07/22/2016 | by

True or false: Many of the practices considered to have the best “bang for the buck” when it comes to promoting energy-efficient buildings are essentially standard operating procedure for most large real estate companies, including REITs? 

False. Many of these practices—which may include participating in demand response programs, installing occupancy sensor-controlled lighting and HVAC systems, turning off systems during off hours and instituting daytime cleaning—are not yet standard operating procedure for most REITs.

Keep in mind that REITs cover the whole universe of property types and that what’s common practice for an office owner is not as easily achieved in hospitality or industrial buildings. Office owners, for example, have significantly more control over building systems than retail or industrial owners whose tenants drive the majority of their buildings’ energy costs. When it comes to tenant spaces, REITs often shy away from energy-saving ideas because tenants haven’t asked for them, leases prevent them or the REIT is concerned that some tenants might not like them. However, often unbeknownst to their landlord, tenants frequently welcome such steps if they are presented in the context of landlord-tenant discussions regarding ways to make the building more sustainable while also cutting operating expenses.

In working with real estate owners and companies on how to improve their spaces’ performance, we have found that energy-efficient buildings offer leaders an opportunity to set themselves apart from their competition while maximizing tenant satisfaction. As more REITs and large real estate companies recognize this, we are hopeful that a range of energy efficiency practices will become part of business as usual.

Do the greatest gains in energy efficiency typically come from investing in new technology or implementing new operating procedures?

More often, the greatest gains in energy efficiency come from implementing new operating procedures, but it often takes both new operating procedures and new technologies to reap substantial rewards. For instance, real-time energy management software alone won’t save energy if building staff (or tenants, in the case of retail and industrial spaces) do not also change their routines and adjust operations in response to insights gleaned from the software. 

What will be the next major sustainability trend to take hold in real estate?

It will be a mix of increased attention to occupant health, growing tenant engagement and demand for sustainable practices, and the continued emergence of building and portfolio energy data in the marketplace. 

One of the toughest questions currently facing the sustainability functions of REITs is how to establish meaningful reporting regimes. What would be your chief piece of advice to sustainability professionals wrestling with this issue?

Companies have a hard time finding a balance between what’s meaningful for internal improvement and what’s meaningful for external stakeholders. Each company must decide individually what information meets the needs of both groups. In addition, in the past, reporting schemes required disparate information that demanded a lot of legwork.

However, the good news is that software and increased industry collaboration are helping some of the reporting schemes find common ground, which in turn simplifies the reporting process. We are hopeful that this will reduce the time burden on sustainability teams in the near future. 

As the executive director of the Institute for Market Transformation (IMT), Cliff Majersik directs IMT’s research on building performance policy, energy codes, energy efficiency finance and green leasing. The IMT is a nonprofit organization that promotes energy efficiency, green building and environmental protection in the United States and abroad.

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