This study uses a first-order approximation of a micro-building to investigate the major factors determining how increased thermal capacitance (ITC) with thermal storage management (TSM) can reduce energy consumption in locations with relatively mild weather conditions such as the southeastern part of the United States of America. In this study, ITC is achieved through water circulation between a large storage tank and pipes embedded within the building envelope. Although ITC results in a larger dominant time constant for the thermal response of a building, an adaptive allocation and control of the added capacitance through TSM significantly improves the benefits of the extra capacitance. This paper compares two first-order models for a micro-building: a reference case model with a single lumped thermal capacitance associated with the building, and another model, with the building's capacitance plus the capacitance of the water system. Results showed that the ITC/TSM system reduced the cost of conditioning the building by reducing the operating time of both the cooling and the heating systems. May through September, the air conditioning operating time was reduced by an average of 70%, and October through April, the operation of the heating system was reduced by an average of 25%.