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THE MAGAZINE OF CORPORATE REAL ESTATE STRATEGY & AREA ECONOMIC DEVELOPMENT
GREEN BUILDINGS
A Site Selection Web Exclusive, October 2012
Demonstrated Value
Quantifiable results and a how-to guide are among the early returns from a
pioneering high-performance tenant demonstration project.
GREEN BUILDINGS
Meetings held in energy-conscious workspaces such as this conference room in the Empire State Building might include reports about the significant savings such green efforts can yield.
Photos courtesy of NRDC

by WENDY FOK & GREG HALE,
Natural Resources Defense Council, Center for Market Innovation
editor bounce@siteselection.com
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n major urban areas, nearly 80 percent of energy is consumed by buildings. Tenant spaces account for over half of a commercial office building's total energy use, and building owners are starting to pay attention, particularly in light of energy benchmarking and disclosure regulations being adopted in cities across the country: New York City; Washington, D.C.; Philadelphia and San Francisco have adopted benchmarking and public disclosure regulations. Austin and Seattle require benchmarking and disclosure at time of property sales transaction.

Yet the efficiency opportunity in tenant spaces remains largely untapped, in part due to missing economic and performance data, and also a lack of understanding of the high-performance design, development and value analysis process.

The Natural Resources Defense Council's Center for Market Innovation (CMI) is developing a new green tenant build-out roadmap by undertaking a tenant demonstration project. This nationwide, first-of-its-kind effort aims to drive the market toward optimizing commercial building performance by accelerating tenant demand for cost-effective, high performance build-outs, which in turn will reduce carbon emissions and create new jobs.

CMI's project partners include Goldman Sachs and the Rockefeller Foundation (grant funding), and guidance from Johnson Controls, Jones Lang LaSalle, Malkin Holdings, SKANSKA, and ULI/Greenprint. In September 2011, NRDC's CMI team launched its High Performance Tenant Demonstration Project at the Clinton Global Initiative Annual Meeting in New York City.

How a tenant selects, designs, builds, and occupies space has the potential to make a big dent in energy and operating costs. Timing the efficiency work is critical to improving the cost effectiveness of energy solutions within tenant spaces. A tenant's relocation into a new space likely means that improvement work to the space will already be taking place. Incorporating the installation of energy performance measures into the tenant's existing build-out plan minimizes the incremental cost (and disruption) to the tenant.

The projections from CMI's first set of tenant projects show that an optimized package of energy performance measures can provide 30-50 percent energy use savings, compared to a standard code compliant space, with a payback period of three to five years.

In its tenant demonstration project, CMI is working in real time, on the ground with tenants who are building out new workspaces or retrofitting their spaces upon lease renewal. Utilizing the project's grant funding, CMI's team of experts assists the tenant's project team in completing a thorough evaluation and financial analysis of opportunities to integrate energy efficiency into their existing design. The project portfolio currently comprises a number of high profile, high impact tenants including Bloomberg LP at 120 Park Avenue; a number of major tenants at the Empire State Building; and Reed Smith in Philadelphia. CMI will be adding a few other select tenant build-out projects to the portfolio this year.

The CMI team engages with tenants during the early stages of the design process of a new build-out to evaluate potential efficiency measures, and present projected performance data in alignment with the tenant's decision-making process and schedule. In doing so, CMI is helping to deliver highly efficient and comfortable workspaces, and then documenting actual space performance results across a portfolio of projects, to serve as a model for the broader real estate market to follow. The case studies, resource guide, and analysis tools in development will be open source and widely promoted through industry and policy based channels to reach the real estate, building design, and energy service market, thus serving to scale the process.

In a recent global study by Johnson Controls Institute for Building Efficiency, 25 percent of 3,500 facility, real estate and energy management executives participating in the survey were willing to pay a premium for space in a certified green building, and 24 percent planned to build out tenant space to high performance standards. CMI's tenant demonstration project addresses the energy efficiency market opportunity by putting the right information together in front of the right people at the right time during the tenant engagement and decision-making process.

Could We See the Menu Please?

The quantitative process that CMI puts in motion combines design evaluation, energy modeling, and costing analytics to present an optimal energy performance package. The projected energy use and incremental costs form the basis of a value analysis, which includes a financial scorecard and recommendation narrative describing the evaluation process and technical factors relating to the energy performance recommendations. The value analysis is synchronized to the tenant's design and decision-making process, and equips the tenant's existing facilities/design team with the right information to determine tiers of good, better, and best packages of energy performance measures to incorporate into the design of the space.

The CMI team also works with each participating tenant to develop and execute a protocol to measure and verify the actual energy performance of the new space for 12-15 months after occupancy. It's nearly impossible to manage energy use without knowing exactly how much, where and when energy is being used. Sub-metering and energy management systems help tenants watch out for energy waste after moving in, keep equipment running more effectively through informed maintenance, and keep both energy and operations costs down.

