Posts Tagged ‘sustainable’
|Split Incentives Key to Energy Efficiency
Thursday, November 10th, 2011
By Mike Tobin, Director of Sustainability
Every tenant wants to pay less in operating expenses, and every landlord is challenged with how to maintain or improve their property to provide competitive operating costs. When it comes to capital investments in building systems, the conversation between the two can become frosty as neither one wants to be burdened with the expense.
In order to improve the energy efficiency of our national and international building stock, it is imperative that we identify a framework for addressing split incentives in both a working and legal relationship. To that end, CresaPartners participated in a workshop hosted by BOMA and the Rocky Mountain Institute to attempt to build just such a framework. BOMA and several of the other participants approached the issue from a landlord’s or owner’s perspective, and CresaPartners brought the tenant’s perspective to balance the table during the discussions. The result of this workshop will be a guidebook that outlines the issues and creates a road map for possible win-win solutions. The goal is to release this to the market by the end of the year.
I’ll outline a few of the key items that were addressed to hopefully spur some further discussion. One discussion point is whether or not the lease or another side agreement should be used to outline split incentive agreements. One on side, the lease is the central legal document to the relationship between landlord and tenant. It is the place to outline any split incentives such as allowing the landlord to pass through to the tenant the cost to upgrade the HVAC system. On the other side, the landlord in a multi-tenant building will have many different leases or forms, and it will be very time consuming and expensive to amend each lease for the split incentive. As a result, a side agreement may conceivably be more efficient to simply focus on the split incentive while not opening up the lease.
Another issue arises out of the multi-tenant buildings—how does a landlord move forward with an energy efficiency project if not all of the tenants agree to the split incentive agreement? A simple answer is that the landlord would just have to decide whether or not it was in their best interest to maintain that asset and thus make the capital investment themselves. But the landlord can also do more to try to be a better salesman. In a lot of instances, the tenants feel as if the landlord is trying to pull something over on them. By engaging the tenants earlier in an open dialogue and providing transparency into the capital planning, energy costs, etc., then the landlord may be able to do a better job of selling the building improvements.
This discussion of improved salesmanship brings up the area of financing the improvement. A new area of financing has arisen for landlords that will provide the upfront capital in return for the cost difference due to improvement in operating efficiency. If the new system is really efficient, then the financing entity gets a nice return. If the system is inefficient, then the financing entity may lose money. The tenants do not realize the cost benefit from the more efficient system during the term of the contract, but they are guaranteed a steady cost of energy that is no more than their current rate. The challenge is that the financing entity will not provide financing if not all of the tenants are in agreement. If not all tenants are in agreement, then there may be other financing agreements that can be structured to meet those needs. By openly discussing these options, the landlord may encourage non-committed tenants to commit.
Sales also takes a certain amount of trust that is sometimes hard to find in a tenant/landlord relationship. In order to build trust, landlords can improve the transparency of the building operations by doing something like publicly proclaiming the energy star rating or the energy use per square foot of the building. There is a lot of debate in the market today about whether or not landlords should be required to give energy star ratings or other national building labels. As tenants and brokers, let’s ask every landlord for their energy star rating (and/or energy use per square foot) until it becomes abnormal not to provide that level of transparency. In that way, we establish a basic level of shared understanding about the building and can build upon that to find common ground and win-win improvement scenarios.
This is just a sampling of some of the issues that were discussed surrounding split incentives, and there are many more issues and ideas around this topic. If you have any good examples or other ideas, please feel free to write me and help us promote better building efficiency through split incentives.
Tags: BOMA, corporate real estate, energy efficiency, energy star, landlord, sustainable, tenant
Posted in Sustainability | 2 Comments »
Server Rooms: Going Green and Saving Green – Part II
Friday, March 4th, 2011
By Matt Newstrom, Senior Advisor
In Part I, I discussed a CresaPartners client, PECI, and how it applied progressive energy conservation strategies to its server room. In this entry, we will look at the third and fourth strategies.
