What Is The Average Utility Cost Per Square Foot Of Commercial Property? (2023)

For most commercial buildings, energy is the single largest operating expense, most of which comes in the form of electricity. That being the case, the cost of utility-supplied power is of major concern to property managers searching for ways to lower costs. But controlling and cutting energy costs doesn’t happen overnight—it’s part of a larger educational process that starts with learning more about how you’re being billed, your industry’s energy profile, and your building’s specific energy dynamic.

To that end, a common question is this: What is the average utility cost per square foot for commercial property? We’ll answer that—and provide some related information on how industry energy profiles can be useful—in the sections that follow.

What is the average utility cost per square foot for commercial property?

The answer: The average cost of utilities for commercial buildings is $2.10 per square foot.

What Is The Average Utility Cost Per Square Foot Of Commercial Property? (1)

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Other interesting facts related to how much utilities cost for a business:

  • The total electricity expense for private-sector office buildings in 2016 was $1.69 per square foot.
  • According to the 2012 Commercial Building Energy Consumption Survey (which was being updated as of 2018), commercial buildings spend $1.44 per square foot per year on electricity and $0.30 per square foot per year on natural gas.
  • In 2018, refrigeration was the largest single use of electricity in the commercial sector, accounting for 13.9% of spending. For U.S. manufacturers, machine drives (motors) were the largest use of electricity.
  • According to the U.S. Department of Energy, the average number of kilowatt hours per square foot for a commercial building is approximately 22.5. (You can see the breakdown on how energy is used here.) A food service facility consumes approximately 56 kWh/square foot, a retail mall 23, a public assembly building 15, and a warehouse 9.
  • Looking ahead to 2050, lighting is expected to show the greatest reduction in electricity intensity (54%) thanks to more commercial buildings replacing incandescent bulbs with LED bulbs and compact fluorescent lamps.
  • On-site electricity generation via solar is expected to increase by an average of 5% per year for commercial buildings.
  • The three states with the highest commercial utility rates are Hawaii, California, and Alaska. (See the chart below for further rankings.)

What factors contribute to the cost of energy?

The cost of electricity is based on a number of variables, including the time of day you’re using it, the season of the year (summer rates can be higher than winter rates due to higher energy demand), and where you live. Click To Tweet

In combination with the factors listed above, you are billed based on your energy consumption and demand. Different industries have different requirements for energy use—for example, some buildings, like hospitals, operate 24/7, and food service facilities must power refrigeration units constantly. Other facilities, like schools, are open during limited hours and even close during the summer. Your energy demand is also a big factor in what you pay: Your maximum hourly power requirement over a billing cycle forms the basis of a utility’s demand charge, and comprises a significant portion of your bill.

Find out how you can reduce your energy costs in the peak demand and consumption areas up to 40% with remote monitoring.

How You Can Use Industry Energy Data To Reduce Your Operating Expenses

There are mountains of data related to industry energy use—use it to your advantage by benchmarking.

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Facilities that benchmark have, on average, been able to reduce their energy consumption 8% in the first year and 40% over 10 years.

Benchmarking is the process of measuring your building’s energy performance against that of other buildings, with an eye toward making improvements. You need two things to be able to benchmark your building’s energy use:

  • Energy use data for buildings similar to yours and in the same industry. The U.S. Department of Energy, the U.S. Energy Information Administration, Building Managers & Owners Association, and other organizations regularly conduct studies and surveys regarding energy use; they provide numerous metrics that paint a picture of energy-related spending and consumption across industries. (Our Energy Benchmarking Report can get you started.)
  • Your own building’s energy consumption data. Once you have a better understanding of how your industry peers are consuming energy, you need something to compare, which means you need to start gathering data that shows your own building’s energy patterns and consumption. Over a period of time, you’ll gain a better understanding of what activities are associated with your energy usage, including what you’re spending the most money on.

Many building managers are already collecting this type of data with the help of the Internet of Things (IoT).

