues as they happen.

Success comes down to making all of these factors — better data, new technology, improved visibility and resident participation — come together. Levkus contends: “Improving visibility into data and introducing Internet of Things technology will help property owners be more successful with energy initiatives in the multifamily market, but they can’t do it alone. Property owners can’t be successful in achieving any major energy goals or savings in the multifamily market if they don’t engage their residents. If you have a 200 unit building, your common area counts as probably 10-15% of the energy bill. The rest is in the hands of your residents, so if you don’t engage them with any sustainability projects, you’re not going to be able to succeed because they control 90% of the costs.”

“Property owners can’t be successful in achieving any major energy goals or savings in the multifamily market if they don’t engage their residents.”

Q&A

Angela Sun: What are some of the reasons why your clients seek out Yardi Energy’s services?

Martin Levkus: Our customers look to our expertise to help them manage their energy and reduce their operating costs. Also, they use our Voyager property management platform as a “single stack” business solution. You work with one, highly credible company like Yardi that can collect all of your information business-wide, and you don’t have to worry about pushing data from one system to another or logging into a third party platform to look at cost and consumption data, it all resides inside your property management system.

For example, because we have a single stack, our clients’ utility bills are paid directly from the Voyager system, so clients just follow their typical work flow – approving payables in Voyager, and letting us facilitate payment directly with the utility vendor. There is no need for moving money because the payments are made directly from the properties’ bank accounts. The process finishes with the bank reconciliation within Voyager. This provides full visibility and puts the client in control of which payables are to be paid and which are held.

With the Utility Expense Management and Utility Billing solutions, we are an extension of our clients’ operations on the payable side. Clients can rely on us to make sure those utility bills are delivered on time and entered accurately into their system, which helps to reduce the number of late fees. Additionally, having all of their energy initiatives reside inside Voyager provides full visibility and transparency.

AS: When you started at Yardi, what was the general sentiment toward energy management and sustainability among your peers and how has that changed since?

ML: I’ve been with Yardi for 16 years, so the industry had different priorities when I first started. The focus was more on the core management and accounting for their buildings. Within those last 16 years, we’ve seen three main phases of evolution when it comes to multifamily energy management and sustainability:

1. Phase one was about billing. Submetering was introduced and metering devices were installed for individual units, allowing residents to be billed based on their consumption. It was really about making residents directly responsible for their usage.
2. Phase two was creating awareness for residents. Residents were educated so they understood how they can change their behavior to conserve water and reduce their utility bills.
3. Finally, phase three focused on whole building data. Today, instead of only having visibility into common area meters and consumption, we can actually measure whole building performance. Using that to compare how different buildings are performing is significant.

16 years ago, I don’t think anyone was looking at the energy data as much as we’re looking at it now, and we see investors demonstrate a growing preference for more efficient buildings. In general, we’ve seen a huge shift for the better, especially as more states and cities mandate submetering and ENERGY STAR benchmarking. Today any new construction in the United States has to have some type of submetering device installed, which is a positive step toward energy conservation for the multifamily industry.

AS: Does Yardi help out with energy consumption disclosure and benchmarking?

ML: Absolutely. We take on the initial setup and work with ENERGY STAR® Portfolio Manager®. We also work with local utilities to obtain the data that we need, so that it flows directly from the different utilities and aggregates into Portfolio Manager for benchmarking. Then we record the ENERGY STAR score into our Yardi E2 Insight reporting platform so clients can look at their cost, consumption and ENERGY STAR scoring all in one place.

We have many commercial clients doing this type of benchmarking, but not as many in the residential space, yet. But we’re seeing a trend of new energy benchmarking mandates in multifamily, so it’s going to happen soon out of necessity. Fourteen states and 23 local jurisdictions have already put energy policies in place, and most recently California enacted AB802 which requires benchmarking, and many clients are turning to us and asking for help.

