Bush Energy Bill Taps GSA to Green the Building Industry
Federal influence on sustainable real estate practices in the private sector is poised to increase considerably as government officials begin implementing measures from the Energy Independence and Security Act (EISA) of 2007, signed into law by President Bush in December.
Federal influence on sustainable real estate practices in the private sector is poised to increase considerably as government officials begin implementing measures from the Energy Independence and Security Act (EISA) of 2007, signed into law by President Bush in December.
The bill, which also set new national fuel economy standards for automakers, paints a clearer picture going forward on federal interest in "greening" the U.S. building stock.
For instance, it allocates more than $1 billion of federal funds over the next decade to catalyze the private sector around improving energy efficiency in buildings, and establishes the Zero Net Energy Commercial Buildings Initiative, which sets a national goal of carbon neutrality in all commercial buildings by 2050.
But policymakers are bringing many of EISA's most influential green building measures to market in the form of mandates on federal buildings and government occupied space. The measures include reduction targets on fossil fuel-generated energy consumption in new federal buildings and a mandate across all federal agencies to occupy space only in Energy Star-designated buildings, beginning in 2010.
The implications for commercial real estate are considerable to say the least. The General Services Administration (GSA), the real estate arm of the federal government and the nation's largest commercial real estate agency, owns or leases more than 350 million square feet of U.S. office space. And that figure accounts for only about 40 percent of the total amount of office space, and just 10 percent of all U.S. commercial space, occupied by the federal government.
The mandate to lease space only in buildings that have earned Energy Star -- the government-sanctioned badge for energy efficiency -- could affect more than 100 million square feet in the private sector in the relative near-term, according to Kevin Kampschroer, the acting director of GSA's new Office of Federal High-Performance Green Buildings, which was created this month under an EISA directive to oversee the new policies on federal space.
When agencies lease space in a non-Energy Star building, which is allowed under certain circumstances such as a renewal or a very small lease, EISA still requires the landlord to agree to make energy efficiency upgrades to that space that would be "cost effective over the life of the lease," the bill says.
By regulating federal agencies in ways that place an obligation on landlords, the government is essentially mandating the private sector without a private sector mandate. As Kampschroer describes the Energy Star lease provision, "It's a mandate from the government to make a good business decision."
The strategy has worked before. As early as 2001, the GSA required third-party developers to meet the U.S. Green Building Council's LEED certification standards, a policy which continues today. "More than half of the buildings in our inventory that have some kind of LEED certification are privately owned. So we do see the market responding and not at a noticeable cost premium," Kampschroer said.
According to Mark Bennett, a senior attorney who heads a specialty group at law firm Miller Canfield focused on green building and climate change issues, the government is smart to drive the market from the demand side instead of regulating supply. "The best thing the federal government can do is do what it's doing -- use its purchasing power in the market," he said.
Bennett also says many of the measures, particularly the Energy Star leasing requirement, should serve as a "wake-up call" to the real estate industry. "Landlords in the federal [leasing] market need to understand this is coming. If they have leases rolling over in 2010 or negotiations [with the federal government] starting before then, they need to be prepared to respond and commit to what's going to be involved in converting their buildings within the timeframe."
But if landlords aren't prepared to meet the Energy Star requirement, it could actually drive up occupancy costs for the government, says Kurt Stout, a senior vice president in Grubb & Ellis' Government Services group in Washington, DC.
"The dilemma is going to be that, to the degree that the private sector is slow in responding, the government will find that there is less viable competition for government requirements, which will directly or indirectly lead to higher rents for the GSA," Stout said. "Landlords will recognize that there are limited options and may not offer rent terms that are aggressive as they would otherwise."
If that does happen, Stout says energy cost savings could potentially offset cost increases.
But Kampschroer says that by delaying the mandate's effective date until 2010, building owners should have time to benchmark their properties and achieve Energy Star. "One of the reasons that legislators put in the two-and-a-half-year timeframe was to allow competition to foster. There's no reason a landlord that starts now can't have an Energy Star label by 2010 if they put their mind to it," he said.
The GSA is also reaching out to industry trade groups like the Building Owners and Managers Association (BOMA) and the International Facility Management Association (IFMA) to involve the private real estate community before the mandate takes effect. "We're using the already-existing educational programs that [BOMA and IFMA] have so we don't reinvent something that's already been done. If we work together we can reduce the risk and reduce the cost to the government and the taxpayer," Kampschroer says.
If the outreach programs and the federal leasing mandate are successful at spurring the market, Kampschroer believes there's ample room for the private sector to continue the momentum. "I would imagine that as government [owned] facilities, and as government facilities that people lease, get benchmarked in a public way, private landlords would be interested in figuring out how to do that as well because it would give them a competitive edge," he said. "Either a competitive edge in attracting tenants or a competitive edge in the sense of just being more effective at running their buildings and making more money."
