Ask any condo owner in the GTA or in any major city across Canada and they’ll unanimously list astronomical monthly maintenance fees as among their biggest concerns with condo ownership. Add higher vacancy rates as a result of COVID-19 and these high fees also become a major issue for condo boards and building owners, all trying to find a way to reduce or optimize costs that will inevitably be passed down to tenants.
One of the greatest contributors to skyrocketing maintenance fees is inefficient or outdated infrastructure in aging buildings—a preventable expenditure when properly managed. From old boilers providing insufficient heating, to high prices for lighting and bulb replacements, energy inefficiency is a major—and expensive—problem for building owners, and ultimately tenants.
But fixing these issues isn’t always an easy task. Various studies have indicated three main reasons for condo boards/building owners not implementing these efficiency retrofits: lack of capital, certainty of return (risk), and capacity to implement these retrofits in a comprehensive way.
The first issue of capital availability is well known – capital is needed to maintain building assets and fund their repair or replacement – something older condo buildings often lack as they prioritize spending on more urgent repairs and immediate tenant needs, leading to a vicious cycle of disrepair and deferred maintenance. The cost to maintain this cycle is subsequently passed down to condo owners and tenants through increased maintenance costs to help raise the required funds.
The second issue of risk is specific to the category of efficiency retrofits. Every condo dweller and building owner can relate to at least one instance of how a retrofit never achieved the savings it was supposed to achieve. This is partly a function of overzealous (and very avoidable) selling and partly a function of a common baseline. Savings need to be measured properly and in comparison to savings generated in previous years – if this baseline is not measured correctly, there can be very different interpretations of savings.
The third major issue is capacity. Most condos and other buildings are managed by a property manager who has limited capacity to undertake comprehensive retrofits. While it is common practice to fix a broken equipment or replace a non-working bulb, very few buildings even think of undertaking comprehensive retrofits because of this issue.
One way to overcome these issues and prevent increases to maintenance fees—or even decrease these costs for tenants in some cases—is through energy efficiency retrofits. Condos can generate both immediate and long-term value in their buildings, leading to potential savings for everyone involved by partnering with a third-party company that invests, develops and maintains efficiency retrofit projects. This value generation happens because these companies invest all the capital needed for the retrofit, guarantee savings to the condo/building owner and complete a ready-to-go installation. There is a natural in-built check and balance mechanism in this arrangement because the company gets paid only when savings are generated.
When managed, implemented and measured appropriately, comprehensive efficiency retrofits can reduce operating expenses by anywhere between 15-40 per cent, using modern equipment and automation to optimize energy usage. This efficiency leads to lower utility costs through lower energy consumption, cleaner buildings and increased comfort for owners and tenants—all the while reducing greenhouse gas emissions by about 20 per cent or more to support the environment.
By replacing outdated equipment, these investments also reduce the heavy fees needed to increase capital reserves. Savings can then be passed on to unit owners through reduced fees and/or building capital can be reinvested into upgrading amenities and shared spaces.
Efficiency retrofits can also help condos become more competitive in an ever-shifting market. Upgraded equipment creates safer, cleaner and healthier spaces through improved ventilation, lighting and heating/cooling systems, making condos brighter overall for possible tenants and ultimately adding value to the space.
Reinventing savings into the building also brings a competitive advantage through a fresh, modern design upgrade, or the installation of new, coveted amenities. The idea of living in a “green” or environmentally-conscious building has become not only sought after but expected —should buildings forego energy efficiency as a priority, they risk losing out on environmentally-conscious consumers looking to rent or to invest in a new space.
Chandra Ramadurai is the CEO of Efficiency Capital. Chandra brings over two decades of experience in sustainable energy, banking and investment management in Canada, the U.S., Europe, the Middle East and India. He has led or been part of various investment deals worth billions of dollars. Previously, he was the CEO at IT Power, one of the world’s oldest clean energy companies based in the UK and has held senior-level positions at Suzlon Energy, a large wind energy company, Cemex, a Fortune 500 company, Standard Chartered Bank and PWC. Efficiency Capital is a performance-based investment solutions provider that upgrades the energy and environmental performance of buildings with no upfront cost to the owner.