Strategy Three – Air-side Economizer
By definition, an air-side economizer is “a mechanical device used to reduce energy consumption. Economizers recycle energy produced within a system or leverage environmental temperature differences to achieve efficiency improvements.” Since PECI both raised the approved temperature set-point to 85 degrees and confined, redirected, and used the heat load created by the servers, it was able to use the ambient office air to “cool” its server equipment. This means that as long as the building’s central plant is conditioning the office space (Monday through Friday, 7 a.m. – 6 p.m.), PECI will be in effect getting “free cooling” for its server room. So, by doing simple math, there are 8,760 hours in a year, and for about 2,600 of those hours, the building is being controlled for occupant use and will be well under PECI’s 85 degree allowable operating temperature.
Outside the normal “occupied” hours in most buildings, the building systems typically will go into cooling mode on nights and weekends when the indoor temperature reaches the mid-80s (some buildings may let their temperatures float up from there, some below). While PECI’s installation is new, and over the next year, hard data will be collected through its energy monitoring system, it is expected the company will only need to rely on supplemental cooling on nights and weekends in the summer months, if at all.
Strategy Four – TIMING!!
I put TIMING in all caps since all of the strategies listed above will be much more difficult to achieve if you wait until your new building is selected, the lease is signed, and the construction documents are at 90%. If you wait until the lease is signed, then you are already behind the eight-ball and can miss out on opportunities that exist during the negotiation phase. In the case of PECI, we spent many hours upfront and even before touring prospective buildings, documenting the requirements and goals of the project beyond the basic questions about “how much space do we lease, and what is the cost per foot?”
The project used an integrated team approach in which we engaged engineers, project management consultants, PECI staff, and the landlord early to gain consensus on what the limitations and opportunities were. Getting an early start on the server room design (as well as other energy-saving initiatives) allowed us to locate the server room in the optimal location of the building and leverage landlord funds to cover the additional costs associated with the build and the other energy-saving tenant improvements.
While not all engineers and IT experts will always agree with some of these ideas and practices, the point is that the problem of excessive energy usage in call centers and server rooms needs a solution, and rethinking “the norm” is what each of us needs to be doing to raise the bar.
Tags: corporate real estate, data center, energy conservation, green, server room, sustainable
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Server Rooms: Going Green and Saving Green – Part I
Wednesday, March 2nd, 2011
By Matt Newstrom, Senior Advisor
I was recently at the BetterBricks Award Breakfast, and the keynote speaker quoted a few statistics regarding energy usage that I had not heard before. According to the Department of Energy , data centers can consume up to 100 times more energy than a standard office building. Between 2000 and 2006, data center energy usage more than doubled, reaching more than 60 billion kilowatt hours per year. Through programs like LEED, the US Green Building Council has done a great job of educating the public and getting more commonly known statistics out to the masses. For example, in the US, buildings consume about 70% of all electricity usage and about 40% of all primary energy usage. Facts and figures like these are acting as a catalyst for changing people’s thinking, awareness, and practices. Whether the motivation for reducing energy usage is to impact the bottom-line fiscally or to save natural resources, either way, we see it as “doing the right thing.”
Now, while those figures are staggering, you may be asking yourself, “I’m a user of office space and don’t own or operate a data center, so what does this have to do with me?” Well, many of the operational practices and principles that data center operators such as Google, Intel, and HP are implementing in the way of energy conservation can be applied to users of office space. Most IT departments require supplemental cooling of their server rooms. The IT personnel calculate the heat load, how many tons of cooling is required to maintain the room at a specific temperature, and then install a CRAC (computer room air-conditioner) unit that will run 24/7/365. CresaPartners recently had the pleasure of partnering with a leader in energy conservation PECI on the leasing, planning, and project management of its new 60,000 SF office space. While PECI implemented many progressive energy conservation strategies into tenant improvements, the one that resonated most with me is the approach to the server room. We’ll be dissecting this approach by taking a closer look at four strategies:
Strategy One – Containing and Exhausting the Hot Air
PECI implemented the use of a “chimney cabinet” versus a more standard four-post rack or cabinet enclosure. The purpose of the chimney cabinet is to exhaust 100% of the heat created by the server equipment out of the back of the servers and into a return duct or directly to the outside. In PECI’s case, it took all of the hot air produced by the servers and ducted it through a coil that then pre-heats its domestic hot water, sends some of the excess heat down to the ground floor retail tenant, and then discharges it into the building’s return plenum. This accomplishes two things: 1) it takes away the heat load that would otherwise be expelled into the room, then costing the tenant to be cooled by supplemental means, and 2) it saves energy that would be required to heat the hot water for the kitchen and coffee bars and heat for the ground-floor tenant.