AS: It seems like the movement toward sustainability hasn’t really been accepted within the multifamily space. Why do you think this sector is slower to adopt?

ML: If you look at the basic business model of buildings, on the commercial side the focus on energy is to reduce the cost of energy consumption, regulate a more consistent and comfortable environment for tenants, and to make the building more sustainable, all of which can lead to higher asset value. The building operator has complete control. On the residential side, the focus is on energy cost recovery from the residents which increases net operating income, but the building is at the mercy of resident behavior in terms of how much energy it consumes. So in multifamily, the focus is not about reducing the building’s gas or electricity consumption, it’s about the owner transferring the existing cost of energy over to the resident. That focus is changing though.

Today, energy initiatives in commercial buildings already have demonstrated quantifiable value in case studies throughout the nation. A sustainability director can easily use other projects to make a case for investment in energy efficiency based on other commercial buildings that have already done so. The proliferation of commercial energy projects has been enabled by new technology development, but investment has taken place because the building has control of its usage and feel more certain that there will be return on investment. We don’t yet have case studies or good quantifiable data on value for the residential side. In order to get it, some apartment building owners will have to be pioneers and make the leap toward such a trend. However, the ongoing emergence of ENERGY STAR benchmarking requirements will drive property managers and owners in the multifamily space to think more seriously about greening their buildings and driving down apartment building energy consumption.

Read insights from Martin Levkus along with those from AncillaryAnalytics and Maxus Properties in our new eBook.

Finally, the new generation of renters will make a difference. These renters are technology savvy, they expect certain tools like elective controls, they’re more socially responsible when it comes to energy and they don’t mind paying more to live in a greener building. Resident demand for more energy efficient buildings will also compel property owners to implement energy management tools, invest in retrofits, and start participating in ENERGY STAR benchmarking in order to compete in the marketplace.

AS: How does Yardi help building owners once they decide to take on an energy efficiency retrofit?

ML: We have one of the largest in-house technician groups in the country. These are our own employees who are fully licensed, trained, and they help our clients with retrofit projects, covering everything from the initial planning, proposal and recommendation of hardware to actually performing the installation and commissioning the meters. Once the submetering devices are installed we also offer a full service maintenance option for our multifamily customers so they don’t need to worry about the health of their metering devices going forward. This is quite a popular service for our multifamily clients.

AS: In your opinion, what is the biggest opportunity for multifamily building owners to green their buildings and become more sustainable?

ML: The biggest opportunity is gaining visibility into data, and there’s a few different components of that. First, property owners and managers need visibility into their consumption data so that they can understand what’s happening and see where their challenges lie. Second, once they have that visibility and understanding, they can start measuring performance. For example, they can do ENERGY STAR benchmarking to measure performance and compare their energy use with other like type properties in their area. Third, once they understand their data and measure property performance against the market, they can deploy the right technologies to ensure effective ongoing energy management.

Taking advantage of new technology, especially Internet of Things technology directly connected with their property management software, is a good first step. The installation of new devices such as smart thermostats like Nest, Ecobee, Honeywell, Wifi, Smart and others, can work with Yardi Voyager. These devices give residents the ability to control the temperature in the unit and make it easy for property managers to manage units when they become vacant (for example, change the temperature when maintenance crews come in or when tenants move out without having to physically walk into a unit). Today, managers will walk into vacant units, but it might not be until a week after the resident moves out, and if the AC was running during that time, the property owner is responsible for the bill.

AS: What role, if any, do residents need to play in improvement efforts?

ML: Improving visibility into data and introducing Internet of Things technology will help property owners be more successful with energy initiatives in the multifamily market, but they can’t do it alone. To achieve any major energy goals or savings in the multifamily market property managers must engage their residents. If you have a 200 unit building, your common area counts as probably 10-15% of the bill. The rest is in the hands of your residents, so if you don’t engage them with any sustainability projects, you’re not going to be able to succeed because they control 90% of the costs.

