Real estate pros strive to explain building energy performance

Real estate pros strive to explain building energy performance

Commercial buildings are some of California's largest energy- and water-guzzlers. With 58 percent of the state locked in the highest category of drought, many commercial property owners are seeing increased utility bills, and with a new building energy benchmarking and disclosure law on the books, building owners seek energy efficiency solutions as a common-sense way to ease some of the pressure. One key trade association in California, the AIR Commercial Real Estate Association, is taking the lead by educating its members on the benefits of energy efficiency.

AIR, founded in 1960, is a regional commercial real estate brokers association with more than 1,700 members across southern California, and is one of the nation's largest organizations of its kind. It's recognized across the U.S. for its ever-expanding library of sample lease forms, which members use to stay updated on industry and lease language trends — several of which now include sustainability. When California's energy benchmarking law, AB 1103, went into effect in January, AIR responded by creating sample energy disclosure lease and sale addenda (PDF) and began educating its members on these new tools.

Brokers are in the thick of it

The law states that any time a non-residential building owner finances, sells or leases a whole building, the property owner is required to use Energy Star portfolio manager to benchmark the building and provide the Energy Star rating and supporting consumption information to the lender, buyer or tenant in the transaction. As brokers are central to every aspect of a commercial transaction, their participation is essential for the law to have its intended effect. AIR's lease and sale addenda effectively address these energy disclosure requirements in one document, providing real estate professionals, building owners, tenants and attorneys with a framework template for compliance with the regulation.

Brokers hold the key to increasing stakeholder awareness, potentially boosting compliance rates, benchmarking data quality and ultimately better building performance and energy management — and educating the community about new regulations and tools is essential to unlocking this potential.

"I really think communication is the key here. It's very important to educate and communicate with the broker community on the benefits of [energy benchmarking] and its long-term economic potential, especially since energy and water costs continue to climb," said Marika Erdely, founder and CEO of Green EconoME, an energy service company based in Malibu that helps building owners in California reduce their energy costs and offers free training on AB 1103 and California's energy code (Title 24), both of which went into effect this year.

Last year, Erdely collaborated with AIR and Elizabeth Watson — one of California's few LEED-accredited lawyers and a partner in the Real Estate Group at the Los Angeles-based law firm Greenberg Glusker — to host a series of AB 1103 education events in the Los Angeles basin that were free and open to AIR members. More than 200 brokers and other key stakeholders attended each event.

Through these sessions and conversations with California's commercial real estate community, AIR quickly discovered that most brokers were unaware of AB 1103 and why benchmarking was important, exposing a major information gap that potentially could lead to significant energy and water waste and higher utility bills if left open. "There are so many brokers doing business every day that call me and have no idea," said Erdely.

AIR's sessions focused on the long-term view for why benchmarking matters — explaining how it's a simple way to save clients money, create more value and attract and retain better tenants. And while there is still a strong need for more education, brokers have started to pay attention. "It seems in general the brokers are becoming much more aware of AB 1103, and my recommendation has been for them to get in touch with an energy consultant like GreenEconoMe to help them through the process," AIR Executive Director Tim Hayes said.

Jeff Gould, director of the Los Angeles Better Buildings Challenge agreed: "We are seeing an increasing interest from brokers, landlords and tenants alike on how to integrate energy and water efficiency into the conversation during a transaction — the natural intervention point for this conversation is during a sales, lease or financing event."

More than the letter of the law

Such conversations don't have to be limited to AB 1103 compliance. Benchmarking, in addition to highlighting areas of poor performance, also typically serves as the foundation for a complimentary suite of energy-saving initiatives such as green leasing. A 2012 report (PDF) commissioned by the California Public Utilities Commission found that benchmarking was highly correlated with building energy improvements and management actions and boosted customer participation in utility rebate and incentive programs.

The potential ripple effect is large, but benchmarking laws are only valuable if the market acts on the information created by compliance. For that to happen, all primary stakeholders, such as brokers, must be invested. This is where education and outreach efforts such as AIR's are key. Through its actions, AIR is providing the kind of leadership we need if these policies will fulfill their long-term goals of reducing energy waste in commercial buildings and maintaining a sustainable and high-performing building stock.

Top image by TAGSTOCK1 via Shutterstock. The Los Angeles Better Buildings Challenge contributed to this article.