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Keeping Your Energy Grade Up, Part Two: Coordination, Compliance & Capital Planning

The second part of the BOMA New York webinar series all about energy grades for commercial buildings focused on coordination, compliance, and capital planning. The virtual event was moderated by Charlie Cichetti of Sustainable Investment Group, with a panel of thought leaders that included Chris Cayten of Code Green; Charlie Marino of AKF Engineers; Nick Mather of RXR Realty and Jennifer Yashar of the law firm Fried Frank.

As Part One of the Energy Grade Series identified, the pandemic nor today’s low commercial occupancy rates will delay the implementation of New York City’s ambitious goals for climate improvement. To be clear, the timeline associated with Local Law 97 (LL 97) – which mandates a reduction of 80% in greenhouse gas emissions by 2050 for all buildings 25,000 square feet or larger – will not be modified. How will approximately 50,000 residential and commercial properties throughout New York City prepare?

The panelists advised that now is the time to plan, and begin to implement, energy efficient strategies that will require an unprecedented amount of cooperation and mutual investment between building owners and tenants.

Subject areas discussed in the fact-packed webinar included tenant space submetering; the “restaurant style” Energy Star letter grades now posted in office building lobbies under Local Law 95; the tenant’s role in energy efficiency; the separate protocols mandated by the federal Department of Energy’s Energy Star programs for building owners and tenants; legal and economic “pro tips;” capital planning for energy upgrade projects; and glimpses into the future, including the panelists’ personal work-from-home efforts to improve sustainability and wellness.

Chris Cayten began the presentation with a review of Local Law 88 (LL 88). Passed by the City of New York in 2009, the law requires compliance in all buildings 25,000 SF and larger by 2025. It requires universal interior lighting upgrades in non-residential spaces and sub-metering for all non-residential spaces 5,000 SF and larger within buildings. In addition, it requires that non-residential tenants be provided with detailed statements of their energy usage on a monthly basis.

Or, as Cayten simply stated, “Put LEDs everywhere!” The upside, according to Cayten, is that lighting upgrades, including the use of modern controls such as daylight sensors, offer complete paybacks after one year. He said, “This will make a huge dent in your energy bill.”

Unfortunately, old wiring and unused hardware that is often left in place when upgrades are installed can complicate the installation of submeters, making it “a heavy lift.” However, Chris introduced one of the webinar’s dominant themes – “now is the time to act, with far fewer tenants in buildings.”

The discussion then moved on to Local Law 95 (LL 95), the “letter grade law” in effect since October 2020. The panelists agreed that the Energy Star benchmarks that determines the letter grade can be daunting. To achieve an “A” grade, a building must be in the top 15% of energy efficient structures. Their straightforward advice: “Keep saving energy.” Charlie Marino said, “If people see a ‘B’ grade in your building, that isn’t so bad, but if it’s a ‘D’ or ‘F,’ that is bad for perception.” He added, “Even a LEED Gold building could be in the ‘B’ bucket.” Mather added, “Post your progress of your improved energy use.”

Asked how the greenhouse gas emissions laws were affecting lease negotiations, Yashar said that LL97, which also requires a 40% reduction in emissions by 2030, was a topic of discussion, but submetering for tenant spaces would become a prominent issue. There is still uncertainty whether the costs of installing submetering will be a tenant or landlord expense, or whether cost-sharing agreements could be reached.

With optimism, Ms. Yashar said, “Tenants that want to be in a compliant building, are willing to do their part.” Marino reinforced that opinion. He said, “Tenants of office buildings generate 40% to 60% of carbon emissions. Most improvements within the tenant’s space will require the tenant’s voluntary involvement.” All agreed and advised that “tenant buy-in” will have the most impact toward reducing greenhouse gas emissions.

Marino cited the Energy Star Tenant Space™ program, which analyzes individual tenant and floor performance and offers insights into efficiencies for lighting and plug loads. He advised building owners to reach out first to their “green champion” tenants, followed by their anchor tenants who use the most energy.

Cayten advised looking at new tenants who are moving into office buildings now. Owners should notify tenants that it will be the tenant’s responsibility to abide by Energy Star Tenant Space guidelines. Citing a “new reality” for tenants. He said, “You will be responsible for your energy use.”

Reiterating that lease negotiations are now focused on the 2030 40% emissions reduction deadline, Yashar commented that “fair share” considerations will come into play. She cited an example of a tenant operating a trading floor, versus “small users” in the same building. She said, “Even the newest and best buildings today don’t comply with LL97.”

Case studies cited by the panel included increased usage of window films, an “old school” technology that is being revived by building owners. Cayten said, “Window films are driving success to improve the thermal performance of glass and are driving savings.”

“Deep retrofits,” such as conversions from steam to electric heating and efficient pumping systems will produce “giant savings,” according to the panel.

The panel’s discussion of the Internet of Things (IoT) led to a candid consensus that building managers were wrestling with the problem of how to use the huge amounts of data produced by “smart, connected” components of a building’s infrastructure. Nonetheless, Yashar said that indoor air quality specifications, measured and monitored in real time by IoT, were already being written into lease documents. The inference is that landlords could be held responsible if air quality standards are not being maintained.

In conclusion, panelists shared their personal “work from home” tips for energy conservation, as it relates to improved sustainability and wellness. Yashar said, “Turn off lights when you don’t need them.” Mather said he has purchased several new air purifiers and humidifiers for his home and has upgraded his air conditioning filtration. Cayten said he just purchased a countertop composting machine and installed plug load sensors. Cichetti said, simply, “Drink more water and stay hydrated!”

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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