The landscape of commercial real estate (CRE) is undergoing a significant transformation, driven by a growing urgency to address climate change. One key element of this shift is the emergence of Building Performance Standards.
Whether you’re new to U.S. Building Performance Standards or looking to brush up on the basics, this guide has you covered to understand their significance, compliance challenges you may encounter, and the role of technology in meeting these standards.
The basics
Building Performance Standards (BPS) are a set of regulations and guidelines established to assess and improve the energy efficiency, environmental sustainability, and overall performance of commercial buildings. These standards aim to address the environmental impact of buildings by setting specific targets for reducing carbon emissions, energy consumption, and other resource utilization.
BPS covers areas like energy efficiency, water conservation, and indoor air quality to promote sustainable practices within the real estate sector. The primary objective is to establish a more eco-friendly and resilient built environment, often necessitating building owners and managers to consistently report on their properties’ performance, adopt energy-efficient technologies and comply with emission reduction targets.
It dictates that buildings meet certain performance criteria, either through design specifications, operational practices, or a combination of both. They often involve measures to:
- Enhance insulation
- Optimize heating
- Ventilation
- Optimize HVAC systems
- Promote the use of renewable energy sources.
- Implement sustainable building materials and practices.
These standards vary by jurisdiction, with some regions adopting comprehensive frameworks that mandate specific performance metrics while others provide guidelines for voluntary compliance.
Compliance with BPS may involve reporting requirements, audits, and penalties for non-compliance, encouraging building owners and managers to prioritize sustainability and invest in efficiency upgrades. It is in a bid to address climate change, enhance public health, and drive economic growth through energy savings.
Growing momentum around BPS
There is an upward surge in momentum surrounding Building Performance Standards, with governments, businesses, and stakeholders beginning to prioritize sustainability and environmental responsibility. The growing global recognition of the urgent need to address climate change and reduce greenhouse gas emissions is driving this momentum.
Many jurisdictions in the U.S. are enacting or considering robust BPS to improve the energy efficiency and sustainability of commercial buildings. While not yet a nationwide mandate, adoption by major cities and states, such as New York City and Boston, indicates a clear and accelerating trend towards more stringent regulations in the commercial real estate sector. These pioneering jurisdictions are setting a precedent for others to follow, spurring further discussions and actions on a broader scale.
State and local Building Performance Standards
The growing momentum around BPS is also fueled by increasing public awareness and demand for sustainable and eco-friendly buildings. Tenants, investors, and consumers are increasingly demanding environmentally responsible practices, pushing property owners and developers to adopt BPS or risk losing market competitiveness.
There’s also the growing recognition of the long-term benefits of sustainable practices, from cost savings to improved market positioning. This growing awareness is influencing the private sector to voluntarily embrace BPS and implement eco-friendly measures in their real estate portfolios.
BPS momentum is set to keep rising, driving more progress in building standards and broader eco-friendly practices in commercial real estate.
BPS regulations
Building Performance Standards are taking root in various states. Let’s explore these unique frameworks to understand the implications:
Local Law 97
Local Law 97 (LL97) represents a significant transformation in New York City’s approach to building sustainability. This legislation, enacted in 2019, has officially entered its first compliance period. It mandates proactive measures to reduce greenhouse gas emissions and energy consumption for large buildings across the city. Understanding the law’s requirements, enforcement mechanisms, and available resources is essential for building owners and operators to ensure compliance.
In summary, the key provisions of LL97 include:
- Applicability: LL97 applies to buildings exceeding 25,000 square feet, affecting roughly 50,000 properties across various sectors.
- Emission reduction targets: The law stipulates phased reductions, targeting a 40% decrease by 2030 and 80% by 2040 compared to baseline emissions.
- Compliance deadlines: The first compliance period began in January 2024, requiring annual reporting and verification of emissions data.
- Enforcement and penalties: Non-compliance incurs significant financial penalties of $268 per ton of carbon, exceeding the limit, with stricter penalties forecasted in future years.
So, who oversees BPS compliance? Industry professionals and stakeholders supervise the law through a Climate Advisory Board, collaborating with the City Council Enforcement Agency. Together, they refine regulations and oversee implementation to enforce compliance. The Department of Buildings (DOB) also administers an LL97 Accelerator Program, which offers guidelines and support to facilitate compliance within the state.
Building owners can also leverage resources provided by the New York State Energy Research and Development Authority (NYSERDA). NYSERDA offers financial incentives to assist building owners in implementing energy-efficient measures and achieving emissions reductions.
As of February 2024, 89% of buildings have met 2024 targets, demonstrating continued progress. However, challenges loom as buildings prepare for more stringent targets in subsequent years. But thanks to tools like Cortex, stakeholders can simply identify low-cost and no-cost emission reduction opportunities to enhance compliance.
BERDO
The Building Emissions Reduction and Disclosure Ordinance (BERDO) is a critical initiative introduced by the City of Boston to address the significant contribution of buildings to greenhouse gas emissions. With buildings accounting for nearly 70% of emissions in Boston, BERDO aims to mandate emission reductions, ultimately striving for net zero emissions citywide by 2050.
BERDO has undergone significant evolution since its inception in 2013. BERDO 1.0 primarily focused on reporting and disclosure of greenhouse gas emissions and energy use. However, in recognition of the need for more substantial reductions, policymakers enacted BERDO 2.0 in September 2021. This updated version introduces emission performance standards measured in metric tons of carbon dioxide equivalent per square foot and extends its coverage to smaller buildings.