Though one size does not fit all in tenant spaces, a common menu of measures can be a starting point to evaluate lighting, HVAC, and plug load energy reduction opportunities. The projections from CMI's first set of tenant projects show that an optimized package of energy performance measures can provide 30-50 percent energy use savings, compared to a standard code compliant space, with a payback period of three to five years.

The following set of measures has been identified through the project as those that have strong potential across a wide range of tenant types.


Tenant Energy Performance 'Menu of Measures'
Strategies Provided by Building Owner
Sub-metering by space/ floor/ net lease
Building envelope (windows, window film, radiative barrier)
Strategies with No or Low Additional Incremental First Cost
Select building with natural daylight access
Design open office layout
Paint walls white or light colors to reflect light
Seal perimeter walls/ openings
Occupancy-based lighting sensors (required by code)
High Payback Measures
High Efficiency Lighting- 1) Design for task appropriate illuminance, 2) Utilize high efficiency light luminares and lamps. Design for lower lighting power density (W/sf) than ASHRAE 90.1 baseline. Target 0.7 W/SF or below.
HVAC Optimization- 1) Right sized high efficiency units, 2) Use variable air volume (VAV) units, 3) Low velocity/ pressure drop air handling units to reduce fan power, 4) Eliminate noise traps.
Plug Load Management - Controlled plug outlets powered off/ on by wall switch or occupancy sensor power strips, computer management software
IT/ Server room Load Management- Combination of Energy Star servers, right sizing server equipment, virtualization and data distribution technologies such as a passive optical network (PON). The reduction in electrical use would result in savings from the equipment power load and as well as reduced computer room supplemental air conditioning and cooling load.
Medium Payback Measures
Daylight Harvesting Lighting Controls - Utilize luminaries with built in photosensors and controls to dim the luminaire when ambient daylighting lights the space.
Demand Control Ventilation - Add CO2 sensors and logic to control outdoor air damper.
Ongoing Management
Sub-metering – Ensure energy use is well managed throughout occupancy term. Separate end use sub-metering for lighting, plug, IT room, and HVAC loads, and a tenant energy management platform will help keep the energy savings in line and provide feedback for ongoing commissioning and maintenance of the systems
Energy Modeling- Use energy predictive analysis during design, incentive filing, and ongoing measurement and verification

Hard to Ignore

CMI is working on a case study for each project documenting the value analysis process, the tenant's selection of performance measures, and the economic return on the tenant's investment in the measures. Project case studies will also note the value placed by tenants on various other advantages to high performance build-outs, including furthering corporate social responsibility goals, and increasing employee attraction, retention and productivity.

The project aims to promote the compounding effect of owner/tenant collaboration, as tenants who value high performance spaces choose to locate or remain in buildings with highly efficient central systems and transparent energy management practices. As a result, building owners investing in central system energy efficiency improvements will not only garner operating savings, but will also gain competitive advantage in attracting and retaining high value tenants. By broadly publicizing this portfolio of case studies, together with a companion how-to guide with step-by-step instructions to streamline and replicate the process, CMI's goal is to make high performance tenant build-outs standard practice for the commercial real estate industry.

Click here to access the how-to guide for The High Performance Tenant Space Optimization Process.

Energy performance is important to both sides of the real estate equation. Tenants and building owners have the opportunity to reduce costs, create more comfortable interior spaces, and gain a competitive advantage whether seeking and retaining talent or high quality tenants, or through promotion and recognition. By working together, tenants and building owners have the opportunity to maximize the financial benefits and recognition of a high performance building and tenant space.

On May 31, 2012, one year after an innovative building retrofit project, the Empire State Building announced it was ahead of plan and had exceeded its year one energy-efficiency guarantee by five percent, saving $2.4 million.

"Greater energy efficiency means higher profits, greater competitiveness, and a better result for the bottom line for everyone involved," emphasizes Anthony Malkin, owner of the Empire State Building. If all commercial office real estate owners and tenants in the U.S. reduced energy consumption by 30 percent, that would translate to over $6 billion in energy cost savings a year, based on commercial office energy expenditures noted in the "United States Energy Efficiency Retrofit Report" published by DB Climate Change Advisors in March 2012. That kind of impact is hard to ignore, isn't it?

Find out more about the High Performance Tenant Demonstration Project at: http://www.nrdc.org/greenbusiness/cmi/high-performance-buildings.asp.

Wendy Fok is project director for NRDC Center for Market Innovation (CMI)'s High Performance Demonstration Project. Greg Hale is the director of efficiency finance at CMI and focused on developing a large-scale private sector energy efficiency financing market. The core mission of NRDC's Center for Market Innovation is to expand the impact of the Natural Resources Defense Council by creating market conditions that will redirect capital flows toward sustainable uses. CMI's team of experts engage directly with the business community to articulate and implement profitable and sustainable value propositions, with a current focus on energy efficiency, water management, and regenerative agriculture.

If all commercial office real estate owners and tenants in the U.S. reduced energy consumption by 30 percent, that would translate to over $6 billion in energy cost savings a year.


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