Strategy Two – Server Room Temperature Set-Point
Most of the corporations that I’ve worked with set their temperature set-point in their server room or telecom closet at 69-72 degrees. Typically, this will require some type of supplemental cooling system to maintain those temperatures, which most of the time must run around the clock. PECI has initially set its set-point for cooling at 85 degrees, with the goal of moving it to 90 degrees. While this may appear to be extreme, a number of studies show that show that running equipment in higher temperature ranges found “no consistent increase” in failure rates due to the greater variation in temperature. With that said, it is advised that you check with the equipment manufacturer to verify any specific warranty requirements associated with operating temperature being met.
Stay tuned for Part II of this series, where I will discuss the third and fourth strategies implemented by PECI.
Tags: corporate real estate, data center, energy conservation, green, server room, sustainable
Posted in Sustainability | 1 Comment »
Facilities Management and Energy Conservation
Wednesday, February 2nd, 2011
By Jim Ricker, Vice President, Corporate Services
For the past few years, we have all read vast amounts of literature about the need to conserve energy. During this time, energy conservation became known as “going green” or “sustainability.” Regardless of the names and definitions, they all are geared toward the same end—improved utilization of our finite resources to the point that we rely only upon renewable energy sources and reduce or even eliminate the waste stream.
While the terminology may change, professional Facilities Managers have long been striving to reach the goals of sustainability. These initiatives originated from the budget process – reducing operating expenses in order to free-up capital for research & development, marketing, and sales. During the Carter administration and the OPEC-generated oil crisis in the mid-‘70s, Facilities Managers responded to the national mandate to reduce energy consumption and the dependence upon foreign oil. Many readers will remember the gas lines, thermostats set in the low 60s, the emergence of the solar energy industry, and a national speed limit of 55 miles per hours.
As OPEC loosened its grip in the late ‘70s and oil started to flow again, these conservation initiatives were set aside by the Reagan administration. However, the majority of Facilities Managers continued their energy-savings efforts – even when the nation returned to 75 miles per hour on its highways. Budgets had to be tightly managed since the calls for capital did not change. So the enterprising Facilities Managers and their suppliers continued to innovate as before:
-Lighting energy usage continued to drop as electronic ballasts and more efficient lamps emerged. Foot candle measurements came into vogue as a means of determining the proper amount of lighting required for the tasks performed at the desktop.
-Paper products in the restroom migrated from all new content to primarily recycled content.
-Cleaning supplies went from chemicals that polluted our water supply to those that are essentially harmless to the environment.
-Motors were switched to more efficient models using substantially less electricity.
-HVAC systems were changed to heat pumps and central systems using highly efficient chillers circulating chilled water to remote units.
-Low-flow and battery-operated fixtures were installed in restrooms.
-Control systems were replaced with those that more efficiently matched up-time with usage requirements.
Today, Facilities Managers are in the lead in pushing for more innovations for solar systems, wind systems, and even tidal power in certain localities. They recognize it is the only way to further reduce energy costs and also the way to eliminate dependence on finite resources by utilizing renewable alternatives.
Tags: corporate real estate, FM, green, OPEC, renewable energy, sustainable
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Sustainability Opens Doors with Clients and Prospects
Wednesday, October 27th, 2010
By Mike Tobin
Ever desire another angle to get a foot in the door with a prospective client or mine deeper with a current client? Sustainability is one of those hot topics that can lead to fruitful discussions with anyone in any company. The reason for this is that sustainability is a main ingredient in the recipe for success in today’s marketplace regardless of service, product, or industry.
Companies inherently desire to be sustainable, which at its basic definition means to be successful and sustain operations. Today’s umbrella term “sustainability” evolved out of trends such as lean manufacturing, green architecture, energy efficiency, and others. These trends have all been aimed at making businesses more productive while better utilizing resources and reducing risk.
