As energy prices continue to rise and as more companies and individuals become carbon conscious, Link Logistics has developed a utility management model that will leverage its access to real estate capital to cut energy costs for its tenants.
Sam Stockdale, senior vice president and head of sustainability at Link Logistics, sat down with Mary O’Connell for the Net-Zero Carbon podcast to explain how Energy Solutions scales decarbonization, as detailed in a new Link Logistics sustainability case study.
In a traditional net leasing agreement, businesses and tenants have to deal with the hassle of managing utilities under their own names and paying higher prices as a result of inefficient systems.
According to Stockdale, this model leads to stagnation on sustainability initiatives. “ESG reporting does not decarbonize buildings, and climate tech doesn’t decarbonize buildings. What does work is deploying capital for sustainable energy products,” Stockdale said.
Of course, access to that kind of capital is a barrier to entry for many businesses and individuals. “Energy saving programs can be very capital intensive. That’s where Energy Solutions comes in,” Stockdale said. “We want to deploy capital for the benefit of our customers as their demand grows for energy and sustainability related products.”
The Energy Solutions program acts as a mechanism that allows Link Logistics to deploy capital that creates value for their real estate and reduces expenses for customers. “When we own the utility accounts rather than our customers, we can correct the decades’ old hindrance to operational sustainability called the split incentive barrier, where one party has the means to deploy capital but another party benefits,” Stockdale said.
Energy Solutions solves this problem by aligning mutual interests. It gives the land owner certainty that they can recover capital they deployed, and the customer certainty that that capital will be deployed to benefit them directly.
Link Logistics’ owner-operated utility model is a win-win for both the firm and its tenants. With the benefit of its access to capital, Link Logistics’ properties can be retrofitted with modern infrastructure and energy saving technology, including LED bulbs, higher efficiency hardware, and solar panels.
“Customers see an immediate cash flow benefit not only in utility cost, but also by bypassing utility security deposits,” Stockdale said. Tenants save on utility costs and avoid the headache of utility management, while Link Logistics sees a return on its investment into carbon reduction and energy savings.
“This is not only an excellent use of capital deployment that benefits the environment and the consumer, but also a way to engage the public with carbon reduction aims,” Stockdale said.
Link Logistics, established in 2019, was founded with sustainability at the center of its identity and began building out its capabilities in this area early on. “We started with a surgical focus on talent, external partner selection and systems design,” Stockdale said.
As an example, Link Logistics’ utility operations team completely redesigned the accounting environment to support utilities management.
The data shows that this project has been a massive success. “So far, our average benefit is 16 cents per square foot, or a 12% reduction from legacy utility bills,” Stockdale said.
Link Logistics’ owner-operated utilities function uses a hub-and-spoke model for all workstreams, including the property management teams, operations teams, utility vendors, finance teams, and the accounting platform.
“We rely on consistent, high integrity utility data for our billing, accounting and meter management functions which serve as the foundation of Energy Solutions,” Stockdale said. “Our team pays 17,000 utility bills per month, tracks 50,000 individual meters every year and performs bill investigations, energy audits and security deposit recoveries.”
This work is highly administrative but highly valuable. Energy Solutions provides $4 million in annual utilities savings, much of which accrues directly to customers.
Another massive benefit of this model is the fact that Link Logistics is able to insulate its customers from the volatility of power prices. “We provide a guarantee structure that unlocks our ability to access aggregated virtual power purchasing, which protects customers from power volatility.”
As power rates become increasingly unstable across the country, this program provides long-term budget stability to customers and paves the way for decarbonization efforts and lower energy consumption.
Regarding the future of Link Logistics’ relationship with customers, Stockdale said that the future looks promising for this endeavor because power is an increasing concern to tenants: “Energy traditionally used to mean oil and gas, but now it means power. Our customers are increasingly seeking answers about sustainability because electrification is such a global theme.”
With this innovative and thorough approach to data, accounting, technology updates and utilities management, Link Logistics hopes to reshape the relationship between real-estate owners and tenants.
“Customers will increasingly rely on landlords not only as providers of space, but also as providers of solutions. Energy sustainability will continue to be at the core of the solutions for our customers,” Stockdale said.