5 Ways to Manage Unpredictable Commercial Real Estate Utility Costs

2024 was a challenging year for commercial real estate (CRE). While many analysts predict the market to take a positive swing as 2025 progresses, there are many cost-cutting measures CRE investors and property managers can take to shore up their position. In this article, we cover how a utility billing expert can help you cut CRE utility costs.

The Growing Challenge of Managing Utility Costs in CRE

Despite some of the positivity in many 2025 market outlooks, utility costs remain a concern for many CRE owners and operators. Utility rates nationwide are either rising or fluctuating – in both cases making it difficult to predict expenses each month. Without proactive management, these unpredictable utility costs can significantly impact a property’s net operating income (NOI).

In addition to unpredictable utility costs, many CRE property owners are facing new legislation and regulations requiring energy benchmarking and energy-efficient upgrades. This adds another layer of costs and unpredictability that can impact cash flow.

Both of these external pressures have pushed many CRE owners and investors to search for ways to both cut down on usage, while at the same time seeking help from outsourced experts to ensure their utility systems and billing processes are fully optimized to recover as much cost as possible.

5 Ways to Manage CRE Utility Costs

From fluctuating utility prices to evolving sustainability mandates in many states and municipal level, controlling utility costs has never been more critical. The good news is there are many direct measures CRE owners and property managers can take to reduce these costs.

#1. Retrofit Energy-Efficient Equipment

Investing in energy-efficient upgrades—such as LED lighting, smart thermostats and high-efficiency HVAC systems—can reduce usage, comply with sustainability regulations and significantly lower utility costs.

#2. Take Advantage of Demand Response Programs

Many utility providers offer demand response programs that reward businesses for reducing energy consumption during peak hours. Looking into these programs can help CRE owners further lower their utility costs.

#3. Conduct Utility Rate Audits

Billing errors, incorrect rate classifications and inefficient usage can all lead to overpaying for utilities. Regular audits help mitigate these issues.

#4. Implement a Utility Billing System

Billing back commercial tenants for their utility usage is a great way to fully recover utility costs each month. This can be done either through a ratio utility billing system (RUBS) – where tenants are billed according to an industry formula, or it can be done through submetering – where each unit in your commercial property has its own meter that measures utility usage and allows for an accurate billback to the tenant.

#5. Work with an Outsourced Utility Billing Expert

Working with an outsourced utility billing provider can not only help CRE owners and managers prioritize and implement the above measures but also take them to the next level.  Here’s how:

• Accurate Utility Cost Allocation: One of the biggest challenges in CRE utility management is allocating utility costs fairly and accurately. Depending on the needs of your firm and the layout of your buildings, a utility billing expert can use submetering, RUBS or a combination of both systems to allocate costs based on actual consumption, preventing landlords from absorbing tenant-related expenses while promoting responsible energy use.
• Data-Driven Decision Making: With advanced utility analytics and reporting tools, outsourced utility billing providers help CRE owners identify utility usage trends, detect inefficiencies and uncover even more cost-saving opportunities. By leveraging that data and analysis, CRE firms can make informed decisions about energy efficiency upgrades and future management strategies that can further reduce costs.
• Utility Billing Consultation and Optimization: A commercial property utility billing system is never a set-it-and-forget-it solution. Commercial utility allocation is complex. When you work with the right utility billing firm, a team of expert consultants and technicians can work for you to ensure your system is working at peak performance through the life of your CRE investments – from system to equipment selection to generating bills.

The Business Case for Outsourcing Utility Billing

Outsourcing a utility billing provider is an added expense, but ultimately, for many CRE firms, that expense may be well worth it. Working with an expert utility billing firm offers many benefits for CRE firms looking to reduce costs and better manage their commercial properties.

• Time and Cost Savings: Billing your commercial tenants is a lot of work–work that you and your team likely don’t have time for. Hiring an outsourced expert not only saves you money by ensuring utility billing is done well, but it also saves your team time and allows them to focus on their core competencies.
• Improved Cash Flow: By billing your commercial tenants with timely and accurate utility bills, you can improve your cash flow, giving your firm more flexibility should another unexpected expense arise.
• Enhanced Tenant Satisfaction: While no one enjoys receiving a bill, your tenants will appreciate the ability to control their utility usage and budget for the future with fair and transparent billing practices.

Conclusion

Implementing a utility billing system and working with an expert utility billing provider can be a great way for CRE firms to reduce costs and ensure their property investments remain stable in 2025. By working with the right provider, they can rely on fully recovering utility costs each month.

Take the first step to managing the utility costs in your CRE portfolio. Get in touch with Synergy today. Our experts are here to make utilities one less thing to worry about.