So it should be fairly easy to begin a conversation with a client or prospect with questions surrounding what they are currently doing to improve productivity, operate more efficiently, and reduce risk. The client or prospect might take this in multiple directions but it is guaranteed to involve a discussion of some sort of initiative that is on top of their mind. In this way, one can engage a client on their terms and priorities while ascertaining how real estate may be able to help them achieve their goals or enhance their success.
Sustainability also has other meaningful discussion topics that can bear fruitful conversations. Most companies have similar challenges such as:
• Marketing,
• Sales,
• Branding, or
• Attracting or retaining talent
Sustainability can play a substantial role in each of these areas in today’s market place. Consumers and stakeholders alike are more knowledgeable and savvy about product, service, and corporate differentiators including one’s sustainable attributes. As mentioned in a previous entry, increased market transparency is allowing clients, consumers, and stakeholders the ability to make choices based on an increasing amount of information. As the public has become more aware about sustainability, companies have been forced to react to pro-sustainability desires.
One may start the conversation with a client or prospect about how sustainability is used in their sales and marketing efforts. The conversation may follow a discussion of positive attributes that the company is looking to enhance or illustrate—product packaging, positioning, resources used, etc. This discussion may easily lead to a discussion of how real estate may enhance those efforts or even provide new angles for supporting their sustainable image.
The conversation may also bring to light that there is a risk in not aligning their real estate with their sustainability initiative. For example, if a product or service is advertised to be sustainable yet the company itself is a gross polluter or somehow does not walk the talk, the damage to the brand’s image could be disastrous.
Another conversation point may be the attraction and retention of talent in the corporation. One key attribute that today’s talent pool looks for is a sustainable work environment. These are places that are generally more healthy and attractive to work and indicate a more progressive corporate management. For corporate management, a sustainable real estate strategy achieves the goal of attracting and retaining key talent while at the same time often leading to more efficient operations.
Sustainability as an umbrella touches all aspects of a business. If you want to get to know your client or prospect and understand their business in more depth discuss their thoughts on sustainability. You may be surprised at how easily it is to link sustainable real estate into a discussion on how sustainability is impacting other core aspects of the business.
How does sustainability impact your business? How do you talk to clients about sustainability?
Tags: corporate real estate, sustainable
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Do Sustainable Real Estate Practices Cost More? Part II
Friday, September 3rd, 2010
By Mike Tobin
In Part I, I began my discussion of whether or not sustainable real estate practices are more expensive. Many individuals say that the cost of coordination and documentation to LEED or other programs pushes the price of sustainable real estate practices to a 10% premium. This is an exaggeration that can be broken up into three facets—one of which I discussed in Part I (Program Fees) and the other two which I will discuss now (Professional Fees and Prerequisite Costs).
The Professional Fees are the fees associated with hiring a consultant to provide the additional service of coordinating the submittal to the sustainable program. These fees have a high degree of variance across the country based on the experience of the project team, the certification program, the complexity of the project, etc. Typically, the lower costs come from consultants who have significant experience with the certification process and are not padding their fees for unknown risk.
Example #1: $2M renovation of a 30,000 SF office. Additional fee for architect to coordinate the LEED certification submittal equals $0 as it is included in the architect’s competitive fee. That is 0% of the project cost.
Example #2: $20M build-to-suit of a 100,000 SF office building. Additional fee for architect to coordinate the LEED certification submittal equals $30,000. That is .15% of the project cost.
The Prerequisite Costs include services that are required in order to meet the requirements of the sustainable program. It is important to note that these costs may or may not already be included in the base project costs (another way of saying that these may not be viewed as additional costs as they are a valued component of the base design). Some common prerequisites are energy modeling and building commissioning. These costs vary depending on the scope and complexity of the project.
Example #1: $2M renovation of a 30,000 SF office. Additional fee for consultant to perform required energy analysis and building commissioning equals $10,000 and $30,000, respectively. That is 2% of the project cost.
Example #2: $20M build-to-suit of a 100,000 SF office building. Additional fee for consultant to perform required energy analysis and building commissioning equals $20,000 and $60,000, respectively. That is .4% of the project cost.
