How to Improve Your Building’s NOI
It’s no surprise that it’s expensive to maintain a commercial building. And, with the COVID-19 pandemic shaping the way that we work and do business, it makes sense that property managers around the world are taking an in-depth look at their building portfolios to determine whether or not their properties continue to be a good investment.
When it comes to deciding whether or not a property is worth maintaining, investors, asset managers, and even CFOs rely on something called a net operating income (NOI for short). In this article, we’ll cover the particulars of exactly what a NOI is, and one unique but effective way that property owners can shift an NOI in their favour.
What is net operating income (NOI)?
The term “net operating income”, or NOI, refers to the profitability of a piece of real estate that was purchased to generate income.
It’s easy to determine a building’s NOI. You can calculate it by subtracting building expenses from building revenue (both figures should be pre-tax). For your average commercial buildings, expenses simply refer to the costs of owning a building like utilities, repairs, property taxes, legal fees, and janitorial services. Revenue includes things like rent, vending machines, advertisements, parking fees, and even pay-to-use amenities.
NOI calculations do not include property depreciation, loan interest, amortization (debt repayment), or capital expenditures (CapEx). CapEx includes things like replacing a roof or the purchase of major appliances.
The most common ways to change a building’s NOI are to avoid vacancies and increase rental fees. However, another strategic way to improve NOI is by cutting back on operational costs such as energy. But how exactly can this be done?
Improving your building’s NOI by saving energy
One of the largest expenditures associated with owning a commercial building is utility costs. This includes a wide range of services necessary to a building’s operation, like electricity, water, and sewage. The price of all of these services add up, but did you know that the largest culprit of your building’s energy consumption is actually your HVAC system?
In fact, HVAC systems are one of the largest sources of energy consumption in commercial buildings, accounting for 45% of total use. It’s not really surprising, when you think of it. In order for us to enjoy a comfortable environment at all times, our buildings need to be appropriately heated, cooled, and ventilated.
The problem is that the HVAC systems that are responsible for these tasks are often outdated and inefficient. This means that they work harder than is necessary to meet our needs, contributing to our energy expenditure and decreasing our buildings’ NOI. One of the quickest (and most cost-efficient) ways that you can decrease your building’s utility costs, and in turn your NOI, is by optimizing its HVAC system.
Optimizing HVAC systems using artificial intelligence
In the past, it used to be that the only way to ensure your building’s HVAC system was operating at optimal levels was through frequent, costly inspections or commissioning projects. Fortunately, through new predictive and self-adaptive AI, building owners can benefit from constant monitoring and autonomous management of their HVAC systems.
BrainBox AI uses self-adaptive, predictive technology to monitor your HVAC system and pick up on inefficiencies. It doesn’t require the installation of a new HVAC system. Instead, it can connect to any existing system and deliver real-time optimization on its own.
Here’s how it works: once installed, BrainBox AI learns the patterns of your building’s HVAC system by observing crucial data points. Within 6-8 weeks, BrainBox AI has a workable map of your HVAC system’s operational patterns and is starting to gather ideas for optimization.
Following this period of initial analysis, BrainBox AI will take a look at the other external factors that affect a building’s indoor environment, such as weather, occupancy trends, local electricity prices, and even outdoor pollution. With these extra factors in mind, BrainBox AI is ready to start optimizing your HVAC system to reduce inefficiencies while providing your building guests with optimal comfort.
BrainBox AI’s job doesn’t end after the first adjustment. Its smart technology will continue to learn about the particular circumstances affecting your building’s energy adjustment and make micro-adjustments that prevent inconsistencies and energy waste, providing a new update every five minutes.
Taking your HVAC system into the 21st century will help you improve your NOI by cutting back on utility costs. Even more importantly, though, it will help you do your part for the environment. Commercial buildings currently make up 36% of global carbon emissions—so every reduction in energy helps.
Ready to revolutionize your building’s HVAC system? It’s easy to get started with BrainBox AI. Installation takes less than half a day and will lead to a decrease in your building’s energy system within 3 months. Learn more about your BrainBox AI saves building owners up to 25% on HVAC costs.