Energy Efficiency Is Gaining More Acceptance

December 9th, 2013 by Diane Moore

There are numerous obvious determinants that affect deals associated with commercial real estate. These include capital availability, location, supply and demand.

Energy Efficiency Is Gaining More Acceptance

Energy Efficiency Is Gaining More Acceptance 

However, there are also certain issues specific to the asset that can greatly impact transactions, such as environmental issues and the energy performance as well as physical condition of the asset.


According to Tonu Liou, president of Partner Energy, the market is increasingly accommodating energy efficient factors. The buildings in the US account for the maximum share of energy consumption, which stands at 41% and carbon pollution-around 40%.

Energy Usage in Commercial Real Estate


Commercial properties include office, multi-family residential, retail, or industrial property which can be bought or sold in the real estate market. Energy cost is the single largest expense that has to be shouldered by commercial office buildings, which represents close to one-third of operating budgets.


Becoming energy efficient, commercial real estate properties can cut down on their operating expenses, enhance the value of the property, and increase tenant comfort. They can also become environmental friendly by reducing detrimental greenhouse gas emissions and pollution that lead to global warming.


In 2012, commercial and industrial properties in the US used approximately 50% of the energy in the country at an expense of around $ 400 billion. These operations and buildings can be made relatively efficient with a wide variety of economic efficiency improvements while constructing a powerful economy and creating jobs.


President Obama had once announced an initiative to render industrial and commercial buildings 20% more energy efficient in the course of ten years and enhance private sector investment in the field of energy efficiency.


Some cost-effective measures:


  • Measure and keep track of energy performance.
  • Turn off the lights when there is enough natural daylight.
  • Set back the thermostat when the property is unoccupied or in the evenings.
  • Educate employees and tenants on how their behaviors have an impact on the energy usage. 
  • Improve maintenance practices and operations by checking and maintaining all the equipments on a regular basis to ensure that they are operating efficiently.
  • Revise the practices of janitors to reduce the time for which lights are used each day.
  • Optimize equipment sequencing, start-up time and power-down time.

Important Energy Efficient Commercial Real Estate Projects in the USA and Europe


New Initiative by NRDC


Natural Resources Defense Council (NRDC) in partnership with New York-based Center for Urban Science and Progress (CUSP) is kicking off a comprehensive initiative to amass and examine information related to energy usage by tenants and provide crucial feedback to tenants in commercial offices within the portfolio of CBRE on the way their energy performance can be compared to that of their peers. CBRE is the biggest commercial real estate services firm in the world.


Through this process NRDC will be able to recognize the top energy performers in the country. A rating system will be developed for comparing tenant energy usage which will provide a determinable foundation for recognizing and bolstering practices related to energy efficiency.


The feedback on the performance of tenants with respect to energy usage will strengthen them to make the required changes, which will eventually bolster their efficiency and cultivate their bottom line. A recent study showed that some tenants of Empire State Building and Li & Fung USA, who undertook this approach is projected to cut down energy usage in its office by approximately 30% in comparison to a standard space-saving around $ 1.8 million in the next 15 years.


Here’s an elaborate breakdown on how this initiative will function phase by phase:

  • Survey and examination phase


This will comprise of scrutinizing tenant spaces across various US cities to capture building characteristics and tenant spaces along with information on consumption and energy management practices. CUSP will then use their expertise to examine the data and develop a benchmark model for the tenants. This information will give valuable insights and will assist tenants to better understand the energy performance.

  • Tenant Feedback


Tenants who will be a part of the study will get direct feedback on the way their energy usage compares to that of their peers, and the trend of their energy use each month.

  • Identifying top performers


Besides providing tenants information on their energy performance, CUSP will also devise a methodology to evaluate the top performing cities across the US, the kind of usage categories and a host of feedback. With the collaborative effort of both CUSP and NRDC, tenants can have access to a model of energy recognition, which will be based on input from the participants.

  • Keep a track of tenant progress following feedback


The energy performance of the tenants who will be a part of the study will be analyzed for twelve months after they receive the feedback. CUSP will then evaluate to find out if there is an improvement in the energy performance.

High Performance Tenant Demonstration Project by CMI


The Natural Resources Defense Council’s Center for Market Innovation (CMI) has started a project with an objective of enhancing the demand to promote the amalgamated effect of tenant/owner collaboration, directed to optimize the performance of the commercial office market.


As a result of this program, tenants who give importance to high performance spaces will opt to remain in properties with superior energy management practices and adept central systems. Building owners who invest in improvement techniques for the efficiency of central systems-besides garnering operating savings will also get a competitive advantage to attract and retain such high value tenants.


The Project Team of CMI is engaged in quantifying, modeling, writing out and publishing energy savings that are generated by a sequence of build-outs associated to high efficiency tenants, the equivalent return and the corresponding incremental investments made by the tenant in the installed EPMs (Energy Performance Measures).


CMI has roped in various industry leaders for technical assistance on this project. These include Johnson Controls, Goldman Sachs, Jones Lang LaSalle, SKANSKA, ULI/Greenprint and Malkin Holdings.

