BOMA New York Hosts Energy Action Day 

As New York City moves forward to implement and enforce the Climate Mobilization Act, the largest climate solution of any city in the world, one of the city’s most environmentally sustainable real estate portfolios is held by Empire State Realty Trust. Its visionary Chairman and CEO Tony Malkin delivered the keynote address for BOMA New York’s Energy Action Day at the end of last month.

His rousing presentation to an audience of the city’s leading commercial real estate owners and managers was a call to action for net-zero carbon emissions. He proved his point with an economic case for energy efficient, repurposed or redeveloped buildings and a list of forward-thinking achievements that has boosted his office portfolio’s occupancy to 92%.

Malkin did not focus on strict emissions compliance deadlines and penalties. Instead, his optimistic message on Energy Action Day was: “You can do this too.”

Malkin is well known for his family’s ground-breaking $100 million, three and a half-year IPO process to transform the former Helmsley Spear-managed portfolio into a real estate investment trust. Arduous as it was, he said, the process was a journey of discovery that not only reinforced his family’s long-held belief in the value of real estate investment, but also established his business model for future decades.

Malkin said, “We spent over a billion dollars over the course of a decade to strip down our buildings: 93% of our office space has been scraped clean. You can do all the energy efficiency work you like, (but) if you tear down an existing building, you effectively tear down trees in a rainforest. The embodied carbon in concrete, steel, aluminum, copper, iron, glass, masonry will outweigh the energy efficiency work of dozens and dozens of buildings over decades.”

He said, “Repurpose them . . . that opportunity is real and it cannot be ignored. What I realized over time . . . was that ‘green’ did not necessarily make any economic sense. What actually made the most economic sense was energy efficiency. The number one expense after rent and salary for any tenant is electricity, combined with – depending upon how you use it – steam and gas.”

Malkin then cited the importance of tenant awareness of the landlord’s role and the tenant’s role in the consumption of that energy. He said, “Buildings are maligned as the producers of carbon. Buildings don’t produce carbon. Tenants produce carbon. So what we need to do is to recognize that without tenants, without occupants, we don’t cause an issue. Then the question becomes, okay, what do we do to improve the situation?”

“We needed to make the case that you could invest in an existing building, reduce energy consumption, and get an economic payback.” Working secretly with Johnson Controls in the early stages, Malkin received a guaranteed contract from Johnson Controls for a 38% reduction in energy consumption.

He said, “We greatly exceeded that, and we continue to monitor and verify our work every year, both on the existing measures we’ve been placed, (and) on the new measures we’ve been placed. It’s a matter of integration into building systems.”

Malkin cited several programs for tenant energy optimization, including “How-To” programs at Urban Land Institute. He said, “It’s free. You can also qualify for Energy Star for Tenants.”

He said, “Just follow those steps and you will be successful; your tenants will be successful. Work with your tenants; we do that regularly. We’ve been able to attract very high-quality tenants to our buildings because we have renovated them, modernized them, and amenitized them. We have made them energy efficient.”

“This creates an environment that attracts better tenants. The better tenants pay higher rent and they care about this stuff. They sign longer term leases. We’ve had nine consecutive quarters of positive absorption. We’re more than 92% leased in our portfolio of office buildings in Manhattan. You can do this too. Create the good story; do the good work.”