Once a fringe concern in commercial buildings, energy-efficient buildings now offer a key competitive advantage.
With another harsh winter on the way, commercial property managers will turn their attention to cutting energy costs.
And while this winter will likely be no different from past years, it'll also mark the highest level of energy-efficiency awareness among building owners and managers, experts say.
The main reason for that is the unflagging efforts of commercial real estate firms, the Minnesota and U.S. governments and industry groups such as the Minneapolis Building Owners and Managers Association (BOMA) and the U.S. Green Building Council to tout advantages of energy-efficient office buildings.
Reducing the carbon footprint was once a fringe concern, but it's now mainstream and has become even more important at a time of tough competition to attract tenants, said Adam Fransen, manager of sustainability programs for CB Richard Ellis.
"The big trend in energy efficiency has been toward 'Energy Star benchmarking,' which is how you understand the baseline usage of energy in building," he said. "Virtually every office building bigger than 100,000 square feet in downtown Minneapolis has been benchmarked."
Under the process, property managers use criteria developed by the U.S. Environmental Protection Agency for its Energy Star program to estimate a building's energy and water usage, and its carbon footprint. The results for each building can be ranked on a 1-to-100 scale in comparison with similar buildings from national surveys.
When building operators agree to partner with the Energy Star program, they commit to making continuous improvements in their energy usage and to keep benchmarking their performance.
The benefits, Fransen said, are measurable. A recent study by CB Richard Ellis and the University of San Diego's Burnham-Moores Center for Real Estate indicated energy-efficient buildings were more intensively managed, fetched higher rents per square foot and had higher occupancy rates and tenant retention than the general market.
The CBRE survey, however, also found that the average operating costs of the energy-efficient buildings were roughly equal to a peer group of non-green buildings at $12 per square foot. Fransen said that was partly because green building owners tend to "intensely manage" their properties, meaning they put more time and money into keeping them up.
Being able to tout an energy-efficient building that measures up to standards set by the U.S. Green Building Council's Leadership in Energy and Environmental Design, or LEED, has gone from an amenity to a crucial selling point for some tenants.
A good example, he said, is the Accenture Tower in downtown Minneapolis, which has been Energy Star-compliant since 2001 and earned LEED Silver status in 2009.
"Government tenants have driven a lot of it," Fransen said. "The General Services Administration, for instance, ... now ... won't go into a building that doesn't have at least a LEED silver or gold certification."
Commercial real estate industry groups like BOMA have also played a big part in raising awareness of how property managers can cut energy costs. The Minneapolis group's BOMA 360 Performance Program bestows designations on commercial office and industrial buildings that meet six major areas of operations and management criteria.
The issue, however, remains dealing with the considerable upfront costs of retrofitting older buildings and deploying green technology, such as solar panels. Bank financing remains tight, and not much financial help for building owners is coming from government.
One such effort to make financing available is the Property Assessed Clean Energy, or PACE, program. Minnesota law allows local governments to help finance such things as solar installations, reflective roofs, lighting and window and heating-air conditioning-ventilation upgrades. Borrowers can repay the cities on their property taxes over 10 years.
"There's a lot of excitement about PACE but it's still really in the prototyping stage in Minnesota," said Stefanie Galey, an attorney with Faegre & Benson specializing in public finance. "There haven't been that many projects so far, and financings haven't really gotten off the ground yet."
She said one problem is that the 10-year repayment period mandated in Minnesota law is too short, making the per-year assessments high enough to cancel out the energy savings.
Commercial property owners seeking to cut energy costs can partner with utilities through programs regulated by the state Commerce Department.
The programs "have been very popular and quite successful," said spokesman Matt Swenson. State utilities could save 1.2 million megawatt-hours hours of electricity from 2008 to 2009 via customers' energy-efficiency upgrades.
Don Jacobson is a St. Paul-based freelance writer. He can be reached at 651-501-4931.