Now Included in Commercial Property Rental Agreements: Backup Power?

August 05, 2016

By Tracey E. Schelmetic - Power Protection Contributor

While power outages in office buildings once upon a time affected little more than the lights, today, companies are literally dead in the water when it comes to power outages. The nature of mobile business today – bring your own device and work-from-home models –  means that for short outages, many employees can continue to work offsite, particularly if the applications they need are safely housed in a data center elsewhere. For lengthy power outages, however, the ramifications are very serious, and tenants may find that their landlords are less-than-responsive.

This week, tenants of a 19-story building along Forbes Avenue in Pittsburgh have discovered the limitations of a landlord’s responsibility for providing backup power (or water) in the event of an outage. Finnegan Schick of the Pittsburgh Post-Gazette has reported that the tenants of the Allegheny Building, which is owned by the New York-based King Penguin Opportunity Fund, include a law firm, county court offices, an insurance company, a restaurant and a cafe, all of which have been without power since last weekend. The outage is due to a transformer fire last Saturday in the former Macy’s/?Kaufmann’s building nearby. Local power is provided by Duquesne Light.

In the meantime, tenants are beginning to muse about the landlord’s responsibility toward its tenants when it comes to outages.

“Where’s your backup plan? To answer a tenant, ‘I don't know,’ is unacceptable,” an employee of one of the tenants in the building told Schick. “I think most of the tenants would tell you that one of the most frustrating and disappointing parts of this is that it's out of [King Penguin's] control.”

King Penguin has apologized for the outage, but is offering tenants little information on how and when the power and water will come back online. It has offered some temporary workspace to tenants of the Allegheny Building.

“At this time, we have not received any information concerning how long the repairs may take and when power will be restored to the Allegheny Building,” the letter to tenants says. “The occurrence of the fire was completely beyond the control of, and is not the fault of, any Allegheny Building tenant, King Penguin Opportunity Fund, or KPP Management.”

The incident begs the question: should a landlord be responsible for providing backup power to its tenants? Power outages in commercial buildings create enormous costs and hardships for business owners, tenants, and employees each year, according the facilities management Web site Buildings. The losses are a combination of lost productivity, sales and product, damage to the brand’s reputation and risks to employee safety. 

Increasingly, many commercial buildings are incorporating backup power systems into the services they offer. While some are doing it on a voluntary basis, others are complying with new code requirements. Increasingly, companies are demanding backup power as part of the agreement when they sign tenancy contracts. In New York forward-thinking landlords are realizing that backup power systems are not only competitive advantages, but can even generate revenue by allowing the owners to participate in demand-response programs, according to Cara Olmsted writing for the Commercial Observer.

“A properly equipped, 1.4-million-square-foot office building with quality backup generators could earn approximately $300,000 per megawatt (MW) each year in DR incentive payments for agreeing to reduce loads during peak alerts,” wrote Olmsted. 

Edited by Alicia Young

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