LED Lighting Retrofit in Apartment Common Areas: Payback Math for Hallways, Garages and Stairs
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Hallways, stairs, garages and exterior walkways in an apartment building often run for many hours a day. Older fixtures use more power, and their bulbs need changing on a schedule that takes staff time. An LED retrofit replaces those fixtures or lamps with LED units that draw less power. The payback depends on two numbers that the owner can measure: how many hours the lights run, and what the building pays for electricity. The labor saved on bulb changes is the second source of savings, and it is easy to forget.
This guide shows how to calculate the savings, the payback and a lower-hours case. It is not an electrical or energy-audit recommendation. A licensed electrician should size the fixtures, and the building's utility bills should provide the real rate.
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What are the savings made of?
- Power. The difference in watts between the old fixture and the LED, multiplied by the hours it runs, gives kilowatt-hours saved. Multiply by the rate per kilowatt-hour to get the dollar saving.
- Labor. Each avoided bulb change or ballast replacement saves the staff or contractor time it would have taken.
- Maintenance. Fewer ladder jobs and fewer failed lamps can reduce callbacks, but these are harder to count.
- Rebates. Many utilities offer rebates for efficient lighting. Count them only when the program is open and the amount is confirmed.
Hypothetical example
These figures are made up for illustration. Use the fixture count from a walk-through, the wattage from the fixture labels and the rate from the utility bills.
A building has 120 fixtures in hallways, stairs and garages. Each old fixture draws 60 watts, and the LED replacement draws 9 watts, a difference of 51 watts. The lights run 12 hours a day, which is 4,380 hours a year. The electric rate is $0.15 per kilowatt-hour. Each year the building avoids 60 bulb-change visits at $40 each.
| Measure | Base case: 12 hours a day | Lower case: 6 hours a day |
|---|---|---|
| Kilowatt-hours saved a year | 26,806 | 13,403 |
| Energy saving at $0.15 | $4,021 | $2,010 |
| Labor saved on bulb changes | $2,400 | $2,400 |
| Total yearly saving | $6,421 | $4,410 |
| Payback on an $18,000 retrofit | 2.8 years | 4.1 years |
The retrofit pays back in under three years in the base case. Even with half the run hours, it pays back in about four years, because the labor saving does not depend on the hours. The owner should confirm the hours with the timers and the sensors, not with a guess. A retrofit that runs lights all day in a stairwell is worth more than one where the lights are on a motion sensor, and the payback should follow the real schedule.
Check the numbers before you count them
- The fixture count and the wattage on each label, from a walk-through.
- The run hours, from the timers and the existing schedule, and any sensors the building already has.
- The electric rate from the last twelve months of bills, not the rate the utility advertises.
- The rebate program, if any, its open date and the amount it pays.
- The fixture's warranty and its expected life from the maker, which decide when the next replacement comes.
Is it a capital item or an expense?
A full retrofit of fixtures is usually a capital improvement, and the tax treatment is a question for the CPA. A single bulb replacement is a repair. The plan should show the retrofit as a capital line and the energy and labor savings as reductions in the operating budget, so investors can see both.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units under Rule 506(b) or 506(c). The deal's capital budget and operating assumptions show the retrofit cost, the energy and labor savings and the payback, including the lower-hours case. DoorRaise does not install lighting or set utility rates. Setup is $1,500 (non-refundable), and the administration fee is $5,000 a year from closing.
Start with a sponsor page or see the fees.
FAQ
Is an LED retrofit always worth it?
Not always. It depends on the run hours, the electric rate and the cost of the fixtures. A short-hours building or a low rate can make the payback long.
Should the owner or the tenant pay for common-area lights?
Common-area lighting is usually the owner's cost, paid through the operating budget. Confirm this in the lease and the utility setup for the building.
Does a motion sensor make the savings bigger?
It can, because the lights run fewer hours. Count the sensor's cost and its upkeep, and test the savings against the hours it actually saves.
Where do I find the rebate?
Ask the local electric utility about its commercial or multifamily lighting programs. Count a rebate only when it is confirmed in writing.
Sources
- Apartment utility expenses in underwriting, for how electric and other utility costs are budgeted.
- Value-add renovation budget per unit, for how to fit a common-area retrofit into the renovation plan.
- Syndication reserves for operating and capital replacement, for how capital work is reserved.
- Example figures are hypothetical. No utility rate, rebate or fixture price is cited here. Use the building's bills, a walk-through and written quotes.
This article is general information, not legal, tax or investment advice. Talk to a licensed electrician about the fixtures, a CPA about the tax treatment and a securities attorney about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.