Energy Bills Outpacing Rent Growth: Why Owners Need a Smarter Playbook
- Octavian Vasilovici
- Oct 14
- 3 min read
It’s one of the biggest shifts in commercial property economics — and it’s happening quietly on every utility statement. Across Canada, energy costs are rising faster than rent growth, slowly compressing margins for even well-managed buildings.
For owners, this trend is more than a budgeting nuisance; it’s a structural risk to profitability. With inflationary energy markets, carbon pricing, and aging systems colliding, many properties are losing ground despite full occupancy.
Most owners recognize the problem but underestimate its scale — or its speed. What used to be a small line-item fluctuation is now a multi-year erosion of net operating income. The solution isn’t simply “cut consumption.” It’s about adopting a smarter playbook that treats energy as a managed investment rather than a fixed cost.
Here’s what that means in practice.
Energy Inflation Is Outrunning Rent Escalations
Across most Canadian markets, rent escalations average 2–3% annually, while utility rates have grown at double that pace. In provinces like Nova Scotia, blended commercial electricity rates now sit around 17–19¢/kWh — a 40–50% jump over a decade. Add carbon pricing and natural-gas volatility, and the compound effect can erase years of rent gains within a single leasing cycle.
Peak Demand: The Hidden Cost Centre
It’s not just what you consume; it’s when you consume it. Utilities charge steeply for peak demand — those short, high-load moments when multiple systems start simultaneously. A few spikes per month can add thousands to a bill. Buildings without demand-management controls are effectively leaving profit on the table every billing cycle.
Aging Systems Reduce Control and Efficiency
Older mechanical systems are harder to optimize. Legacy controls can’t respond to variable pricing or demand events, and maintenance delays shorten equipment life. What seems like a cost deferral often turns into serial emergencies, each with higher labour and parts costs. Planned modernization remains the cheapest long-term path to stability.
Tenants Are Watching the Energy Line
Sophisticated tenants now evaluate total occupancy cost, not just base rent. High utility bills can make a property look overpriced — even if lease rates are competitive. In markets where submetering and energy transparency are becoming the norm, inefficient buildings risk losing their edge with both new and renewing tenants.
Regulation Is Tightening the Screws
The federal carbon shadow price of $300/ton is already influencing public and institutional projects, while provinces roll out stricter energy codes and cities move toward performance-based standards. Within a few years, poor performers won’t just pay higher utility bills — they’ll face reporting obligations, penalties, and retrofit mandates.
A Smarter Playbook for Owners
Forward-thinking owners are responding by integrating:
Benchmarking and Submetering to pinpoint losses.
Peak-Load Controls through BAS and staggered startups.
Right-Sized Equipment that matches real demand.
On-Site Renewables and electrified systems where incentives align.
Life-Cycle Costing that evaluates decisions over 30–40 years instead of fiscal quarters.
These aren’t sustainability slogans — they’re financial controls for an energy-intensive future.
Energy is no longer a passive expense; it’s a lever of asset performance. Owners who understand that — and act on it — are the ones preserving NOI in a volatile market.
At OptiBuild Consulting, our engineers help owners quantify true operating risk, forecast energy exposure, and design upgrade strategies that align carbon, cost, and comfort for the long term.
If you’re unsure where to start, start with data.
Request an independent energy performance review and see where your building stands before next year’s rate increases take effect.
