The Efficiency Premium Has Arrived: What It Means for Property Value in Northeast Ohio

10/26/2026 | Rubber City Appraisal Studio, LLC | , , ,

Oct 26, 2026 ยท @Tracy

On September 21, 2026, the global commercial real estate firm JLL published The efficiency premium accelerates in real estate in its Insights library. The article was written by Paulina Torres, JLL’s Global Research Director, Sustainability. It also lists three JLL leaders as contacts on the topic: Guy Grainger, Head of Sustainability Services; Josephine Tucker, Americas Head of Energy Advisory and Sustainability; and Dana Arnold, Global Head of Sustainable Operations, Smart Building Services, and Energy Engineering. Torres draws on JLL Research, including the firm’s 2026 Global Real Estate Transparency Index and Future of Work survey. Below is a summary of her findings, followed by what they mean for property value in northeast Ohio.

What JLL found

Torres’s central argument is that energy efficiency is no longer an upgrade that is nice to have and hard to justify. Citing JLL Research, she reports that the most efficient buildings now cost 43โ€“75% less to run each year than the least efficient, a saving of US$1.58 to $5.13 per square foot (Torres, JLL). That figure comes from 4,437 offices in seven global markets, comparing the most and least efficient buildings in the same city.

Three findings stand out.

  1. Electricity is outrunning inflation. Across six electricity markets studied, commercial electricity prices rose 11% to 91% more than local inflation between 2020 and 2024. As a result, the savings from efficiency keep growing. In Los Angeles, the best-performing offices saved $2.78 per square foot on energy in 2019; by 2024 that had risen to $4.06, a 46% increase.
  2. The gap depends on the market. Paris shows the widest spread of any market studied and Chicago the narrowest, a roughly threefold difference driven as much by local electricity prices as by building performance.
  3. Owners are not ready. In JLL’s 2026 Future of Work survey, energy efficiency ranks 4th among the scenarios executives see as most transformative for their portfolios, while CRE teams rank their own preparedness 7th of 8. A previous JLL study of 46,600 buildings across 14 global markets found that around 66% perform poorly.

Torres stresses that the quickest gains often come from operations, not new equipment. She points to LaSalle Investment Management’s portfolio, where one office property cut energy use intensity by 27% through HVAC temperature and schedule optimization alone, saving roughly $100,000 a year with no capital investment. She frames the issue for owners directly: the readiness gap is a value gap, and tenants, lenders and investors are scrutinizing energy performance more closely (Torres, JLL).

How this affects value

Torres writes for owners and occupiers. For appraisers, lenders and owners in our market, the takeaway is that energy performance now affects value in several distinct ways.

  • Net operating income (income approach). Utility costs are an operating expense. In a gross or modified-gross lease, an owner whose building costs more to run collects less NOI from the same rent. As a simple illustration, an annual cost gap of $1.58 per square foot, capitalized at an 8.5% rate, works out to about $18.60 per square foot of value. At $5.13, it is about $60 per square foot. That cap rate is for illustration only and is not a measured rate for northeast Ohio.
  • Lease structure. In triple-net industrial and retail, the tenant pays the power bill. The penalty for an inefficient building doesn’t show up in the owner’s expenses. It shows up as weaker rent, slower leasing, and harder renewals. Before deciding where an energy adjustment belongs, read the lease.
  • Comparable selection and adjustments (sales comparison approach). A building that is the same age and class as a comparable but runs much less efficiently is not really the same product. Utility history and building systems are worth checking before a sale is treated as a clean comparable.
  • Obsolescence (cost approach). Old HVAC, controls and envelopes that drive excess operating cost are a form of functional obsolescence. Rising power prices make that obsolescence more costly.
  • Marketability and exposure time. JLL expects power access, intensity and sources to become standard due diligence line items, particularly for assets targeting power-intensive occupiers. Buildings that can’t document their performance may take longer to sell or lease.

The Northeast Ohio angle

JLL’s highest-scoring markets for energy reporting are cities like New York, Seattle and Boston. Here, the pressure is arriving mostly through the utility bill rather than through regulation, and that bill has climbed quickly.

Power costs. Northeast Ohio is served by the PJM grid, and PJM capacity prices have jumped. They rose from $28.92/MW-day (2024/25) to $269.92 (2025/26) and $329.17 (2026/27) (Ohio Commercial Energy). PJM capacity auctions have now cleared at the price cap three years running: $329.17/MW-day starting June 2026, $333.44 starting June 2027, and $325 starting June 2028 (ElectricRates.org). Locally, FirstEnergy Ohio customers, including The Illuminating Company and Ohio Edison, have seen electricity supply costs rise by up to 20% since June 1, 2026 (ElectricityRates.com).

What Ohio businesses pay. Based on U.S. Energy Information Administration data, as compiled by Ohio Commercial Energy, Ohio’s average commercial price for Januaryโ€“June 2026 was about 13.78ยข per kWh, up from 11.07ยข a year earlier, a rise of roughly 24%. That puts Ohio close to the national average of about 13.86ยข, so the gap has largely closed. Low power costs used to be a cost advantage for Ohio, and that advantage is mostly gone.

What this means locally. Chicago, the Midwest market in JLL’s study, had the narrowest efficiency gap of the seven cities. That was largely because power there was relatively cheap. Northeast Ohio used to fit the same profile. Rising capacity charges are steadily removing the reason the efficiency gap here was small. Our older office stock and our mid-century flex and industrial buildings are where that change will hit hardest.

Financing tools already exist. Owners don’t need a mandate to act, and they have local financing. Ohio’s energy special improvement districts include the Northeast Ohio Advanced Energy District in and around Cleveland and the Akron-Summit County ESID (Bricker Graydon). PACE projects in the region include the Great Lakes Mall in Mentor (Bricker Graydon). One point for appraisers: PACE assessments can run with the land upon sale, with financing terms of up to 30 years in Ohio (Bricker Graydon). If a property you are valuing carries a PACE assessment, account for it the same way you would any other special assessment.

The bottom line

The efficiency premium is real, it is growing, and it is now showing up in northeast Ohio power bills. Owners who want their buildings to hold value should benchmark their utility costs now. When valuing a property, treat energy performance as a factor that affects NOI, comparable selection and obsolescence.

Sources

This post is market commentary, not an appraisal of any property.

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