Commercial Real Estate: Landlords Up Their Game
Development and Innovation Energy consumption measurement, monitoring, and tracking activities within the commercial real estate sector have traditionally focused on cost reduction and payback periods.
Industry reports from the mid-1980’s talk about energy reduction programs; however, about 10 years ago, something started changing.
As Al Gore released An Inconvenient Truth, a deeper interest in energy and greenhouse gas emissions reduction gained momentum in the sector with a tailwind of green building labelling programs, hiring dedicated in-house energy experts, and outsourced energy management to engineering firms. Today, the term “energy management” has expanded to not only be a hallmark of professional asset management, but also a component of landlord branding, tenant engagement programs, and corporate social responsibility reporting. The energy managers of yesterday are the chief sustainability officers today.
The value of benchmarking
To support the growing interest in building energy performance, voluntary initiatives have been developed in Canada with input from the real estate industry, technical experts, and supporting organizations. Examples of tools and programs include REALpac’s Energy Benchmarking Program, Natural Resources Canada’s Portfolio Manager, Toronto Civic Action’s former Race to Reduce program, and multiple projects involving schools, town halls, hospitals and multi-residential buildings.
Consistent tracking and evaluation of building data is central to any reduction initiative. The continuous collection, analysis and benchmarking of energy use data amongst peers provides both the stimulus for action and revised relative performance data, providing a feedback loop for operational improvement.
"Today, the term “energy management” has expanded to not only be a hallmark of professional asset management, but also a component of landlord branding, tenant engagement programs, and corporate social responsibility reporting."
This type of analysis is also invaluable as an indicator of areas and processes needing attention that are not generating expected results. Compensation can be re-aligned to performance making benchmarking an organizational change of attitude, and culture.
Quantifying energy consumption attributable to tenant and occupant activity has spurred new and unprecedented collaborative initiatives in which landlords and occupants work together to reach their energy and performance goals.
With tenant plug load often at 30 percent of total building electricity consumption, it is a slice of the consumption pie that cannot be ignored. Not to be left behind, water use and waste production and diversion issues have come to the forefront of the collaborative conversation.
Setting higher standards
Internationally, leading Canadian commercial real estate companies have leapt to the front of the sustainability pack by embracing benchmarking, portfolio target setting, and friendly competition. However, there are still obstacles to overcome.
The challenges such as standardizing utility consumption data inputs and outputs, addressing privacy concerns and building market awareness, have been discussed recently in Ontario amongst key industry players like the Independent Electricity System Operator (IESO) and the Advanced Energy Centre at Toronto’s MaRS Discovery District.
In the energy use management space, we have seen a transformation occur in multiple U.S. cities with the introduction of municipal ordinances, requiring owners to report building energy use to the city, which may then be disclosed publically on city websites or in connection with commercial transactions related to the building.
The City of Toronto and Province of Ontario are currently in consultations to evaluate the feasibility of developing such programs and will be drafting policy documents in 2015. Vancouver is also interested in such an initiative, and other Canadian cities are likely to follow their lead.
The continued acceptance of benchmarking performance over time, whether it focuses on energy, water, waste, or carbon emissions, is a testament to the heightened knowledge and level of sophistication organizations are bringing to the management of their real estate assets. While Canadian office landlords are in many ways leading the way, there is more we can do together.