Office Building in Seattle Goes Ultra Green


A six storied office building with an area of 50,000 square feet in Seattle is functioning totally off the grid. The building has used solar panels for deriving energy, a huge rain cisterns for collecting water, geothermal wells for heat and composting toilets to keep sewage out.


Denis Hayes, president of the property, Bullitt Foundation, says that you need to flush before using and even after that and adds that this may be the single largest change in the lifestyle.


The owners of the property are toiling to meet the stringent requirements as laid down by Living Building Challenge (LBC) which came into being in 2006. LBC calls for properties to have net-zero water and energy systems, besides using 50% of the energy needed to achieve LEED platinum certification. A building won’t be certified by LBC as “living” until and unless it meets the objectives of the group for an entire year after the tenants move in.


What makes the property so impressive is its relatively tiny rooftop and also the location. Even with the property managing important systems, users need to make lifestyle transformations-using the stairs and not the elevator, for example, and selecting MacBook Air Laptops, which require less energy compared to a 100-watt bulb.

Green Financing Program in San Francisco


The Department of Environment in San Francisco launched the Green Finance SF Commercial Program to assist businesses in the city to make their properties green, save energy, reduce carbon emissions and create jobs.


This program provides owners of commercial properties admittance to new kinds of financing for installing renewable energy, water conservation and energy efficiency improvements. It directly addresses the important barriers that crop up while implementing improvements related to energy efficiency in commercial properties.


Mayor Lee said that Green Financing Program is a huge step forward in efforts made by San Francisco to dramatically cut down usage of energy and carbon emissions. He added that the team is excited to unlock a huge amount of private investments-from a broad range of sources besides creating a huge number of construction jobs in the region.


Supervisor Eric Mar said that property owners will save a lot of money with this program, enhance property value besides putting individuals to work.


The 16,000 commercial properties in San Francisco are responsible for 50% of citywide usage of energy and an excess of 25% of the carbon footprint in the city. This program will assist commercial owners reduce the consumption of water and energy and contribute to the objectives of greenhouse gas reductions.

Energy Efficient Building by the European Initiative


The construction industry is a giant contributor to emissions of carbon dioxide-with buildings responsible for nearly 40% of the total energy consumption in Europe and 60% of carbon dioxide emissions.


To assist address climate transformation, the European Commission has established some specific targets which have to be achieved by the year 2020-referred to as the 20/20 targets. The targets include cutting down energy consumption by almost 20%, reduce carbon dioxide emissions by 20% in addition providing 20% of the total energy from renewable energy.


The European Construction Technology Platform has established the Energy Efficient Building European Initiative, known as E2B EI, in order to reach its targets by 2020.


The E2B EI will work hard to achieve the following goals:


  • Leverage additional industrial, regional and national RTD investment.
  • Allow the market entry of technologies related to energy efficiency, enabling the forces of commercial market to drive the linked public benefits.
  • Build close partnership with research being done on regional, national and international levels.
  • Place Europe on the limelight of energy efficient properties and district technologies in the world.
  • Concentrate on achieving sustainability, durability and performance on a long-term basis.
  • Strive to overcome important areas of technological difficulties.
  • Facilitate interaction between universities, research center and industries.
  • Target non-technical obstructions to derive advantage from the markets and perform research modes to bolster the development of fresh regulations.
  • Review present standards to get rid of artificial obstacles in the market.

Energy Efficiency Building Program in Washington


The state offers a variety of programs to industrial and commercial customers through its grand initiative-known as the Energy Smart Services.


The highlights of this program are:


  • Energy evaluations to commercial customers without any charges for the management of operating costs and recognizing opportunities to save energy.
  • Industrial customers to receive technical aid along with financial incentives to furnish payment for all expenses associated to the analysis of energy, and 70% of the costs related to the efficiency of the project (depending on electricity savings), which includes lighting upgrades, heat recovery and upgrades of electric furnace among others.
  • Financial incentives that are based on kWh savings annually (70% of project expenses) can be accessed by commercial customers for the installation of energy-efficient equipment, which includes lighting, glazing, controls and HVAC.

How Can New Commercial Properties Be a Big Saver


Based on a recent report, new construction in California could see a huge cut in the usage of energy if the state advances upon the energy codes of commercial properties to a “Low Energy Case”-a model which increases the energy efficiency of building energy.


The potential figures include:


  • Energy usage-19.8%
  • Emission of carbon-22.6%
  • Energy expenses-24.5%
  • Life Cycle expenses-1.3%


The report entitled-Benefits and Costs of Energy Standard Adoption in New Commercial Buildings-utilizes the database from NIST (National Institutes of Standard and Technology) which permits the analysis and simulation of measurements in energy efficiency for buildings.


The software, known as BIRDS (Building Industry Reporting and Design for Sustainability) will be released to the public as a free resource in 2014.

Final Thoughts


Energy efficiency offers a wide variety of benefits, with such programs offering a great alternative to tenants as well as business owners. Individuals participating in various utility-or-state-sponsored energy efficiency programs save 10% to 20% on their energy bills-which is why tenants and owners of commercial real estate should embrace energy efficiency.



Diane is a highly-qualified translator of the English, Italian and Spanish languages. She has studied extensively in Italy and Switzerland. She writes about a variety of financial services industries including insurance. She has a love of life and a curiosity that drives her both personally and professionally.

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