How To Use The IoT To Decrease Utility Costs

Your utility bill tells how many megawatt hours of energy your building used over a certain period of time, but that data isn’t detailed enough to be of much help. For example, your bill won’t show how energy is consumed—for example, how much electricity your HVAC uses vs. lighting. It also won’t reveal your energy use patterns, such as when the most water is typically used or when your HVAC consistently works overtime. Benchmarking—and taking follow-up action to decrease utility costs—requires having specific data about your building’s subsystems that can be compared and analyzed.

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The IoT gives you the ability to understand how your building works on a more granular level. Wireless IoT sensors are capable of monitoring any of your facility’s subsystems—lighting, HVAC, machinery, water, and more—with great accuracy. Gaining a better understanding of your energy profile naturally exposes inefficiencies, and allows you to make meaningful comparisons with industry competitors that will further reveal areas ripe for improvement.

For example, continuous monitoring by IoT sensors might reveal that…

your HVAC system uses more energy than the average comparable building in your industry, and that it’s responsible for the largest portion of your energy spending. Further investigation shows that it turns on every day three hours before the first employee arrives at work. You could potentially save tens of thousands of dollars simply by turning the system on two hours later.

Another example of benchmarking and targeted action:

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If your average utility cost per square foot of commercial property is higher than that of your competitors, you may decide to implement IoT monitoring to understand why. A few weeks’ worth of data reveals a pattern: Most of your high-power equipment and building systems are operating during the electric company’s hours of high demand. You could again save thousands by alternating HVAC operation by floor for an hour at a time, scaling back on lighting where appropriate, and timing the use of high-power equipment to avoid operation at those key times.

One of our customers implemented IoT sensor monitoring after noticing an unusual increase in its water bill. The result:

IoT sensors revealed that one of its water-cooled refrigeration units was continuously calling for water circulation, wasting more than 10,000 gallons of water daily. After addressing the issue, this customer now saves more than $115,000 annually on its water bill.

You can get as granular as you like with the IoT, monitoring the energy consumption of individual pieces of equipment, specific processes, specific floors or even rooms. The more data you collect and analyze, the more opportunities you’ll have to make meaningful changes for the better.

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Looking for ways to lower your building’s utility costs?

If you’re looking for ways to improve your building’s performance, getting your energy profile is the first step.

Iota’s team of IoT experts can get the job done. Tell us about your goals for your facility, and we’ll work with you to design an appropriate data collection strategy, decipher all the data from your sensors, and offer guidance and recommendations around how best to reach your goals. We’ve helped numerous Fortune 100 clients decrease their facility’s energy consumption—and by extension their utility costs; let us do the same for you! To learn more, visit our website or talk to us.

What Is The Average Utility Cost Per Square Foot Of Commercial Property? (2)

FAQs

What is the average utility cost per square foot of commercial property in Canada? ›

While it can vary significantly depending on the building and what the intended use is, for industrial properties, we suggest budgeting between $2.00 – $3.00 / sq ft for utility costs1.

How do you calculate utility costs? ›

How to Calculate Your Electric Bill
  1. Multiply the device's wattage by the number of hours the appliance is used per day.
  2. Divide by 1000.
  3. Multiply by your kWh rate.

How much energy is used by commercial buildings use? ›

Typically, the average number of kilowatt-hours per square foot for a commercial building is approximately 22.5 kWh per year.

What is the average utility cost in the US? ›

In the US, residents should plan to spend at least $290.79 per month on essential utilities like electricity, natural gas, water, and sewer. Depending on where you live and your container size, you should also budget $25–$100 for trash and garbage collection.

How do you calculate price per square foot for a commercial building? ›

It can be calculated by dividing the price of the building by the building's square feet. For example, if a 2500 square foot building is selling for $250,000, then the PPSF is $100. Price per square foot can vary depending on where you would like to purchase or lease commercial real estate.

