In today's commercial real estate landscape, building performance standards have become a critical focus for property owners and managers.The increasing urgency to address climate change has put the built environment—particularly commercial buildings—under the microscope, given its substantial contribution to global carbon emissions.
For many in the industry, navigating the complex landscape of building performance standards can seem daunting. However, these standards represent more than just regulatory compliance; they offer a pathway to enhanced property value, improved tenant satisfaction, and a significant contribution to global sustainability efforts.
This blog post aims to demystify building performance standards for commercial real estate professionals. We'll explore the fundamentals of these standards, their importance in today's market, and practical strategies for implementation. Our goal is to equip you with the knowledge and tools needed to transform these standards from potential challenges into opportunities for innovation and leadership in the real estate sector.
What are building performance standards?
Building performance standards (BPS) are regulatory measures that set specific energy use and emissions targets for buildings. These standards aim to reduce energy consumption, lower greenhouse gas emissions, and improve overall building efficiency. BPS are typically enforced through a combination of federal, state, and local regulations, with varying levels of stringency depending on the jurisdiction.
The primary goal of building performance standards is to mitigate the environmental impact of buildings by encouraging energy efficiency and reducing carbon footprints. As buildings account for a significant portion of global energy consumption and carbon emissions, BPS play a critical role in national and global sustainability efforts.
In the United States, building performance standards are shaped by a mix of federal guidelines, such as the ENERGY STAR program, as well as state and local mandates. These regulations are often part of broader climate action plans aimed at achieving specific greenhouse gas reduction targets.
Key building performance standards in the USA
Federal standards
ENERGY STAR: Managed by the U.S. Environmental Protection Agency (EPA), ENERGY STAR is a voluntary program that helps businesses and individuals save money and protect the climate through superior energy efficiency. Buildings that achieve ENERGY STAR certification use, on average, 35% less energy and emit 35% fewer greenhouse gases than typical buildings.
ASHRAE Standards: The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) has developed several standards that are widely adopted in building codes across the country. Notable standards include ASHRAE 90.1, which sets energy efficiency requirements for buildings, and ASHRAE 189.1, which provides guidelines for high-performance green buildings.
State and local standards
New York City’s Local Law 97: As part of the Climate Mobilization Act, Local Law 97 sets strict greenhouse gas emissions limits for buildings over 25,000 square feet. By 2030, these buildings must reduce emissions by 40% from 2005 levels. Non-compliance can result in hefty fines, pushing building owners to adopt energy-efficient technologies and practices.
Washington D.C.’s Building Energy Performance Standards (BEPS): BEPS require buildings in Washington D.C. to meet or exceed the median ENERGY STAR score for similar buildings. Buildings that fail to meet these standards must improve their energy performance or face penalties.
California’s Title 24: Part of the California Building Standards Code, Title 24 mandates energy efficiency in new construction and major renovations. The regulations cover various aspects of building design, including insulation, windows, lighting, and HVAC systems, making California a leader in energy-efficient building practices.
Washington State’s Clean Buildings Act: This law establishes energy performance standards for commercial buildings over 50,000 square feet, with phased compliance deadlines beginning in 2026. The act also offers incentives for early adopters, encouraging building owners to meet energy use intensity (EUI) targets sooner.
Colorado’s Building Performance Standards: Colorado’s regulations require buildings over 50,000 square feet to track and report their energy use, with specific EUI targets to be met by 2026. These standards are part of the state’s broader climate action goals.
New York State’s Climate Leadership and Community Protection Act (CLCPA): The CLCPA sets ambitious targets for greenhouse gas reductions, including a 40% reduction by 2030 and 85% by 2050. These targets influence state-level building performance regulations and encourage the adoption of energy-efficient practices.
Massachusetts’ Building Energy Reporting and Disclosure Ordinance (BERDO): BERDO applies to buildings over 35,000 square feet in Boston, requiring annual energy and water use reporting. Starting in 2025, BERDO will implement emissions performance standards, with penalties for non-compliance.
Oregon’s Energy Efficient Buildings Program: Oregon’s stringent energy codes apply to new buildings and major renovations, emphasizing the integration of green energy technologies. Public buildings must include a minimum percentage of renewable energy systems, setting a high standard for energy efficiency in the state.
Maryland’s EmPOWER Maryland Program: This program aims to reduce energy consumption in buildings by 15% by 2025, offering incentives and technical assistance to help building owners achieve these goals. Future building performance standards may emerge from this initiative.
