You may have heard a tenant overtime system referred to as a TOS, overtime HVAC and/or lighting, tenant billing system, tenant after-hours billing, or any combination of these names. You’ll primarily find these systems in commercial real estate as a means for tenants to schedule HVAC and lighting in their spaces after the agreed-upon hours in their lease.
In a typical tenant lease in a commercial office building, it is specifically stated that the tenant should expect their space to be heated or cooled to a certain temperature range during a selected time period (ex: 8am to 6pm, Monday through Friday). The lease may also specify that the space receives lighting during this time as well. As a means of saving energy and money while still serving their tenants, the property management company asks tenants to let them know when they will need these services outside of their contracted time. There is usually a fee associated with this additional service that is determined by an hourly rate or the energy consumed.
Overtime requests are typically served through the property’s building automation system (BAS). The building automation system is responsible for the operation of all HVAC equipment and oftentimes lighting as well. As such, on a typical day, the BAS will have the HVAC system running during the hours specified in the tenant’s lease. For overtime requests, the system simply extends those hours, however, the processes in which requests are made, executed, and billed can vary quite a bit.
Requesting Overtime HVAC and/or Lighting
Historically, overtime air and lighting requests have come in a number of different ways. Some of the more antiquated systems require tenants to call, come in, or write a work order to request this service from property management. Some phone systems allow tenants to request service by pressing buttons on their phone. Other systems provide tenants a button on a thermostat in their space to request an hour of overtime service.
As you might imagine, the more modern after-hours HVAC and lighting systems now offer tenants an online interface to schedule these services. With tenant billing software, select tenants are given administrative access to the system as a means of restricting who can request service among their employees. These “Super Users” can then subsequently add and remove other users when necessary. Within modern tenant after-hours platforms, tenants can easily see what hours are included in their lease, how much an overtime request will cost, and make notes as to why the request was made.
Executing Overtime Scheduling
With a dated TOS, building engineers are typically required to go into their building automation software to schedule the request. Because of the manual nature of this process, tenants are often required to give 24 to 48 hours notice prior to their overtime request. This can be cumbersome on tenants as not all overtime scenarios are scheduled. In the case of state-of-the-art tenant overtime systems, tenants can easily logon to a website to schedule their air and lighting on-demand. The TOS has a direct link to the BAS putting their requests immediately into action.
Billing Overtime Requests
Now that the overtime air/lighting request has been made, it typically gets billed back to the tenant in a weekly or monthly invoice. Tenant overtime requests are typically billed by the amount of time and/or the amount of energy consumed. Time increments may be as low as 15 minutes, but this is often a criterion that is determined by property management. Energy usage can be calculated by the facility’s BAS and/or meters.
Like the request and execution process, the billing process will likely be much more manual for older systems and automated for newer systems. If requests were made by phone or work order, they must be logged by a member of the property management team and entered into their billing system. This leaves room for human error and potential revenue leakage. If requests are made by website, chances are there is a built-in, backend accounting system used to track and invoice overtime requests.
The Cost and ROI of Tenant Overtime Systems
As you might imagine, tenant overtime systems are a great revenue generator for commercial real estate managers, however, you have to consider the payback period for this investment. Depending on the service partner you choose, you may have little to no upfront cost, but you’ll end up paying more in the long run. On the other hand, you might pay in full for your system upfront and see a greater ROI in the long-term.
Software As A Service (SaaS)
If your service partner utilizes the SaaS business model, it is likely that your initial cost for their TOS will be lower, however, you will need to agree to an ongoing subscription fee. This subscription fee may be a flat rate or based on the revenue you generate through the TOS. For smaller properties that will not generate as much revenue through their TOS, this may be the better of the two options being that the payback period will be longer and commercial real estate properties change hands frequently.
In the case that you contract your TOS with a service provider that only charges a single initial fee, your upfront installation cost may be slightly higher, but once it is paid off by the revenue it generates, you will capture 100% of the profits. For large commercial properties, this route generally yields a greater ROI, even if the building changes hands in a matter of a few years.
Beyond the revenue as the obvious return on this investment, consider the time it’s going to save your building engineer from scheduling, your property manager from processing, and your accounting team from generating invoices. It also eliminates human error meaning higher tenant satisfaction and no revenue leakage from unlogged requests.
Client: La Jolla Commons
Location: 4747 Executive Drive | San Diego, CA 92121
Facility: 302,261 square feet; 13 stories
Project Type: Tenant Overtime System
Controls Contractor: Computrols
Objectives: Give building tenants a user-friendly, web-based interface to schedule overtime A/C and lighting.
Decision Drivers: The system in place required a monthly software as a service fee that was cutting into the property owner’s revenue.
Installation Date: July 2017