The Building Advisor

San Francisco’s mayor, Gavin Newsom, signed legislation on Monday that will enable property taxes to serve as a vehicle for financing energy efficiency upgrades of buildings and homes.

The Property Assessed Clean Energy (PACE) program, which will make $150 million in bonds available, is apparently not the first of its kind, but it will be the nation’s largest.  Launched in November of 2008 in Berkeley, CA, there are currently 17 states that have authorized PACE programs.

The idea is that since up-front costs often represent the most significant barrier to the implementation of more energy efficiency solutions, by spreading the cost out over time, such cost-saving and more sustainable solutions will become more widespread.  Essentially the city or district makes a loan for the project and then is paid back on the loan through the property tax bill.  Another feature of PACE programs is that the loans are attached the the property and not the owner.

It’s another example of the type of innovative financing programs that are springing up all across the country to help spur more improvements in energy efficiency and hopefully will lead to an increase in green jobs.

Coming soon to a city near you…the latest in processes, requirements, and methods to impact the amount of energy consumed by buildings is an ordinance for energy benchmarking.  Seattle’s mayor today announced this new ordinance which requires large commercial and multi-family property owners in Seattle to annually measure, or benchmark, energy use and provide the City with ratings to allow comparison across different buildings. Building owners will also be required to share energy usage and ratings with prospective buyers, tenants and lenders during the sale, lease or financing of properties.

More efficient, green buildings cost less to operate, attract more tenants, command higher rent, and sell for more.  For these reasons, it is important that people and businesses have access to information about the building’s energy efficiency so that they can make smart decisions on here to work, live, and play.  Christian Guntner with Kennedy Associates, a Seattle-based institutional real estate investment advisor, points out that building owners who aren’t benchmarking, monitoring, and improving energy consumption are going to be less competitive.

In the best news possible, Energy Star is out in the real world talking about the launch of its new program for rating Data Centers inside of Portfolio Manager coming this June (2010).  The only thing better could be if they announced the addition of manufacturing space types also.

They have been working heavily in the Data Center sector of commercial buildings over the last few years and have some good programs for people to utilize.  This announcement allows for Portfolio Manager to finally rate Data Centers as full buildings and not just as secondary space type with ridiculous square footage restrictions.  The rating will rely on the PUE (Power Utilization Efficiency) of a Data Center, which is the ratio of the total power supplied versus the amount delivered to the IT equipment.  As you will read, there are some strong thoughts about the PUE but in all of Energy Star’s efforts they will follow up with the right tweaks as needed.

http://www.pcworld.com/article/188658/energy_star_for_data_centers_coming_in_june.html

This morning I was reviewing some articles in our local (Portland, Or) Business Journal.  One article in particular caught my eye as it begins to tell a story we’ve been predicting to our partners nationally.  Commercial building owners and investors are under extreme pressure and we’re just seeing the early stages of it.  Here are some excerpts:

“It takes a perfect storm to trigger the wave of foreclosures, receiverships and bankruptcies that washed across some of Portland’s most prominent offices in recent months.”

“Vacancy rates rose, income fell, financing disappeared and shifting capitalization rates drove down building values.”

“Every building reflects its own unique circumstances, but collectively, the wave of building-related news tells a chilling story of struggling business models, loan payments missed and owners wrestling with real estate that’s no longer worth what they paid, or owe.”

I have to believe that if we surveyed each and every Business Journal across the country, we would see similar articles detailing the pain being felt in commercial real estate markets.  There is nothing unique about what we are experiencing here in Portland.  Indeed as I travel across the country visiting with commercial ownership and management it is apparent that we are just experiencing the tip of the iceberg.
These people are scared.  Many of them came into the industry at the beginning of the boom and have never experienced anything like what we are going through now.  Steady demand for office space drove up rental rates which, in turn, drove up asset values.  Hardly the formula we’re seeing in to today’s market.  Instead, vacancy rates are hitting 20% in a lot of markets, asset values are plummeting as much as 40-50% and owners and managers are trying to get a handle on their operating costs, something many of them have never had to do before.

They understand that the only avenue they have for preserving their assets is a focus on operating cost cutting.  Constituting approximately 40% of the variable operating cost of a building, energy is the place they need to focus.  And with HVAC and lighting making up 70% of those operating costs, owners and managers can cut a lot of cost out of their model.  Interestingly enough, according to BOMA, owners could cut their utility costs by 10-30% without any capital investment.  By just working with their local HVAC Mechanical company, they could modify their current service agreement to include these incredible cost cutting services.  This overlooked service base could literally generate monthly cash savings for owners if owners would just ask for help ( or maybe contractors should point this out to their customers).

