Energy Use in Commercial Buildings
A Proposed Standard for Assessment and Disclosure
A draft ASTM standard practice guides commercial building energy performance evaluation and reporting.
If you’re in the commercial real estate business and looking for a deal, now may be a good time to buy. But buyers beware. From soaring office buildings to giant industrial complexes, to sprawling shopping malls and amenity-crammed luxury hotels, commercial structures can be energy guzzlers. Lawmakers have already passed legislation in California; Washington; Austin, Texas; Washington, D.C.; and New York, N.Y., forcing commercial properties to disclose their energy use. However, there is a problem. There is no standard method for collecting, disclosing or ensuring consistent and reliable energy use information for commercial buildings.
“There’s huge variability to it,” says Anthony Buonicore, a veteran ASTM member and managing director of a Milford, Conn.-based real estate development and management group. “Energy use will change based on weather, vacancy rates, operating hours, operation and maintenance practices, tenant behavior and whether any major renovations were made. An office building that’s fully occupied will have very different energy costs compared to one that’s 70 percent occupied. We need a standard way for collecting and reporting energy consumption data. Otherwise, the numbers by themselves are meaningless.”
Urgency Speeds Standards Development
Buonicore and a stakeholder group decided to take action and proposed that ASTM International Committee E50 on Environmental Assessment, Risk Management and Corrective Action develop a standard. In April 2009, the committee formed the nearly 300-member task group that is now developing draft standard WK24707, Building Energy Performance Assessment and Disclosure for a Building Involved in a Real Estate Transaction. Under Buonicore’s leadership, the group completed a draft proposal in October 2009; its members hope to have a published standard this year.
“The two key drivers for developing a standard are the proliferation of different local, state and regional standards, and pure economics,” explains Mark J. Bennett, a Michigan-based attorney who specializes in climate change, real estate and environmental law, and co-chairs the legal task group helping to develop the proposed standard. As interest in energy efficiency grows, buildings with poor energy performance may become less valuable, reducing the pool of prospective tenants and purchasers. Additionally, there may be increased capital costs for energy-saving renovations required by new building codes. “New building codes are driving the need for a due diligence review that will be largely based on the new ASTM standard,” says Bennett.
Already, one of the largest commercial real estate owners in the country, CB Richard Ellis, requires no net carbon increase for its commercial real estate properties. “That raises the question of who pays for the cost of carbon offsets if necessary,” says Buonicore. “That will have to be factored into leases going forward.”
WK24707 describes the process for conducting a building energy performance assessment, or BEPA, and how the information should be disclosed. The draft is designed to supplement the existing ASTM standards E2018, Guide for Property Condition Assessments: Baseline Property Condition Assessment Process, and E1527, Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, “so it can be done very easily at the same time as the PCA or ESA,” explains Buonicore.
The proposed process includes four components: a site visit, records collection, review and analysis, interviews and a report. Among other data, the service provider conducting the BEPA will collect information on building energy consumption and cost over the previous three years or since the last major renovation.
“When you look at energy costs on a monthly basis, 36 months provides a good degree of variability for all the independent variables, including temperature, occupancy, heating and cooling degree days, and hours of operation,” says Buonicore, “In the last three years, we have seen the peak of the real estate market as well as its collapse, providing excellent insight into the impact of occupancy on energy consumption.” He adds that building renovations — especially expansions — can also have a major impact on energy use and must be taken into consideration.
The analysis phase of the process includes converting the collected data to a calendar month basis; determining the appropriate building energy consumption metrics, such as the number of BTUs per square foot per year; calculating the building’s carbon footprint and determining the relationship between the building’s energy consumption and the independent variables that can impact it.
The final BEPA report will describe a commercial building’s historical energy use and cost; how these factors can be affected by weather, occupancy and other conditions; the building’s carbon footprint and an energy consumption disclosure statement with supporting documentation.
The proposed standard is designed to give building owners, potential purchasers and individuals who provide professional services to the commercial real estate industry — such as real estate attorneys, appraisers, environmental consultants and, for new construction, architects and contractors — a consistent, reliable means of collecting and reporting the details of a building’s energy use. WK24707 could also ensure that banks and other lenders, who scrutinize a building’s utility and other operating expenses before agreeing to a loan, that the information they have received is reliable.
The proposed standard “is not a legal mandate,” explains Bennett. “It’s a starting point, something that can be used where practical to enable compliance when an energy disclosure representation or audit is required pursuant to state and/or local statutes and regulations.”
Data for Benchmarking
Buonicore also stresses that WK24707 is not designed as nor is intended to be a benchmarking standard that compares the energy efficiency of one building to another. Nor does it compete with current green building rating, certification and labeling initiatives promoted by the U.S. Green Building Council’s Leadership in Energy and Environmental Design, or LEED, rating system; the Capital Markets Partnership’s Green Value Score; the U.S. Environmental Protection Agency’s Energy Star program; or the American Society of Heating, Refrigerating and Air-Conditioning Engineers’ Building Energy Quotient program, all of which have supported the development of an ASTM International standard. “We complement their initiatives by being way out in front of them, providing a standardized way to collect and report the data they need,” says Buonicore. In fact, according to Buonicore, some 75,000 to 80,000 PCAs are conducted every year.
When WK24707 does become a published ASTM International standard and is embraced by the commercial real estate industry, it could generate a huge amount of data that would be useful to benchmarking efforts and future legislation that seeks to monitor and limit energy use.
Adele Bassett is a Malvern, Pa.-based freelance writer who has covered everything from youth gangs in Colorado to earthquakes in Connecticut while working for a variety of corporations and publications. She holds a B.A. in English, an M.S. in journalism and an M.B.A.