Commercial Utility Billing: What Property Owners Need to Know

Commercial Utility Billing: What Property Owners Need to Know

A growing number of commercial properties are turning to utility billing as a solution to cut their utility expenses and enhance their Net Operating Income (NOI). Here's everything property owners need to know before diving into the world of commercial utility billing.

What Is Commercial Utility Billing?

The escalating costs of utilities have placed a significant financial burden on commercial property owners. Commercial utility billing offers a remedy by empowering landlords to charge tenants for their individual utility consumption. This approach ensures a fair distribution of utility costs among commercial tenants while enabling property owners to begin recouping their utility expenses.

What Is Submetering?

Submetering is a method that allows property owners to accurately allocate utility costs among tenants by measuring each unit's actual consumption of water, gas, and electricity. By installing meters between the master meter for the property and each tenant’s unit, property owners can obtain precise data on individual consumption for every utility. This data enables them to bill tenants accurately based on their actual usage.

What is RUBS?

RUBS, or ratio utility billing system, is a billing method that proportionally distributes utility

costs to tenants based on an industry-accepted formula. It covers a range of services, including water, gas, electricity, trash, cable, and more, with each service weighted differently in the billing process. RUBS is particularly suitable for commercial properties that cannot implement submetering due to technical or practical constraints.

What Are the Benefits?

Property owners who adopt commercial utility billing stand to gain several benefits:

• Competitive Pricing: By accurately allocating utility costs, property owners can offer competitive lease rates to tenants.

• Increased NOI: Implementing utility billing can lead to a significant increase in Net Operating Income, bolstering the financial performance of the property.

• Improved Property Value: Enhanced NOI resulting from utility billing can improve the overall value of the commercial property.

• Delivers Long-Term ROI: While there may be initial setup costs, the long-term return on investment from utility billing can be substantial, providing ongoing financial benefits to property owners.

Conclusion

Commercial utility billing streamlines the management of utility costs for commercial properties, offering a range of benefits to property owners. However, to achieve optimal results, property owners must implement a billing system that ensures a high level of cost recovery and accuracy.