How is commercial space cost calculated? ›

How to Calculate Commercial Rent:
  1. Take Your Price Per Square Foot.
  2. Multiply That by Your Total Square Footage.
  3. That Gives You Your Total Annual Rent.
  4. Divide by Twelve for Monthly Rent.
20 Sept 2019

How average utility is calculated? ›

Average utility refers to the utility that is obtained by the consumer per unit of commodity consumed. It is calculated by dividing the total utility by the number of units consumed.

What is considered a business utility expense? ›

Utilities expense is the cost consumed in a reporting period related to electricity, heat, sewer, and water expenditures. The category is sometimes also associated with expenditures for ongoing telephone and internet service.

What is utility pricing? ›

Utility refers to the total satisfaction or value that you get from consuming a particular product or service. Utility values are critical for determining why different goods have different costs and levels of demand. Products with higher utility usually have more demand, meaning they can command higher prices.

What uses the most electricity in a commercial building? ›

Lighting is the largest single use of electricity in commercial buildings. Lighting is the largest end use of electricity in commercial buildings, and many buildings target lighting for energy savings through energy-efficient light sources and advanced lighting technologies.

How many kWh does a commercial building use per month? ›

In the US , large office buildings (those with more than 100,000 square feet) use an average of 20 kilowatt-hours ( kWh ) of electricity and 24 cubic feet of natural gas per square foot annually.

How many kWh is a square foot? ›

The average kWh per month per square foot is . 5 kWh per square foot. So if you have a 2000 square foot house, your average kWh per month is 1,000 kWh.

What is the most expensive utility? ›

The Aloha State's utilities are upward of $200 more than the second most expensive state, Alaska, thanks largely to staggeringly high electricity and natural gas costs on the islands.
...
#1: Hawaii.
UtilityCost per monthRank
Water$40.00National average
Total cost of utilities$730.861
4 more rows
29 Jan 2018

What is the average cost of utility bills per month? ›

The average monthly cost for gas, electricity, and water is around £160. You can help cut heating costs by turning down your heating when you are not home and wearing more clothes to stay warm instead of running.

How much do most utilities cost? ›

But utilities can be costly for homeowners, landlords and even renters. The typical U.S. family spends $2,060 on average per year for home utility bills, according to EnergyStar.gov.

What does $18.00 SF yr mean? ›

Meaning of $/SF Year in the Commercial Rental Industry

In the commercial leasing industry, $/SF/year or $/SF/yr means the rent per square foot per year. Why is this important? This is because most commercial rental rates are usually quoted in dollars per square foot on an annual basis.

What is the fastest way to calculate price per square foot? ›

The formula to calculate price per square foot is price divided by size (in square feet). So for example, if you have a 2,000-square-foot house selling for $300,000 you take the total price, then divide it by the square footage, which would give you $150 per square foot.

How do you calculate monthly rent per square foot? ›

$10 per square foot would be the annual rental rate for the space in question. What you would do you would take the size of the space, multiply it by the $10 per square foot, divide that by 12 and you'll have your monthly rent.

What is the formula for commercial property? ›

Net Operating Income / Cap Rate = Market Value

You've calculated a cap rate of 7% based on other similar recent sales. By dividing the net operating income of $45,000 by the cap rate of 7%, you're left with a property value of around $640,000.

What fees are there when buying a commercial property? ›

The costs of buying commercial property
  • Stamp Duty Land Tax.
  • Business rates.
  • Renovations and building work.
  • Ongoing costs.
  • Legal advice.
12 May 2022

Why is commercial space so expensive? ›

Commercial property takes a lot of money to build in the first place. They require a whole set of systems not found in residential homes. Things like a sprinkler system and more extensive HVAC and plumbing are going to run the cost of the building up.

What are the 4 types of utility? ›

There are four basic principles that fall under this umbrella, including form utility, time utility, place utility, and possession utility.

When average utility is at a maximum? ›

When marginal utility is zero total utility is maximum as after that any further consumption will lead to negative marginal utility and fall in total utility.

