Tenant Star: Cost-Saving Real Estate Energy Efficiency Solutions Power through the House
Today, the U.S. House passed an energy efficiency bill that includes a groundbreaking “Tenant Star” program designed to accelerate energy efficiency in leased commercial spaces, which could cut utility bills for landlords and tenants by an estimated $2 billion dollars by 2030 and reduce carbon emissions by nearly 12 million metric tons.
The bipartisan “Energy Efficiency Improvement Act of 2014” (HR 2126) includes a Better Buildings section with the Tenant Star provisions, widely endorsed by the Real Estate Roundtable, private industry and energy efficiency advocates. Tenant Star would establish a voluntary, cost-free certification and recognition program to promote energy efficiency during design and occupancy of leased space. As a result, it would save money for businesses—both tenants and landlords when energy use decreases.
Introduced by Representatives David McKinley (R-WV) and Peter Welch (D-VT), and containing real world best practices and results from NRDC’s High Performance Tenant Demonstration Project, the bill unanimously passed the House Energy and Commerce Committee in January and now heads to the Senate.
Meanwhile, on the Senate side, Sens. Jeanne Shaheen (D-NH) and Rob Portman (R-OH) last week reintroduced their Energy Savings and Industrial Competitiveness Act (S 2024) with the Tenant Star provisions.
Unlocking the market potential
Tenant leased spaces typically represent 50 percent or more of a building’s overall energy use, and present often overlooked energy savings opportunities. This means to unlock the market potential and reduce the estimated $20 billion dollars spent annually on commercial office buildings’ energy use, a comprehensive building efficiency program is essential. Tenant Star would complement the widely recognized whole building ENERGY STAR® label and address often overlooked energy savings in leased spaces through cooperation between commercial building landlords and tenants.
“Tenant Star will encourage commercial tenants and landlords to design and construct leased spaces in office buildings to achieve high levels of energy performance. H.R. 2126 aligns office tenants – who can account for more than 50 percent of the energy consumed in an office building – to incorporate into the construction of their leased premises common sense, cost-effective measures that yield excellent returns on investment over short pay-back periods. Tenants will favor landlords whose buildings can support such installations. Broad adoption will save businesses billions of dollars on energy costs in the coming years. The reduced consumption will afford savings in future capital outlays for energy generation and related infrastructure.”
Anthony E. Malkin, Chair of The Real Estate Roundtable’s Sustainability Policy Advisory Committee and Chairman, President, and CEO of Empire State Realty Trust, Inc.
"Tenant Star provisions will boost innovation in buildings across the nation. Tenant Star will encourage cooperation between commercial tenants and landlords to design and construct high-performance leased spaces, and make smart operational decisions to lower energy use by investing in measures that will pay for themselves through energy savings. Tenant Star will also go a long way to help ensure that U.S. buildings – and the separate spaces leased within them – are at the vanguard of technology and energy conservation. The program will allow building owners to attract financiers, investors, and tenants in the increasingly competitive national and global markets for real estate."
Jeff D. DeBoer, Real Estate Roundtable President and Chief Executive Officer
Scaling up building energy efficiency solutions that work
The latest momentum in support for building efficiency comes at a pivotal time, when real estate transactions are on the rise and private markets are driving demand for energy efficiency return on investment and measurable results.
To stimulate the building efficiency market, NRDC’s High Performance Tenant Demonstration Project portfolio provides business case studies and a step-by-step process for selecting office space and evaluating energy efficiency investments throughout the real estate lease term across multiple business sectors and markets. From the Empire State Building tenants Li & Fung USA, Coty, LinkedIn to Brandywine Realty Trust tenant Reed Smith at Three Logan in Philadelphia, leased spaces in high performance ENERGY STAR® buildings, energy efficiency investments were driven from a desire for greater competitive advantage—through better workplace environments, energy cost savings, and leadership recognition.
More powerful than individual success stories, a package of practical, cost-effective energy saving solutions for tenant spaces, whole buildings, and across national portfolios is the ultimate goal. For example, Reed Smith’s high performance tenant space is estimated to save more than 34 percent of expected electricity use and $1.8 million over the lease term. From the initial success in Philadelphia, Reed Smith is now implementing the energy optimization process in new plans for offices in Washington, D.C., New York City, and all future space.
Energy efficiency is a perfect example of how business and government leaders are coming together to support market-driven solutions to save our nation energy, money and encourage job creation. In addition to Tenant Star, the House bill includes several other energy efficiency measures, including data center efficiency -- an area where there are huge efficiency opportunities and NRDC has been active. It's great to see the House of Representatives take a bipartisan step forward on clean energy bill that advances energy improvements and private sector innovation.
In addition to the energy and cost savings, cutting energy waste ensures cleaner air and reduces our overall environmental impact. With all the benefits, it is no surprise 9 out of 10 Americans support energy efficiency. In this latest progress on Tenant Star, we support and applaud Congress for stepping up to battle energy waste and for securing a better future of our buildings and for our nation.
Photo credit: Tim Schenck