Energy Myth #1: Does the Tenant Bear All Energy Costs?
Updated: 3 days ago
“The tenant pays the energy bill anyway.” That assumption is too narrow for professional real estate portfolios. Recoverable costs can be passed on, but vacancy, owner-borne expenses, carbon costs and tenants’ total occupancy costs remain relevant to owners, asset managers and property managers.
This article is the first in our "Energy Myths in Real Estate" series, where we challenge common misconceptions with market insights and practical perspectives.
Assess energy within the full operating cost picture
The contribution of electricity and heating to operating costs depends on the building’s use, systems, consumption and supply contracts. Portfolio management therefore needs the actual cost structure of each property.
The study “Gesamtmietbetrachtung Büromarkt Deutschland 2025” by bulwiengesa and BAUAKADEMIE reports that prime office operating costs almost doubled over the five years to 2025. Its estimate that around 40% of costs can be influenced refers to overall operating and maintenance costs. It is neither an energy cost share nor a promised saving.
Structured procurement, competition and consumption optimisation address different variables. Measure their contributions separately: a lower supply price does not automatically reduce consumption, while reduced consumption does not replace a review of contract terms.
Why recovering costs does not fully insulate owners
Total occupancy costs: Tenants consider service charges alongside base rent. Lower energy costs can support letting activity; higher rents or faster lettings do not automatically follow.
Vacancy: Unoccupied space may still need energy for frost protection or building operations. Costs that cannot be allocated under a lease remain with the owner.
Contractual and legal requirements: Whether costs can be recovered depends on valid agreements and applicable rules. For German residential tenancies, Section 556 of the Civil Code governs operating cost agreements and the requirement for economic efficiency when reconciling advance payments.
Owner-borne costs: Non-recoverable costs and statutory landlord shares directly affect the owner’s income. Savings on fully recovered costs do not automatically increase net operating income by the same amount.
Carbon costs: Distinguish residential and non-residential buildings
Heating supplies within the scope of Germany’s Carbon Cost Allocation Act require separate assessment. In residential buildings, the allocation depends on annual carbon emissions per square metre of residential floor area. The statutory classification table provides for landlord shares of up to 95%. The allocation is not directly determined by the energy performance certificate’s efficiency class.
For non-residential buildings, Section 8 of the Act generally limits the tenant share to a maximum of 50%. The scope of the legislation and statutory exceptions must be considered in each case. These percentages apply to the relevant carbon costs, not the entire energy bill.
Connect energy supply, sustainability and asset value
Efficient operation and suitable energy supply arrangements can support a building’s competitiveness. Their impact on lettability, financing or market value also depends on location, building quality, market conditions and stakeholder requirements.
Renewable electricity or biomethane can form part of the supply approach. Their emissions impact and regulatory recognition depend on the product, supporting evidence and the applicable accounting or legal framework. A product switch alone neither replaces efficiency measures nor secures a higher property value. Myth #2 on strategic energy procurement explains how price, contracts, data and sustainability work together.
Conclusion: Include energy costs in portfolio management
Even where tenants bear part of the energy bill, cost recovery, vacancy, carbon cost shares and total occupancy costs remain relevant to owners. Sound management connects procurement, consumption and the actual allocation of costs.
NeoBid helps you assess consumption data, contract terms and procurement options across your portfolio. The overview of energy procurement for real estate portfolios explains the approach.
