CRE Properties Make Energy-Efficiency Progress

The commercial real estate industry has made significant progress over the past 10 years in reducing carbon emissions and energy consumption while increasing asset value, reported the Urban Land Institute, Washington, D.C.

The Greenprint Performance Report, which tracks the performance of 8,916 commercial properties, found a 17 percent improvement over 10 years in energy use intensity, calculated by dividing a building’s annual energy consumption by its gross floor area.

The report said three trends are pushing real estate companies to integrate sustainability into their core business. They are:

–A move toward a circular economy. “To fully address the environmental impact of buildings, real estate must move toward a circular economy where waste of materials is minimized,” ULI said. “This includes incorporating a ‘reduce, reuse, recycle’ mindset for building materials.”

–Due to a lack of federal guidance, local climate legislation is setting building performance standards. More than 30 major cities from San Francisco to Atlanta have set energy benchmarking policies for buildings. “Cities are also beginning to set minimum performance standards that become more stringent over time,” ULI noted.

–Investors are also increasing their pressure on real estate firms’ environmental, social and governance initiatives by asking building owners and asset managers for details about their ESG programs. “Many investors now see ESG initiatives as material to long-term investment returns and [they] work with asset managers to balance ESG and financial returns,” the report said.

The report cited projects and best practices some CRE firms have undertaken to reduce energy consumption and carbon emissions, including “green leasing” for multifamily housing. For example, GID Investment Advisers, Boston, started incorporating a “green lease addendum” into all master lease forms. These addendums include agreements that residents of the properties will use the apartment in a manner that will conform with sustainability practices, including using water-based paints, limiting the use of products known to be harmful to the environment and allowing the property to set controls on thermostats to avoid freezing pipes and mold growth.

Also, last year, Morgan Creek Ventures, Boulder, Colo., completed Boulder Commons, one of the first multi-tenant office buildings aspiring to achieve net zero energy. The project’s estimated energy use is nearly 70 percent less than the average building in Boulder. It should register an annual energy savings of $146,000 compared to traditional office buildings in the city. Morgan Creek Ventures gives each tenant an energy budget and offsets excessive energy usage with renewable energy credits.