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Hidden Costs in Commercial Real Estate Leasing - HVAC and MEP System Due Diligence

Updated: Jun 15, 2021



Often Overtime Cooling and Supplemental Cooling costs are overlooked when executing a lease for a new office space. Differences in these costs can easily equate to millions of dollars over the 10-year lease term.


Need help assessing a commercial real-estate lease in regard to the MEP and HVAC systems? Contact Built Engineers & Architects for Due Diligence or Physical Conditions Assessments (PCA). Call 646.481.1861 or email info@builtengineers.com



What is Overtime Cooling?

  • Overtime cooling is cooling that is to be provided by the main building systems outside of the typical building cooling operating hours.

  • This is usually billed as a separate cost to the tenant for additional power requirements, building staff, and maintenance.


Overtime cooling costs at PROPERTY A = $275 per floor per hour


Overtime cooling costs at PROPERTY B = $151 per floor per hour


Big deal right? Only a different of $124 per floor per hour.


But what if you're looking to take (10) floors at the building?


Overtime cooling costs at PROPERTY A = 10 floors *$275 = $2750 per hour

Overtime cooling costs at PROPERTY B = 10 floors *$151 = $1510 per hour


$2750-$1510 = $1240 difference in overtime cooling costs per hour.


Still not a huge figure, but we have not yet considered how many hours of overtime cooling will be utilized:


***Assuming 8 hours per week of overtime cooling during cooling season. 8 hours * 20 weeks of cooling season = 160 hours per year.***

160 hours * $1240 difference = $198,400 approximate cost difference per year

PROPERTY A could be approximately $198,400 MORE per year for overtime cooling than PROPERTY B and approximately $1,998,400 MORE for overtime cooling during a 10-year lease term!


 

What is Supplemental Cooling?

  • Supplemental cooling is typically provided to tenants from a building-maintained cooling tower assembly.

  • The tenant is provided with connection points on each floor to tie into the building condenser-water system.

  • This is useful for areas requiring dedicated cooling 24/7/365, even during overtime hours when building cooling systems do not typically operate.

Supplemental cooling costs at PROPERTY A = $1000 per ton per year. No Tap in Fees.


Supplemental cooling costs at PROPERTY B = $450 per ton per year. No Tap-In Fees.


We assume roughly 25-Tons of supplemental cooling to be utilized on each floor. 250-Tons Total.


Supplemental cooling costs at PROPERTY A = $250,000 per year

Supplemental cooling costs at PROPERTY B = $112,500 per year

$250,000-$112,500 = $137,500 difference per year

PROPERTY A could cost approximately $137,500 MORE per year than PROPERTY B and approximately $1,375,000 more for supplemental cooling during the 10-year lease term.


 

Total Cooling Cost Differences


Overtime cooling cost difference = $198,400 per year

Supplemental cooling cost difference = $137,500 per year

overall COOLING COST DIFFERENCE = $335,900 per year

PROPERTY A could cost approximately $335,900 more per year than PROPERTY B and could cost approximately $3,359,000 more for cooling during a 10-year lease term.



$3,359,000 in Hidden Cost Differences between PROPERTY A and PROPERTY B !


$3,359,000



As you can see it is extremely important you use the services of an experienced design professional to asses these potential issues with your commercial office.


Need help assessing a commercial real-estate lease in regard to the MEP and HVAC systems? Contact Built Engineers & Architects for Due Diligence or Physical Conditions Assessments (PCA). Call 646.481.1861 or email info@builtengineers.com




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