Vermont’s Commercial Building Energy Standards (CBES): Vermont’s CBES set rigorous energy efficiency requirements for new commercial buildings, additions, and renovations. The standards offer a performance-based compliance path, allowing building owners to tailor their strategies to meet energy targets.
Voluntary standards
LEED (Leadership in Energy and Environmental Design): Administered by the U.S. Green Building Council, LEED is a voluntary certification program that rewards buildings for meeting specific sustainability criteria. LEED-certified buildings often enjoy lower operating costs, higher occupancy rates, and increased market value.
WELL Building Standard: The WELL Building Standard focuses on the health and well-being of building occupants. It includes performance metrics across categories such as air quality, water quality, and light, making it a valuable complement to energy-focused standards.
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The business case for adopting building performance standards
Cost savings
Adhering to building performance standards can lead to significant cost savings. By improving energy efficiency, buildings consume less energy, resulting in lower utility bills. Additionally, buildings that meet or exceed these standards are often eligible for tax incentives, rebates, and other financial benefits, further enhancing their economic viability.
Tenant demand
Modern tenants, particularly large corporations, are increasingly prioritizing sustainability in their leasing decisions. Buildings that comply with performance standards are more attractive to these tenants, leading to higher occupancy rates and the ability to command premium rents. According to a 2020 study by the Department of Built Environment of Aalto University, buildings with green certifications like LEED have rental premiums of up to 23%.
Risk mitigation
Compliance with building performance standards helps mitigate the risk of future regulatory penalties and legal liabilities. As regulations become more stringent, buildings that already meet high-performance standards are better positioned to adapt to new requirements, protecting their value and ensuring long-term viability.
Strategies for meeting building performance standards
Energy audits and benchmarking: Conducting an energy audit is the first step in understanding your building’s current performance levels. Benchmarking against similar buildings can help identify areas for improvement. Many states and cities require annual energy reporting, making benchmarking a crucial part of compliance.
Building analytics and monitoring: Technology plays a vital role in meeting building performance standards. Building analytics platforms, such as CIM’s PEAK, provide real-time insights into energy usage, equipment performance, and potential inefficiencies. Continuous monitoring allows for proactive maintenance and adjustments, ensuring that buildings remain compliant with performance standards.
Retrofits and upgrades: Retrofitting existing buildings with energy-efficient technologies is often necessary to meet performance standards. Examples include upgrading HVAC systems, installing energy-efficient LED lighting, and improving insulation. These upgrades not only help meet regulatory requirements but also enhance occupant comfort and reduce operating costs.
Training and education: Ensuring that building staff are well-trained in energy management and building operations is critical to maintaining compliance. Regular training programs and updates on the latest technologies and regulations can help staff make informed decisions that support building performance goals.
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Challenges and solutions in implementing building performance standards
Common challenges
Implementing building performance standards can be challenging due to upfront costs, technological adoption hurdles, and the complexity of regulations. Building owners may also face resistance from tenants or stakeholders who are unaware of the long-term benefits of compliance.
Overcoming barriers
To overcome these challenges, building owners can leverage financial incentives, such as tax credits and rebates, to offset the cost of upgrades. Engaging with experienced consultants who understand the regulatory landscape can also help navigate complex requirements. Additionally, involving tenants and stakeholders in the decision-making process and educating them on the benefits of compliance can foster a collaborative approach to meeting performance standards.
The future of building performance standards
Evolving regulations
As the urgency to address climate change increases, building performance standards are likely to become more stringent and widespread. New regulations may include stricter energy use targets, mandatory renewable energy integration, and enhanced reporting requirements. Building owners should stay informed about potential changes to ensure their properties remain compliant.
Sustainability goals
Building performance standards are a key component of broader sustainability goals, both at the national and global levels. These standards align with the goals of reducing carbon emissions, improving energy efficiency, and promoting the use of renewable energy. As more countries and states commit to achieving net-zero emissions by mid-century, building performance standards will play an increasingly important role in shaping the future of the built environment.
Conclusion
As building performance standards continue to evolve, commercial real estate owners and managers must stay ahead of the curve to ensure their properties are compliant and competitive. By understanding these standards and implementing the strategies discussed in this blog, you can reduce your building’s environmental impact, enhance tenant satisfaction, and protect your investment.
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