Utility Benchmarking:  A Proven Way to Increase NOI

In multifamily, utility billing benchmarking is essential for effective asset management and financial optimization. As utility costs continue to rise, it becomes increasingly important for property managers, owners, and investors to have a clear understanding of their utility expenses, how these compare to market standards, and where opportunities for cost-saving lie. Benchmarking provides a critical lens through which properties can identify inefficiencies, make data-driven decisions, and maximize profitability.

What is Utility Billing Benchmarking?

At its core, utility billing benchmarking is a process that allows multifamily properties to compare their utility usage and costs with similar properties. By collecting and analyzing data on electricity, water, gas, and other utility expenses, property managers can see where they stand in relation to other buildings of similar size, location, and type. This analysis can highlight areas where consumption is above average and provide insights into potential improvements. In short, benchmarking serves as a diagnostic tool, pinpointing where inefficiencies may be impacting the bottom line.

Why Benchmarking Matters in Multifamily

The multifamily sector is particularly impacted by utility costs, as these expenses can account for a significant portion of a property’s operating budget. Benchmarking helps multifamily operators manage these costs in several ways:

1. Identifying Cost-Saving Opportunities: When properties are benchmarked, it becomes easier to see patterns and pinpoint areas for improvement. For example, if a building’s water usage is higher than average, this could indicate leaks or inefficient fixtures that need attention. Targeted upgrades can then be made to reduce consumption, which in turn reduces costs.

2. Increasing Property Value: By reducing utility expenses through benchmarking insights, a property’s net operating income (NOI) can improve. Since multifamily properties are often valued based on NOI, reducing these costs effectively increases the asset’s value. Benchmarking enables property managers and owners to take proactive steps, ensuring that utility costs are optimized, and the property’s value is maximized.

3. Supporting Sustainability Initiatives: In today’s market, environmental responsibility is more important than ever. Benchmarking helps properties align with sustainability goals by identifying and reducing excessive energy and water usage. This not only lowers costs but also positions the property as environmentally conscious, which can be an attractive quality for both residents and investors.

4. Data-Driven Decision Making: Without a clear picture of where a property stands, decisions around utility management can feel like guesswork. Benchmarking provides the data needed to make informed decisions. This includes choosing when to invest in upgrades, such as energy-efficient lighting or HVAC systems, as well as adjusting operational practices, like scheduling preventive maintenance to avoid costly repairs.

5. Enhanced Transparency and Reporting: With benchmarking in place, reporting becomes more comprehensive and meaningful. Investors, stakeholders, and regulatory bodies appreciate transparent reporting that demonstrates proactive cost management and sustainable practices. Additionally, many municipalities and states are introducing benchmarking mandates, so adopting this process early can keep properties compliant with future regulations.

Steps for Effective Utility Billing Benchmarking

1. Data Collection: Start by collecting data on all utilities, including water, gas, and electricity usage for each property within the portfolio. This information should be as detailed and recent as possible to provide an accurate snapshot.

2. Define Benchmarks: The next step is to set benchmarks that make sense for your property. Many multifamily owners compare utility costs on a per-unit or per-square-foot basis. Industry standards and local averages can also serve as helpful reference points.

3. Analysis and Comparison: Once you have collected the data and defined your benchmarks, you can begin analyzing where your property stands. This comparison should be done across multiple metrics, including total usage, usage per square foot, and cost per unit.

4. Set Goals for Improvement: After identifying areas for improvement, it’s time to set actionable goals. For instance, if water usage is higher than average, the goal may be to replace older fixtures with low-flow alternatives. By setting clear, measurable goals, properties can track progress over time and see how changes impact the bottom line.

5. Regular Monitoring and Adjustments: Utility usage can fluctuate based on a variety of factors, from seasonal changes to tenant occupancy. Benchmarking should be an ongoing process, with regular monitoring and adjustments to ensure continuous improvement. Many property managers find that quarterly or annual reviews work best, though some may prefer monthly check-ins for tighter control.

Technology’s Role in Utility Benchmarking

Technology plays a major role in making utility benchmarking easier and more effective. Solutions like automated utility billing and advanced reporting analytics allow for seamless data collection and instant insights. Platforms can centralize utility data, generate reports, and even identify trends that might otherwise go unnoticed. At Banyan Utility, our reporting analytics provide multifamily properties with in-depth insights into their utility expenses, enabling effective benchmarking and ongoing optimization.

With the right technology in place, benchmarking doesn’t have to be a manual or labor-intensive process. Instead, it becomes an integrated part of property management, providing critical information at the touch of a button. This not only saves time but also ensures accuracy and consistency, allowing managers to focus on acting on insights rather than gathering data.

Utility billing benchmarking is essential for multifamily properties seeking to control costs, enhance value, and operate sustainably. By understanding where a property stands in terms of utility usage and costs, property managers can make targeted improvements, boost NOI, and create a more attractive asset. Moreover, benchmarking ensures a culture of accountability and transparency, aligning with today’s sustainability expectations and helping properties stay competitive.

In a competitive market, multifamily operators need every advantage they can get. Benchmarking offers that edge, turning utility data into actionable insights that drive efficiency, reduce costs, and support long-term success.

About BANYAN 

BANYAN founded in 2007, is a leader in utility expense management and resident billing services. We are dedicated to providing a sustainable and cost-effective environment through awareness and conservation to help you increase your NOI and achieve your green energy initiatives. Our focus is providing customized utility solutions for our clients and their portfolio of communities in the US and Canada. Our innovative solutions include property management software integration, resident payment processing, in-house collections department, utility expense management, vacant cost recovery, regulatory support and submeter consulting. BANYAN has been on the Inc. 5000 list of fastest growing companies six times, including 2019.