What is an example of average utility? ›

Average Utility is that utility in which the total unit of consumption of goods is divided by number of Total Units. The Quotient is known as Average Utility. For example—If the Total Utility of 4 bread is 40, then the average utility of 3 bread will be 12 if the Total Utility of 3 bread is 36 i.e., (36 ÷ 3 = 12).

What are the 5 utilities of business? ›

A firm goes through the process of both creating and distributing a product to create utility (value) for the end consumer. There are five types of different utilities that can be generated for a consumer by a firm. These are: form utility, task utility, time utility, place utility, and possession utility.

Can you write off utilities on business taxes? ›

Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs.

Can you write off utility bills for business? ›

If you use part of your home regularly and exclusively for business-related activity, the IRS lets you write off associated rent, utilities, real estate taxes, repairs, maintenance and other related expenses.

What are the 3 types of utilities? ›

There are mainly four kinds of utility: form utility, place utility, time utility, and possession utility. These utilities affect an individual's decision to purchase a product.

What are the 3 types of utility? ›

Place utility: this utility is derived when you can transport goods from one place to another. Time utility: it is derived by keeping or storing goods over a period of time so that they can be used later. Service utility: it is derived by rendering professional services to consumers.

How do you calculate maximum utility? ›

When multiple products are being chosen, the condition for maximising utility is that a consumer equalises the marginal utility per pound spent. The condition for maximising utility is: MUA/PA = MUB/PB where: MU is marginal utility and P is price.

What two appliances use the most electricity? ›

The largest electricity consumer in the average household is your heating and cooling appliance. By a long shot. Central air conditioners and heaters use tons of energy in order to keep your home set to the right temperature.

What two forms of energy are used in a commercial building? ›

Electricity and natural gas are the most common energy sources used in commercial buildings. Most individual commercial buildings have their own heating and cooling systems.

How does electricity work in a commercial building? ›

Electricity from the Power Company

For small commercial buildings or residential customers, power companies lower the voltage with a transformer on a power pole or mounted on the ground. From there, the electricity is fed through a meter and into the building.

Is 1000 kWh a month a lot? ›

How Much Power Does An Average House Use? 1000 kWh is not far off the US monthly average for a typical home, which is 900 kWh/month. This equates to about 30 kWh per day.

Which industry uses the most energy per square foot? ›

Machine drives (motors) are the largest use of electricity for U.S. producers. According to the U.S. Department of Electricity, for a commercial house, the average amount of kilowatt hours per square foot is roughly 22.5.

How many kWh does a 2500 square foot house use monthly? ›

According to the Energy Information Administration (EIA), the average house in the United States between 2,500 and 2,999 sqft in size uses 12,280 kWh annually, or 1,023 kWh per month.

How many kilowatts do I need for a 2000 square foot house? ›

Average kWh usage for a 2,000 square foot home: 1,325 kWh. Average kWh usage for a 3,000 square foot home: 1,840 kWh. Average kWh usage for a 4,000 square foot home: 2.200 kWh.

How many kilowatts do I need for a 2500 square foot house? ›

A 2,500 sq. ft. home came in at 12,271 kWh, and residences that measured 3,000 sq.

How do you calculate electric bill per square foot? ›

To estimate your own expenses per square foot, take your last monthly electric bill, and divide it by the surface of your home. If you are paying more than what is shown in this graph, you should consider switching suppliers to save on your energy bill.

What is the most expensive part of utilities? ›

In fact, electric bills are typically the largest utility cost that homeowners face each month.

Why is my electric bill so high all of a sudden 2022? ›

Households are facing soaring costs as the energy price cap increased again in October 2022. The average price of electricity per unit has gone up from 28p per kWH to 52p per kWH, with a 1p increase to the standing charge (46p).

What will be the average energy bill 2022? ›

The average unit price for dual fuel customers on a standard variable tariff, paying by Direct Debit from 1st October 2022, is approximately 10.3p per kWh plus a 28p daily standing charge for gas. And for electricity, it's roughly 34p per kWh plus a 46p daily standing charge.

