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Yerina Mugica’s Blog

New initiative to recognize most energy-efficient commercial real estate tenants in the U.S.

Yerina Mugica

Posted July 17, 2013 in Curbing Pollution, Green Enterprise, Solving Global Warming

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Our nation’s buildings account for the largest share of energy consumption (41%) and corresponding carbon pollution (40%) in the U.S. So understandably, we have a lot of interest in finding opportunities for building owners and managers to improve the energy performance of their properties.

But that’s only half the picture.  Within commercial office buildings, tenant spaces often account for more than half of a commercial office building's total energy use.  That means half of the opportunity for improvement is in the hands of the tenants. But to-date, that space often remains largely unaddressed when it comes to making efficiency improvements.

That’s, in part, because while whole buildings have access to a range of tools and systems that enable them to effectively measure and benchmark their energy performance (such as EPA Energy Star for buildings and a range of Building Energy Management Systems), the corresponding market for usable and useful data on commercial office tenant energy performance is not as robust.  So how do commercial tenants know how efficient their spaces are compared to their peers?  In many cases, they don’t, which can make it challenging to optimize energy performance and energy savings.

That’s a vexing challenge in the commercial real estate sector that we are excited to be able to help address. Thanks to an award from the new “Real Green Research Challenge” from CBRE (the world’s largest commercial real estate services firm), NRDC’s Center for Market Innovation was one of five projects selected by CBRE for the challenge, out of more than 100 submissions for projects aimed at leading-edge sustainability research and innovation in commercial real estate. 

Along with university partner New York University’s Center for Urban Science and Progress (CUSP),  NRDC is launching a comprehensive initiative to collect and analyze information on tenants’ energy usage and provide valuable feedback to commercial office tenants within CBRE’s portfolio on how their energy performance compares against that of their peers. Through that process we’ll also be recognizing the nation’s top energy performers. We’ll do that by developing a rating system for comparative tenant energy use that provides a quantitative foundation for identifying and promoting energy efficient practices.

We believe this feedback on how well tenants are performing in terms of energy use will empower them to make changes that will increase their efficiency and improve their bottom line.  We have already seen in our work with tenants that they have the potential to save significant money and energy through practical, cost effective measures. (A recent case study of ours shows that the first tenant to work with us to undertake this approach—Empire State Building tenant and global consumer goods company Li & Fung USA—is projected to reduce energy use in its office space by nearly 30% compared to a standard space, saving an estimated $1.8 million over the course of the 15-year lease and paying off the investment in 3.5 years!)

It will also benefit building owners by helping them to partner with tenants to improve the energy profile of their office spaces, thus improving the energy performance of the entire building. Spurring this deeper collaboration between building owners and tenants can help them achieve results that benefit them both.

We are excited to be partnering with both CBRE and with NYU on this project. As a global leader in real estate services, working with CBRE provides a tremendous opportunity to engage the firm’s tenants to better understand office tenant energy use patterns.  CBRE’s technical and market expertise will be invaluable in the success of this initiative.  Led by Dave Pogue, Global Director of Corporate Responsibility at CBRE, CBRE will bring deep expertise in real estate services and sustainability, access to information and a world-class platform for engaging the real estate industry on sustainability.

And NYU’s CUSP brings an extensive depth of knowledge, experience and research in the area of building energy performance, including a new comprehensive research program on building informatics.  CUSP’s strengths include analyzing, and modeling cities to optimize outcomes, prototyping new solutions, and formalizing new tools and processes - exactly what we will be focusing on through this Tenant Recognition initiative.  Led by CUSP Deputy Director, Constantine Kontokosta, CUSP will apply that expertise in this project to help make sense out of the data that we collect and the develop tools that will allow tenants to better understand their energy performance.

For our part, NRDC’s Center for Market Innovation will lead this initiative, applying our expertise and experience in real world projects with commercial tenants that deliver both economic and environmental benefit.  We will draw on the experience from other commercial real estate energy projects of ours, from pioneering strategies to optimize energy savings over the term of a tenants lease, to advising New York City’s Carbon Challenge, and collaborating with the EPA and the U.S. Department of Energy on the development of “Tenant Star” – a program to certify leased spaces in buildings as energy efficient.

 We are rolling out this multi-year Tenant Recognition initiative in a number of phases (detailed below).  But in short, we will begin by surveying CBRE tenants and analyzing the results.  We will then use these results to provide valuable feedback to the tenants so they can better understand their energy performance and how it compares against their (anonymized) peer group.  This analysis will also serve as the basis for developing a platform to recognize top performing tenants in the nation. And to see the impact that this feedback has over time, we will track the energy performance of tenants participating in the study to see whether a measurable change in performance results.

The end result? Less emissions from one of the nation’s largest, and unaddressed sources of carbon dioxide pollution. And money-saved for commercial tenants who use this information to take action.

Here’s a detailed breakdown of how our Tenant Recognition Initiative works, phase-by-phase:

  • Survey and Analysis Phase: We will start by conducting a survey of tenant spaces across multiple U.S. cities to capture tenant space and building characteristics, information about energy management practices and energy consumption, among other inputs.  CUSP will apply their deep expertise to integrate, validate, and analyze the data, identify comparable properties and develop a tenant benchmarking model.  This data will provide valuable insights that will help tenants better understand their energy performance.  It will also be the foundation to establishing a Tenant Recognition protocol that will identify and recognize top performing tenants.
  •  Tenant Feedback: Each tenant participating in the study will receive direct feedback on how their energy use compares against that of their peers, as well monthly trend data of their own energy use. Tenants will benefit from clear, concise information that gives them a better sense of how they are doing and can help them identify and implement strategies for improvement.   
  • Recognizing top performers: In addition to providing tenants with feedback on their energy performance, we will also develop a methodology to assess who are the top performing tenants across cities, type of use categories and more.  With CUSP leading the analysis, and NRDC leading on the recognition program design, we will design a tenant energy recognition prototype based on the data from the tenant survey participants.  As part of our effort to comprehend what is behind the numbers, we will interview selected tenants to better understand the practices of the best performers as well as others along the spectrum.  Through this process we will categorize tenant performance and identify top performing tenants. 
  • Track the tenant progress after feedback: We believe that tenants that have clear, concise information about their energy use are more likely to take steps to improve their performance.  To test this hypothesis, we will track the energy performance of tenants participating in the study for twelve months after they have received their energy use feedback.  Here again NYU will apply their analytic expertise to assess whether there is in fact a correlation between receiving this type of information and changing energy performance going forward.  
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Switchboard is the staff blog of the Natural Resources Defense Council, the nation’s most effective environmental group. For more about our work, including in-depth policy documents, action alerts and ways you can contribute, visit NRDC.org.

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