It’s not about windmills, cogeneration, or new fuel cell technology.  There’s gold in those buildings and the HVAC industry is poised to help owners mine some of it and help owners get back on solid financial footing.

Which comes first – energy savings or tenant comfort? This is a question we often hear when discussing control strategies. While energy savings and tenant comfort are both important considerations, the good news is that they often are not mutually exclusive. There are many control strategies capable of improving tenant comfort while achieving significatn energy savings. Moreover, the following strategies are relatively easy to understand and can be implemented with almost any type of HVAC system:

1. Close OA during night cycle and morning warm up
2. Turn fans off at night (unless heating called for)
3. Hot/Chilled water temp. reset with respect to OA temp.
4. Lock out exhaust fans locked at night
5. Reset SA temperature with respect to zone needing most heating/ cooling
6. Time clock control of equipment (e.g. boiler, pneumatic air, fans, etc.)
7. Economizer cycle
8. Optimum start/stop
9. Demand Limiting
10. Duty Cycle

Cap and Trade is coming in 2010 regardless of whether Congress passes the legislation, as the EPA is set to enact its Regulations under the Clean Air Act.  The question is do you know what the targets are? & How poised you are to help alleviate a building owner’s concern for rising electricity and fuel costs?

Based on emissions in 2005 here is a composite look at the overall reduction levels proposed by Congress.  The EPA regulation is likely to be a little more aggressive up front because this will reduce the lifetime costs associated with the energy reductions needed to combat climate change.

• by 2012, cut by 3 percent
• by 2020, cut by 17 percent (House) or 20 percent (Senate)
• by 2030, cut by 42 percent
• by 2050, cut by 83 percent.

For more info on Cap & Trade and how it actually works, go here: http://www.facilitiesnet.com/green/article/How-Cap-and-Trade-Regulations-Work-and-Who-May-Be-Affected–11359

Corporate real estate (CRE) executives are more willing to invest in the sustainability of the space they own, despite economic pressures, according to a CoreNet Global and Jones Lang LaSalle 2009 survey.

The key finding is that real estate executives still consider sustainability to be a critical business issue, especially when it comes to retrofits of the real estate they own.  But, it also shows that they are focused on cost savings in the short term.  Read the report and think about how you are helping to lower costs in the short term.  If you’re not reducing energy costs for your clients, that would be the best place to start.

Here’s an example of yet another type of organization that is working to improve the energy efficiency of an existing building stock.  The Downtown Development Authority of Ann Arbor, MI, is in the 2nd year of its Downtown Energy Saving Grant Program. In this program, participating companies receive a free energy audit from a city-approved contractor, worth anywhere from $2,000 to $5,000.  The auditor will identify list of improvements that would boost energy efficiency, and after consultation with the DDA, landlords then pick which energy efficiency improvements to make.  After the improvements are made, the DDA rebates half of the landlord’s cost, up to $20,000.

Do you know about other programs like this?  We’d like to hear about them.  And whoever you are in the food chain, whether a contractor who does energy audits or a building owner or manager, you can push for programs like this in your area.

Good discussion on a blog post at My FacilitiesNet about the maintenance profession being cool now.  The premise is that with the bigger-than-ever emphasis on energy efficiency in the buildings industry, partly due to the provisions in the economic stimulus, job opportunities are being created which will pull people to the maintenance, engineering and operations professions.    And also, knowing that you’ll be directly contributing to energy efficiency makes the job cooler.

What do you think?

AirAdvice has recently released an update to its BuildingAdvice technology for providing energy services in commercial buildings.  On the surface, it may not sound like a major update - it is a new report, called an Energy Savings Assessment, that can be run using the system.  What makes this a giant step forward is how the new report now enables a cost-cutting, highly valuable service to be provided as part of a service agreement or service relationship.

In the tumultuous economic environment of the commercial real estate industry, cost savings are king.  Rent cannot be raised.  Occupancy cannot be increased.  And credit, which is so crucial to the industry, is extremely tight.  Cash must be conserved.  And one of the largest cash outflows month-to-month is the utility bill.  Mechanical service contractors can lower this cash outflow by making changes that result in lower energy consumption.   And this can be done as part of ongoing, regular maintenance agreements.

But don’t call them regular maintenance agreements.  These are Energy Service Agreements.  And the whole point is to go beyond what’s normally provided in a maintenance agreement and focus on ways to reduce the amount of wasted energy in the building.  This is the basis for the program that AirAdvice released recently and why the new Energy Savings Assessment report was created.  It fits into a process for providing energy services to buildings, including benchmarking and energy assessments.

Read the press release about the new product and program.