By
Wayne Hansen, PE, REA, CEM
The business
of owning and managing buildings has been on a financial roller coaster over the
past 15 years. When the current economic boom began, the focus to expand real
estate portfolios was so active, that many properties changed hands with less
than usual physical due-diligence being performed. Real Estate Investment Trusts
(REITs) acquired many of these properties for long-term holding.
With the
buying frenzy subsiding, many owners have identified the need to analyze properties
and find ways to generate additional profits. Recently, Richard S. Ziman, chairman
and CEO of Arden Properties was quoted as saying, "The truly good property
bargains are now extremely difficult to find, so you have to focus on maximizing
the returns from your existing portfolio. If you can't find new ways to generate
more profit from your existing portfolio, you're not going to meet investor expectations."
The discovery
period for each of these newly acquired properties has found many issues that
involve risk identification. To most building owners and managers, this topic
is not a pleasant one, because it invariably results in a cost to management with
no perceived payback. Examples of this are: the American Disability Act compliance,
asbestos awareness and abatement, fire/life/safety retrofit issues, and the refrigerant
replacement program.
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When the
topic of indoor air quality risk (IAQ) and liability is raised, it becomes another
in the list of necessary evils requiring management attention. However, that is
definitely a misconception. There are favorable paybacks to investment in the
indoor air environment. The return on investment (ROI) comes from several areas
and each deserves particular attention:
· Improvements in individual productivity,
· reduction in tenant and employee turnover,
· reduction in tenant disputes,
· reduction in HVAC system energy consumption, and
· reduction in some HVAC equipment repair reserves.
Human assets
are the most valuable and expensive assets of any business. Studies have shown
that in terms of cost-per-square-foot, the human asset is approximately 10 times
the total building operating cost and nearly 100 times the energy cost. Expressed
in another way, a 50 percent reduction in energy consumption would equal a 5 percent
gain in personal productivity.
Another
study, performed under a contract from the U. S. Department of Energy, concluded
that for every dollar spent on improving IAQ, three dollars can be returned from
improvements in human productivity. This study further concludes "the potential
financial benefits of improving indoor environments exceeded costs by a factor
of 1 to 2."
Of particular
interest to the commercial building arena, are the projected annual productivity
gains or savings from establishing a sound fiscal IAQ program. The total range
nationwide is from $29 to $168 billion. The average of $70 billion for potential
productivity gain or savings is highly significant when compared to the total
cost of energy in the U.S. at $88 billion.
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Figure 1
shows the average cost of a Worker's Compensation Claim. What these numbers do
not account for is the cost to business for absenteeism of these workers. If the
absent worker happens to be in a supervisory or managerial position, there is
a cascade effect on productivity losses from the staff that they supervise.
FIGURE 1:
AVERAGE COST FOR A LUNG/RESPIRATORY CLAIM
Tenant disputes and turnover is costly to building owners. In some disputes, tenants
have been known to deposit rent checks into escrow accounts while awaiting dispute
resolution. In most cases, however, the tenant simply elects to relocate to another
building, leaving the suite vacant. During the vacancy period, there is lost rent,
while the costs of utilities, maintenance, and other fixed costs continue. There
are also costs associated with attracting a new tenant, such as marketing and
advertising costs, tenant improvements, and incentive packages.
As an example,
if we assume a 20,000-square-foot suite with 125 employees, the estimated cost
to upgrade the building and system for better IAQ is $100,000, which results in
a productivity gain of $58,500. Should that tenant move and the suite stays vacant
for four months, the net loss to the owner for this vacancy and new lease is projected
to be $283,333. Clearly, the financial advantage is to improve the indoor environment.
Employee
turnover is costly to employers. The cost for attracting new employees, along
with training, represents a period of reduced productivity and cost. If the tenant
experiences an employee turnover because of IAQ-related issues, it can become
a cost and public relations issue for the building owner.
How important is good air quality to tenants and employees? A recent study by
the Urban Land Institute and the Building Owners and Managers Association concluded
that indoor environment was far more important than some of the so-called frills,
such as fitness centers or child day care centers.
Unresolved
issues generate complaints, and that can result in litigation. In many cases,
the tenant or employee is responsible for an IAQ issue, but the building owner
could still get sued. A way to minimize the potential for litigation is by performing
an IAQ Risk Assessment at lease inception and by incorporating IAQ specific language
in the lease agreement.
Poor IAQ
is often shown to be a factor in increased HVAC system energy consumption and
decreased system performance. If these conditions are allowed to continue, the
life of the equipment can also be adversely affected. In some cases, internal
neglect of HVAC components has necessitated the shut down of systems and the replacement
of major components.
The HVAC
system is a major energy user in any facility. A clean HVAC system, running at
peak efficiency, improves IAQ and acts to reduce energy consumption. The following
case history will illustrate the engineering approach to integrating IAQ considerations
with energy conservation techniques.
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A major
aerospace firm in Phoenix, Arizona was threatened with a closure of a critical
clean room because the air quality was below specifications. While there was a
defined need to address the IAQ situation from a critical process standpoint,
there was an energy consumption issue as well. The operating data from one HVAC
unit shown in Table 1 was developed by having a certified balancing firm take
specific readings prior to performing any corrective work in order to establish
the base operating conditions.
|
ITEM
|
BEFORE
|
AFTER
CLEANING
|
AFTER
BALANCING
|
|
CFM
|
5,930
|
9,280
|
5,930
|
|
SP
|
2.90"
|
2.05"
|
0.84"
|
|
RPM
|
1,234
|
1,234
|
788
|
|
AMP
@ 480V
|
8.00
|
11.00
|
2.90
|
|
GPM
@ TD
|
74
@ 6 degrees
|
22
@ 18 degrees
|
40
@ 10 degrees
|
|
MBH*
|
224.00
|
200.00
|
200.00
|
Calculated
data
Table 1: Operational Data, HVAC Unit 7
The critical control point of these readings is the airflow (CFM) delivered by
the unit. These readings were taken after the HVAC system was cleaned and repeated
after the fan speed was reduced to the initial airflow level. The fan energy consumption
in column two after cleaning, is higher than the initial reading, because the
clean unit is doing more work as evidenced by the higher airflow reading. This
is why an integrated approach, including both cleaning of the HVAC system and
balancing, is required in order to achieve the desired airflow and energy savings.
The 5.1
Amps reduction in fan energy translates into an annual savings of 37,143 KWH and
$2,266 at a blended rate of $0.061/KWH. The increased heat transfer efficiency
through the coils and reduced pumping energy required account for a reduction
of 57,706 KWH and $3,520. The total savings for the first year, as a result of
addressing IAQ concerns of this single AC unit, is $5,786. The remediation cost
for this unit was $2,704 which resulted in a simple payback of less than six months.
Once these issues are understood and included in the equation of the total building
operation, the program can be designed to mitigate these issues. In most cases,
management has been able to successfully turn what was considered a negative into
a positive. As REIT property owners and managers have gained more experience with
the IAQ assessment and related issues, they have been able to use these efforts
as marketing tools to decrease vacancy rates and turn their Aging Desperados into
cash cows.
Wayne Hansen is director of engineering for Mintie Corporation,
a national indoor environmental solutions provider. He is a Registered Mechanical
Engineer (REA) in seven states, a member of Cal-OSHA's Committee on IAQ, and a
member of AEE, ASHRAE, EEMI, and APEM, among others. He is contributing editor
for JCAHO's "Guide to Managing IAQ in Healthcare Organizations" and
has been published widely.
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