Andrew Burr is news editor at CoStar Group Inc. This article originally appeared as part of a series examining federal green building policy.
The bill, which also set new national fuel economy standards for automakers, paints a clearer picture going forward on federal interest in "greening" the U.S. building stock.
For instance, it allocates more than $1 billion of federal funds over the next decade to catalyze the private sector around improving energy efficiency in buildings, and establishes the Zero Net Energy Commercial Buildings Initiative, which sets a national goal of carbon neutrality in all commercial buildings by 2050.
But policymakers are bringing many of EISA's most influential green building measures to market in the form of mandates on federal buildings and government occupied space. The measures include reduction targets on fossil fuel-generated energy consumption in new federal buildings and a mandate across all federal agencies to occupy space only in Energy Star-designated buildings, beginning in 2010.
The implications for commercial real estate are considerable to say the least. The General Services Administration (GSA), the real estate arm of the federal government and the nation's largest commercial real estate agency, owns or leases more than 350 million square feet of U.S. office space. And that figure accounts for only about 40 percent of the total amount of office space, and just 10 percent of all U.S. commercial space, occupied by the federal government.
The mandate to lease space only in buildings that have earned Energy Star -- the government-sanctioned badge for energy efficiency -- could affect more than 100 million square feet in the private sector in the relative near-term, according to Kevin Kampschroer, the acting director of GSA's new Office of Federal High-Performance Green Buildings, which was created this month under an EISA directive to oversee the new policies on federal space.
When agencies lease space in a non-Energy Star building, which is allowed under certain circumstances such as a renewal or a very small lease, EISA still requires the landlord to agree to make energy efficiency upgrades to that space that would be "cost effective over the life of the lease," the bill says.
By regulating federal agencies in ways that place an obligation on landlords, the government is essentially mandating the private sector without a private sector mandate. As Kampschroer describes the Energy Star lease provision, "It's a mandate from the government to make a good business decision."
The strategy has worked before. As early as 2001, the GSA required third-party developers to meet the U.S. Green Building Council's LEED certification standards, a policy which continues today. "More than half of the buildings in our inventory that have some kind of LEED certification are privately owned. So we do see the market responding and not at a noticeable cost premium," Kampschroer said.
According to Mark Bennett, a senior attorney who heads a specialty group at law firm Miller Canfield focused on green building and climate change issues, the government is smart to drive the market from the demand side instead of regulating supply. "The best thing the federal government can do is do what it's doing -- use its purchasing power in the market," he said.
Bennett also says many of the measures, particularly the Energy Star leasing requirement, should serve as a "wake-up call" to the real estate industry. "Landlords in the federal [leasing] market need to understand this is coming. If they have leases rolling over in 2010 or negotiations [with the federal government] starting before then, they need to be prepared to respond and commit to what's going to be involved in converting their buildings within the timeframe."
But if landlords aren't prepared to meet the Energy Star requirement, it could actually drive up occupancy costs for the government, says Kurt Stout, a senior vice president in Grubb & Ellis' Government Services group in Washington, DC.
"The dilemma is going to be that, to the degree that the private sector is slow in responding, the government will find that there is less viable competition for government requirements, which will directly or indirectly lead to higher rents for the GSA," Stout said. "Landlords will recognize that there are limited options and may not offer rent terms that are aggressive as they would otherwise."
If that does happen, Stout says energy cost savings could potentially offset cost increases.
But Kampschroer says that by delaying the mandate's effective date until 2010, building owners should have time to benchmark their properties and achieve Energy Star. "One of the reasons that legislators put in the two-and-a-half-year timeframe was to allow competition to foster. There's no reason a landlord that starts now can't have an Energy Star label by 2010 if they put their mind to it," he said.
The GSA is also reaching out to industry trade groups like the Building Owners and Managers Association (BOMA) and the International Facility Management Association (IFMA) to involve the private real estate community before the mandate takes effect. "We're using the already-existing educational programs that [BOMA and IFMA] have so we don't reinvent something that's already been done. If we work together we can reduce the risk and reduce the cost to the government and the taxpayer," Kampschroer says.
If the outreach programs and the federal leasing mandate are successful at spurring the market, Kampschroer believes there's ample room for the private sector to continue the momentum. "I would imagine that as government [owned] facilities, and as government facilities that people lease, get benchmarked in a public way, private landlords would be interested in figuring out how to do that as well because it would give them a competitive edge," he said. "Either a competitive edge in attracting tenants or a competitive edge in the sense of just being more effective at running their buildings and making more money."
Andrew Burr is news editor at CoStar Group Inc. This article originally appeared as part of a series examining federal green building policy.
