Leasehold Criteria - Benefits of LED Retrofits

This is the latest in our short series on benefits of lighting retrofits. In the first article, we examined reducing load on regional utility companies and explored why it makes economic sense for utilities to offer rebates for lower energy usage, rather than simply upgrading equipment to meet higher energy demands.

The second article looked at reducing maintenance costs for commercial and industrial spaces. When a building has hundreds or thousands of light bulbs on for 12, 16, or 24 hours a day, changing out light bulbs becomes a full time job in itself. Longer-lasting bulbs can significantly reduce ladder time and labor costs.

The third article went into detail on cooling systems and how filament based lighting systems contribute to heat generation. Because these bulbs burn at thousands of degrees, combined with the fact that most office buildings operate in cooling mode far more often than heating mode, reducing heat from the lighting system can also reduce cooling costs.

This article will take a look at an overlooked aspect of retrofits: the impact lighting has on lessors and lessees of building space.

Unused Office Space

One big challenge facing landlords and property managers of commercial space is how much unused space is out there. Wired.com estimates there are 2 billion square feet of unused office space around the United States. This has been a result of a more mobile, internet-based workforce whose need for permanent desks and offices has been declining.

Vacancy rates for retail, industrial, and office space has been around or over 10% since 2012, with only slight declines in the last couple years. Even the government is dealing with an abundance of empty buildings, although these properties are more often forgotten about because of the trouble of transferring them into private hands. NPR reports the US government owns 77,000 empty buildings at a yearly cost of $1.7 billion for maintenance.

With all of the unused space on the market already, plus new construction, older buildings have a hard time competing for renters. And even if they can attract a company to lease, the building owner will face difficulties in charging enough to remain profitable. As property managers compete in an area with an abundance of available space, profit margins shrink.

Benefits of Retrofits for Lessors and Lessees

This is where a lighting upgrade can make an impact. Retrofit projects may include replacing T12 fluorescent bulbs and magnetic ballasts with T8 bulbs and electronic ballasts or LED T8 tubes or LED flat panel fixtures, which will lead to lower energy bills and more comfortable working environments, even in older buildings.

From the tenants' perspective, upgrading the lighting system can be a chip in the negotiating game. Employees may not notice a big difference between older bulbs and ballasts and newer technology, but no one wants to work under buzzing and flickering lights. Because of the oversupply of office space on the market, many tenants have the ability to negotiate for better lighting prior to signing a lease or prior to resigning a lease.

If this is the case and a tenant does demand better, more efficient lighting as part of their lease agreement, it can be an opportunity for building managers to begin a larger retrofit project on a smaller scale. Relamping one office at a time is a significantly smaller investment than taking on the entire building at once. Most likely, lighting (unless it is terrible) will not be a deal-breaker in a contract negotiation, but it can be a win-win for both landlords and tenants.