If you add all these costs up for the two examples you have the following approximation of fees for achieving a certified sustainable project:
Example #1: 2.16% of project costs
Example #2: 0.58% of project costs
Before anyone goes and starts using these examples to wave in the air about the new cost of pursuing a sustainable real estate practice, note the following errors in logic that make them suspect (there probably are more):
-These examples are for project pursuing a sustainable certification program. This is different from pursuing sustainable real estate practices that may not include a certification program.
-There are many different sustainable certification programs out there with varied certification fees.
-Professional fees vary significantly depending on sustainable program, experience, competitive bidding, market, building type, etc.
-Prerequisite costs vary as some sustainable programs do not have any requirements.
-Prerequisite costs may not be considered additional costs. The owner may consider an energy model or building commissioning good practice to include in their baseline.
The truth is that one cannot generalize the cost of incorporating sustainable real estate practices. The fact is that sustainable real estate practices DO NOT necessarily cost more. The key is to understand what the baseline is for the comparison.
And with this truth, fact and key, you are FREE to practice sustainable real estate. Are you planning on implementing a sustainable real estate strategy?
Tags: LEED, sustainable
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Do Sustainable Real Estate Practices Cost More? Part I
Wednesday, September 1st, 2010
By Mike Tobin
There is a myth that sustainable real estate practices are more expensive, and it needs to be put to rest. The myth is causing more harm than good in the market and it is time to shed light on the truth.
So, are sustainable real estate practices more expensive? In order to answer this, one is forced to first determine what we are measuring up against. When you hear someone say, “A sustainable building costs 10% more,” please ask them what they are comparing that to. Some of the typical responses are:
a) A typical building of similar size and function.
This does not hold water as there is no common definition of a typical building. There are millions of buildings in the United States alone that have been constructed and operated over the course of centuries. The Davis Langdon company, among others, has performed multiple studies to properly define a typical set of buildings to make an accurate and statistically relevant comparison for LEED certified buildings. Their study (and others) have found that there is no statistical evidence to support that LEED certified projects cost more than similar buildings not certified.
b) A code compliant building of similar size and function.
This also does not hold water as every building constructed must be code compliant. Even if they meant to compare it to a building built to code minimum, it is safe to say that there are very few buildings built today to the exact code minimums. It would be ridiculous for someone to compare their building to something that they would never build in the first place.
c) The cost alone of coordination and documentation to LEED or other programs pushes the price to a 10% premium.
This is an extreme exaggeration. The fact is that the cost to certify a building to many of the sustainable building programs is minimal. There are three facets to this cost exaggeration though that needs explanation: Program Fees, Professional Fees, and Prerequisite Costs.
The Program Fees are the fees associated with the registering and submitting a project to the sustainable building program. These are typically much less than 1% of project costs.
Example #1: $2M renovation of a 30,000 SF office. Cost to register and submit the project to the LEED program equals $3,150. That is 0.16% of the project cost.
Example #2: $20M build-to-suit of a 100,000 SF office building. Cost to register and submit the project to the LEED program equals $5,400. That is 0.027% of the project cost.
Stay tuned for Part II on Friday where I will discuss Professional Fees and Prerequisite Costs.
Tags: LEED, sustainable
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Can Real Estate Practices Prevent Oil Spills?
Wednesday, May 12th, 2010
By Mike Tobin
Continuing on the thread of transparency in the real estate market from the last posting, the waters of sustainability can be rather murky…literally in the case of the oil spill in the Gulf of Mexico where we face one of the worst environmental disasters since the Exxon Valdez. It is amazing how within a short period of time (i.e. since the last blog posting), we are forcefully reminded of how perilous the line between our industrial economy and our natural ecology is.
This disaster will inevitably bring forth the heated debate about the risk/reward balance with off-shore drilling. Then, the debate will most likely grow to encompass the risks and rewards of oil drilling in general (we’ll be inundated with “Drill, Baby, Drill!” references again and again). Next, it will expand into a debate about the need for energy independence and renewable energy sources. Finally, it will come full circle to how we need safe/effective/controlled/regulated oil drilling as part of the process to achieve energy independence. Ahh…the same circular arguments we have every few years that are initiated by a disaster of such proportion as to WAKE US UP and get us to start thinking quickly…but acting slowly.