This means that multifamily buildings need to put submeters in units so that residents can view their consumption data. It also means that managers need to educate residents about the data and provide tips on how to consume less. One way to do this is to provide a portal where residents can log in to see their rent and utility charges all on one single ledger, which can be of significant benefit to the resident. Also providing visibility to a monthly projection of their utility cost and consumption based on the submeters in their units through the same resident portal is important. That way, residents can go in and look at the projection to see if they’re saving any more based on changes in behavior and even compare their consumption to other like type units in the building, historical cost and consumption trending of their unit, access to their utility bills or access to any energy saving tips or green projects that the property is participating in. Plus, if residents have the convenience of making one payment for their rent and utility bills through the portal at the same time, building collection typically increases by 20%. Yardi’s single stack with utility billing, utility expense management, E2 Insight, Voyager and RENTCafé® solution offers all of those capabilities.

We’ve also seen clients that offer their residents incentives, such as contests with prizes or discounts for the lowest energy bill. I think the new generation of renters likes it — they like to be challenged and they like to be recognized. With the right tools in their hands, they can be successful, and in this way they work together with the property managers to keep energy consumption down.

AS: Do you have any customer success stories you can share?

ML: I’ve talked a lot about owners in the multifamily market being a little bit reluctant to adopt green practices, but there are many exceptions. There are many owners who act as leaders in their communities and are very socially responsible. Additionally, there’s a new hiring trend for sustainability energy managers in the multifamily sector which wasn’t typical in the past. Now we see multifamily property management companies with energy managers on staff who are looking at different initiatives to improve energy efficiency. For example, we have a client in Canada that put a shadow meter on top of the master meter in order to retrieve real-time data on consumption rather than having to wait until the bill arrives. This real-time data allows the company to be proactive in fixing any issues and takes proactive steps to ensure building continues to run as energy efficient as possible without impacting the comfort of their residents. And they asked us to extend that information by adding the submeter data and giving consumption visibility to residents so they can participate in making their buildings greener and more energy efficient.

Another success has been with the United States Military through their Resident Energy Conservation Program, which uses our solution for cost and consumption projection reports. We introduced submeters and gave military family members access to the cost and consumption data for their individual units. Since giving them full control over their cost and consumption as well as the ability to compare their units with others, we’ve seen costs and consumption drop by 15-20% for the military.

On a different note, as part of our utility expense management service we handle many different exceptions generated by our master meter invoice auditing process. About 55% of the bills that come to us have some type of exception that we have to resolve. For example, we have a large customer with over 60 buildings in the northeast, and in two consecutive years we recovered close to $400,000 in billing errors. By working with the utility provider we were able to get back payments for those errors to our client.

AS: That’s awesome. What innovation are you excited about seeing grow in the multifamily space?

ML: We are very excited about Internet of Things technology connecting with property management software, for example smart thermostats that you can control from a remote location. Imagine you have a resident (or multiple residents) moving out. At some point, someone from the property management staff needs to walk the unit, which includes resetting the temperature or turning off the AC. It can happen within 48 hours, but in many cases it can happen a week later. The Internet of Things changes all of that. You can control those vacant units from a remote location, leasing or corporate office and make these temperature or AC resetting immediately based on the resident move out date and your unit status changes from occupied to vacant. The reset can occur for one or multiple units and you can have different reset points by different unit types or your common area space. Similar scenarios can occur while you are making the unit ready and expecting maintenance work to be performed between certain hours. The scheduler can accommodate to make sure the unit is comfortable during the maintenance time, but as soon as the crew is finished the temperature is reset back to vacant unit mode.

See the rest of Martin Levkus’ insights in our Multifamily Energy Efficiency eBook.

This is just one of the exciting new technologies we are working on and our clients are excited as well. One of many options for clients to implement and benefit from IoT in their buildings, especially when integrated with Yardi Voyager.

AS: I can see that having a tremendous impact on operational efficiency.