What is the energy price cap per kWh 2022? ›

What's the maximum charge for a single unit of electricity or gas from 1 October 2022? So, from 1 October 2022, if you're on a standard variable tariff paying by direct debit, the average unit price will be frozen at 34.0p/kWh for electricity and 10.3p/kWh for gas (including VAT).

How much is the average water bill 2022? ›

Until 31 March 2022, everyone who has a water meter will pay £20.34 a year for water fixed charges and £65.18 a year for wastewater charges.

What cost most on power bill? ›

Washing machines, clothes dryers, dishwashers and hot water cylinders consume the most household power. Typically washing machines, dryers and dishwashers each use $1 of electricity per load. By running these appliances during off-peak hours or during your free hour of power, you can cut your power bill significantly.

What is the average utility bill in the United States? ›

In the US, residents should plan to spend at least $290.79 per month on essential utilities like electricity, natural gas, water, and sewer. Depending on where you live and your container size, you should also budget $25–$100 for trash and garbage collection.

What costs a lot of electricity? ›

Washing machines, dishwashers and tumble dryers account for 14% of a typical energy bill, taking the top spot in our list. The power needed to heat the water that they use pushes up consumption, making them energy-hungry household appliances.

How much is the average utility bill in Canada? ›

How Much are Home Utilities per Month in Canada? The cost of utilities varies depending on the type of service, provider, and location. However, the average monthly cost for utilities in Canada is around $300.

How much does the average Canadian spend on utilities per month? ›

What Is the Average Cost of Utilities in Canada? The average cost of utilities in Canada is $325 per month.

What costs are involved in owning commercial property? ›

From taxes to operating costs, there are many additional costs associated with buying commercial property that you'll need to factor into your budget.
...
Ongoing costs
  • Insurance payments.
  • Repairs and maintenance.
  • Energy costs.
  • Service charges, such as waste collection.
12 May 2022

What are current hydro rates in Ontario 2022? ›

Ontario Energy Board announces changes to electricity prices for households and small businesses
Winter TOU Price PeriodsNovember 1, 2022 TOU Prices
Off-Peak (Weekdays 7 p.m. – 7 a.m., all day weekends and holidays)7.4 ¢/kWh
Mid-Peak (Weekdays 11 a.m. – 5 p.m.)10.2 ¢/kWh
1 more row
21 Oct 2022

How much are utilities usually in Ontario? ›

Clearly, it's not easy to say exactly how much the Ontario average cost of utilities is. In general, you could expect to pay around $200 on the low end for smaller homes with one or two people and up to $500 or more for larger homes, larger families, and those who tend to use a lot more utilities.

What is a good salary to live comfortably in Canada? ›

In order for a couple to live comfortably, it is recommended to have around $3,500 per month or around $50,000 plus per year. This can vary a lot depending on if the couple is a one-income or two-income household as well as the size of the apartment/house you choose to live in.

What is a livable salary in Canada? ›

How much does a Good make in Canada? The average good salary in Canada is $44,850 per year or $23 per hour. Entry-level positions start at $30,956 per year, while most experienced workers make up to $90,714 per year.

What is a good salary in Canada for a family of 4? ›

The average family salary in Canada is $47,846 per year or $24.54 per hour. Entry-level positions start at $31,200 per year, while most experienced workers make up to $149,611 per year.

What is a good return on commercial property? ›

For commercial property investors, yields are typically much higher than residential property. Yields from commercial property can be anywhere from 5% to 10%. Meanwhile, residential property is known for yields between about 1% and 3%.

What value is most commonly used for commercial property? ›

The Income Approach

Also referred to as the Income Capitalization Approach, this tactic is the one most commonly used in commercial real estate transactions. The value is established here by estimating the property's income using the capitalization rate (commonly referred to as merely the cap rate).

Is it worth buying commercial property? ›

Investing in commercial property has many benefits and is considered a good long-term investment. It is said that commercial landlords have greater protection under the law if the tenant fails to pay rent on time.

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