Perhaps, the April 20, 2010 oil spill disaster will be THE tipping point we will look back upon in the future as the time when we started to act quickly to change our current mode of operation. Or maybe not. Regardless, it will definitely be a date and a disaster that will not be forgotten soon and will force us to react.
Now, how does this event relate to transparency in the real estate market and sustainable real estate practices?
The simple fact is that real estate has a major impact on our energy policy and our environment. The United States Green Building Council tracks some handy statistics you can use when connecting the dots:
In the United States alone, buildings account for:
• 72% of electricity consumption,
• 39% of energy use,
• 38% of all carbon dioxide (CO2) emissions,
• 40% of raw materials use,
• 30% of waste output (136 million tons annually), and
• 14% of potable water consumption.
At the very least, this disaster provides a common reference point for corporate America to discuss sustainability. What can be done to prevent such a disaster from happening again? Is there anything we can do to help? What will the future bring?
This is a time when we should take full advantage of our resources to engage corporate real estate managers in discussing these questions and to educate them on the impact real estate has on the global environment. We should be excited about the opportunity to introduce them to sustainable real estate practices.
As real estate advisors, we can and should do our part to help clean the waters and bring sustainable real estate practices into every business. By engaging and educating, we can help people and corporations to see through the murkiness and to act in a positive and sustainable manner to help ensure a disaster like this will not happen again.
Do you think that real estate impacts energy policy and energy independence?
Tags: energy policy, environment, gulf of mexico, oil spill, sustainable, sustainable real estate practices, usgbc
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Dawn of the Green Technology Decade
Wednesday, January 20th, 2010
By Mike Tobin
Welcome to 2010 and the dawning of the clean/green technology decade – or so we are led to believe! The current administration has ushered in the new decade with some very exciting steps towards embracing a more sustainable and environmentally focused strategy which has the potential to dramatically affect our real estate market. From the notable steps taken by the Supreme Court in the 2007 ruling that the EPA must regulate CO2 and other greenhouse gases to the recent December 7, 2009 announcement in which the EPA has formally determined that greenhouse gases threaten public health and welfare, it is inevitable that business as usual will no longer exist as it relates to greenhouse gas emissions. Congress will need to pass comprehensive greenhouse gas regulation soon otherwise the EPA will be required to regulate these emissions under rules that most experts consider inefficient. It was therefore more of a formality and favorable political opportunity for President Obama to finally, and confidently, put the United States in the middle of the discussions on global warming and limiting greenhouse gas emissions at the Climate Conference in Copenhagen this past month.
Regardless of politics, the winds of change are blowing harder than ever in relation to how businesses address greenhouse gas emissions and other sustainability issues. Leading companies have already put in place a strategic sustainability plan and begun to measure their carbon footprint, analyze their exposure to “dirty” fuels, and assess their capabilities to harness renewable energy sources (among other objectives). All companies could substantially benefit from developing a similar plan to position themselves for the cleaner/greener future.
Within this sustainability plan, the impact on real estate will be profound as companies struggle to adjust to the new regulations and stakeholder expectations, as well as the necessary efforts to take advantage of the myriad of incentives and initiatives surrounding them. This era of change brings with it opportunities for success but it also brings the potential for pitfalls. In order to capitalize on the future, leading companies are diligently working now at the forefront of change to identify both the opportunities and pitfalls.
For example, we all know the key in real estate is “location, location, location”. The new changes on the horizon will affect the playing field for finding the best sites. Site location criteria will begin to focus more on the mix of local fuel sources with an eye toward avoiding areas with “dirtier” fuels and areas with local utilities that have a higher cost to meet compliance. “Dirtier” fuels and higher conformance costs will translate into higher costs to consumers. Also, understanding the feasibility of local renewable energy sources will become more important as this will affect the prioritization of sites that allow a company to tap into the most efficient renewable energy systems that will provide clean, consistent power at relatively stable prices into the future.
As we begin 2010, how are you helping your company or your client prepare for – and capitalize on – the clean tech decade?
Disclaimer: The opinions expressed in CresaPartners’ Blog represent those of our bloggers, and not necessarily those of the firm.
Tags: green, renewable energy, sustainable
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