ML: If you think about one occurrence where you forget to turn off the AC and you get your monthly bill, if you’re in an area like Florida, that bill could easily be a few hundred bucks. Just that one occurrence pays for the device itself, and there are other financial benefits.

Given the expectation of the new generation of renters, there’s an ongoing trend toward properties that have smart thermostats in their units which can be operated by the resident from their smartphones using resident access and user interfaces to effectively control their unit climate on the go. Those properties will have an advantage not just by attracting those tech savvy customers but also driving their energy consumption down, creating greener multifamily buildings and helping our planet. That is the future and direction of the multifamily market.

AS: How else do you see technology shaping the movement toward a more sustainable multifamily landscape?

ML: In addition to Internet of Things technology that helps manage buildings more effectively and gives residents access to the data, we are also looking at technologies that provide real-time energy data with visibility to the building energy load. This technology helps to identify any outliers that can be addressed timely to maintain or increase building energy performance. Along with that comes education, because as the data gets more granular, we need to educate property owners and residents on how to use it to make smart decisions.

AS: How does partnering with Urjanet help your customers achieve their goals in energy and sustainability?

ML: We see our partnership with Urjanet important to our business especially in instances in which we are unable to receive utility bills any other way than on paper. We work with many utility companies today on EDI, where we electronically receive data and bypass the whole mailing process, and we also get e-statements from many utility companies and process those electronically. However there are still a number of utility companies that don’t have the ability to provide electronic data and only supply paper bills. Working with Urjanet helps us get those bills much faster, which in turn allows us to process them and deliver them to our customers much faster to ensure bills are being paid on time to avoid unnecessary late fees or disconnects.

AS: How does data enable your customers to push forth new initiatives in energy management and sustainability?

ML: There are three things:

1. First, you need to have visibility into energy data to understand outliers and identify opportunities.
2. Second, you need manage your energy data by implementing proper energy initiatives to start managing your building more efficiently through tools like ENERGY STAR benchmarking.
3. Third, you need to make sure you can measure the ongoing success of your energy initiatives to achieve your desired building energy performance, including setting a baseline and ensuring you deploy the right solutions to address your issues.

AS: What advice can you give others in your industry trying to green their multifamily buildings?

ML: My advice would be to simply start doing it. You don’t have to jump into complete retrofit projects right off the bat. Just start doing little things like replacing light bulbs with more efficient ones or putting low flow toilets in the units or having sensors that turn on and off hallway lights. Those little things will get you introduced to some energy savings and provide feedback that can inform more improvements. You can also engage with reputable companies like ours to help to identify the right technology to reach your energy goals and ensure the best energy performance for your buildings.

For example, I worked with a client that has HOA units. Usually with HOAs, owners pay a fee that covers their utilities. If the utility rates go up, most likely the HOA fees will too. In this case, the building purchased LED light bulbs for the entire building, including the individual units. They’ve seen enough savings just by making that initial investment that they didn’t have to increase the HOA fees despite utility rate increases.

Installing LED lighting is such a small thing, but it’s a good place to start because it is easy and relatively inexpensive. Again, knowing your data and having the right software tools in place to measure energy data and ensure wanted results are being achieved is helpful. Adopt a proactive approach to address any energy load outliers to maintain desired building energy performance. There are companies like us that can help you to achieve just that.

Ready to Move Your Energy Initiatives Forward?

Making changes like those described by Levkus are well within reach. Learn more about what it takes to make it happen in our eBook, The Next Frontier for Energy Efficiency: “Greening” the Multifamily Sector.

Grab your copy to learn more about the potential opportunities, uncover actionable steps for getting started with energy efficiency efforts and get advice from experts like Levkus who have helped leaders in this space realize success.

Related Resources:

• Facility Management & the Path Towards Energy Efficiency
• How EPA’s New Water Score for Multifamily Gives You a Smarter Way to Save Water
• Building Energy Benchmarking & Transparency Laws: Simplifying Compliance

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