Central components of BERDO 2.0 include:
- Applicability: BERDO applies to non-residential buildings over 20,000 square feet, residential buildings with 15 units or more, and parcels with multiple buildings summing to at least 20,000 square feet or 15 units.
- Emission reduction targets: By 2050, all qualified buildings must achieve net zero emissions, with benchmarked goals set at five-year intervals starting in 2025.
- Phases: The implementation of BERDO occurs in phases. Phase 1 is about reporting and verification; Phase 2 sets up a Review Board for proposing regulations and overseeing enforcement; and Phase 3 deals with compliance with emission standards, hardship plans, and fair emissions investment funds.
Reporting and verification are integral components of BERDO compliance. Buildings must report their water and energy use annually by May 15th, with third-party verification required. Penalties include:
- First group: Includes non-residential buildings over 35,000 square feet, or 2 buildings on the same parcel totaling 100,000 square feet, and residential buildings over 35 units, or 35,000 square feet. Penalties for non-compliance with reporting or emission standards are substantial.
- Second group: Encompasses non-residential buildings between 20,000 and 35,000 square feet and residential buildings with 15 to 35 units or 20,000 to 35,000 square feet. Penalties are less severe but still significant.
- Failure to report accurate information: The Review Board determines fines ranging from $1,000 to $5,000 for individuals or entities based on the seriousness of their non-compliance with regulations.
Boston requires building owners to understand and adhere to BERDO requirements to avoid penalties and contribute to the city’s sustainability goals.
Challenges of BPS
The steady spread of Building Performance Standards across the U.S. presents some challenges for commercial real estate owners and managers. Challenges of BPS include:
Penalties for non-compliance
One of the most pronounced challenges arises from the penalties imposed for failing to comply with BPS requirements. For instance, New York City’s LL97 mandates strict penalties for buildings that do not meet specified emission reduction targets. These penalties include fines for late submission of compliance reports and exceeding carbon emission limits. While penalties serve as incentives for compliance, they also create financial burdens for property owners and managers.
Lack of standardization across jurisdictions
Another challenge stems from the lack of standardized BPS across the country. Each jurisdiction is allowed to develop its own set of regulations, which may lead to inconsistencies and complexities for building owners operating across multiple states. For example, while LL97 targets large buildings in New York City, other cities or states may have different criteria or metrics for assessing building performance.
This lack of uniformity poses several issues:
- Administrative complexities: Building owners with properties in multiple locations must contend with varying standards and reporting procedures, increasing their administrative burden.
- Compliance ambiguity: The absence of standardized BPS criteria can lead to confusion, making it challenging for building owners to navigate and comply with diverse regulations.
Navigating the patchwork
The absence of a standardized approach to BPS standards across the country necessitates proactive strategies for building owners. To address these challenges, stakeholders must:
- Implementing robust compliance systems for monitoring and ensuring compliance with diverse standards is crucial.
- Invest in technological solutions to help track and optimize energy usage to meet BPS requirements efficiently.
Using technology to help you meet BPS
Technology gives you access to advanced tools and systems to enable you to meet Building Performance Standards effectively. The benefits include:
Operational excellence
Implementing smart building technologies, energy management systems, and IoT devices allows real-time monitoring and optimization of energy usage. It empowers building teams to identify inefficiencies, manage peak loads, and enhance overall operational performance.
Maximized efficiency
Technology enables building teams to squeeze every last kWh of efficiency from existing infrastructure before moving into capital investments. Buildings can reduce energy usage and avoid expensive upgrades by adjusting operations and schedules and implementing energy-saving measures.
Shortens the lead time for change
Achieving BPS targets often requires substantial changes in building infrastructure and operations. Technology streamlines this transition by providing actionable insights and facilitating a phased approach to meet targets over time.
Building owners must adopt technology now to address sustainability goals and comply with changing regulations.
Looking ahead
Here’s what we can expect in the future of Building Performance Standards:
- Wider adoption: While currently implemented in cities like New York and Boston, states like California, Washington, Colorado, and Maryland are actively considering BPS legislation. Expect this trend to continue as the need for sustainable practices gains prominence.
- Stricter standards: Get ready to raise the bar. As the urgency to combat climate change intensifies, future BPS are likely to mandate deeper emissions reductions, pushing building owners to explore advanced efficiency solutions and potentially renewable energy integration.
- Technology integration: As climate concerns intensify and the demand for sustainable practices grows, BPS will likely incorporate new technologies and innovative strategies to further minimize our carbon footprints. Advanced analytics, automation, and AI will become indispensable tools for optimizing building performance, ensuring compliance, and unlocking even greater sustainability gains.
- Increased financial incentives: To ease the transition, expect to see more government-backed financial incentives and funding opportunities for building upgrades and retrofits that align with BPS goals.
- Enhanced collaboration and standardization: As BPS evolves, we are likely to see governments, businesses, and stakeholders collaborate to establish uniform standards. It will simplify compliance and encourage cross-regional innovation.
By staying informed, embracing technology, and proactively engaging with sustainability initiatives, you can ensure your buildings not only comply but thrive in this evolving real estate landscape.
Conclusion
Building Performance Standards represent a paradigm shift towards a more sustainable and resilient real estate future. While challenges exist, such as non-compliance penalties and the lack of national standardization, the potential benefits – environmental responsibility, financial gains, and long-term asset value – are undeniable.
By understanding the challenges, leveraging technology effectively, and taking proactive steps, building owners can ensure their portfolios not only comply with evolving regulations to meet climate objectives but also optimize resource utilization.
Get in touch with us and let us know what questions you have about using technology to meet upcoming regulations. We want to help you reduce energy, emissions, and regulation risk in your buildings through operational excellence.
