The NOI hiding in your utility bill

A building can be comfortable, fully operational and still waste money every hour.

For owners and asset managers, that deserves the same attention as vacancy or rent growth. Energy performance is not just an engineering concern. It directly affects operating costs, net operating income (NOI) and asset value. A utility bill should be viewed as an opportunity to uncover inefficiencies, not simply an expense to forecast.

The starting point isn't necessarily new equipment. It's understanding whether existing mechanical systems are operating efficiently and responding to what the building actually needs.

When normal operation hides waste

Consider an office building whose ventilation follows outdated occupancy schedules. An apartment building may continue heating without recognizing that suites are already too warm. A retail property may start several large systems simultaneously, driving up peak electricity costs.

These are operating inefficiencies worth investigating before assuming equipment needs replacement.

The questions are straightforward: What runs when the building is quiet? Where are we heating or cooling unnecessarily? Are we moving more air or water than required? What drives our highest electricity demand?

Targeted investment, not wholesale replacement

Mechanical optimization focuses on making existing building systems work more efficiently, both individually and together.

Solutions may include smarter controls, improved temperature monitoring, equipment scheduling, variable-speed fans and pumps and targeted measures such as duct sealing. These improvements are supported by engineering, commissioning and ongoing performance monitoring.

For example, ventilation systems can be adjusted to deliver the right amount of air at the right time. Temperature sensors can help equipment respond to actual building conditions. Where duct leakage exists, sealing combined with system balancing and fan-speed adjustments can further improve efficiency.

The objective isn't to replace equipment unnecessarily or compromise comfort, indoor air quality or ventilation requirements. It's to eliminate wasted energy while maintaining the building's performance.

What this looks like at portfolio scale

The Drewlo program, presented at The Buildings Show in 2025, covered more than 85 buildings and 10,000 suites, delivering millions of dollars in reported annual savings and a 16% return on investment.

At Drewlo's 710, 720 and 730 Wonderland buildings in London, NERVA implemented an integrated mechanical optimization strategy that included mechanical submetering, communicating thermostats, temperature sensors and makeup-air optimization.

Targeted measures such as duct sealing, balancing and fan-speed adjustments improved ventilation efficiency. The project showcase reported a 700,000 kWh reduction in electricity consumption.

Not every property will achieve identical results. The lesson is that meaningful savings can often be unlocked by better measuring, controlling and optimizing existing mechanical systems.

Translate energy savings into asset performance

Consider a building that reduces annual operating expenses by $100,000 through mechanical optimization. If those recurring savings flow directly to the owner's NOI, they could represent an additional $2.5 million in indicated property value at an assumed 4% capitalization rate.

That's not a guaranteed valuation increase. Lease structures determine who benefits from utility savings, while capital costs and ongoing fees must be considered. In net-leased properties, lower utility expenses don't necessarily translate directly into higher owner NOI.

The important distinction is measuring the financial benefit the owner actually retains, not simply the percentage reduction on a utility bill.

When evaluated properly, mechanical optimization becomes more than an energy-saving initiative. It becomes an opportunity to improve operating performance, protect NOI and strengthen long-term asset value.

Make it part of asset management

Start with utility bills, energy consumption data, equipment schedules and available building controls information. Understand how the building uses energy before selecting improvements.

Identify unnecessary overnight operation, unexplained consumption and peak demand charges. Then prioritize an integrated package of improvements based on potential savings, practicality and financial returns.

Measure results against historical performance, accounting for weather and changes in building use.

For portfolios, begin with a small group of buildings where operating teams can support implementation. Compare findings, document improvements and use verified results to guide future investment.

The goal isn't to install the same solution everywhere. It's to apply the same disciplined approach while tailoring improvements to each building's equipment and operating requirements.

Most importantly, assign responsibility for performance after installation. Sustained savings require continuous monitoring, identifying inefficiencies and making adjustments that protect the original investment.

I'll explore these strategies at The Buildings Show 2026, December 2–4, in my session 'Eliminating Energy Waste to Drive NOI and Asset Value' (TS201), presenting Thursday, December 3.

Before deciding what a building needs next, it's worth understanding what in its existing systems is driving unnecessary costs.

About the author: Josh Lewis is a professional engineer and energy performance specialist with NERVA Energy, working with building owners and operators on data-driven mechanical optimization and targeted retrofits.