Future-ready buildings: increase asset value and reduce real estate investment risks by preparing for building performance standards now

New construction codes have been driving toward net zero performance in jurisdictions around the country but building performance standards (BPS) with similar aims are emerging for existing buildings. Building performance standards are state and local laws that require existing buildings to achieve minimum levels of low-energy or climate-aligned performance. For building owners and operators, BPS means that their properties will have to meet increasingly stringent performance targets for energy and carbon emissions, or risk being identified as poor performers. A future-ready capital planning approach, beginning with long-term performance goals in mind, is an opportunity for building owners to leverage investments and increase asset value while meeting forthcoming BPS.

Current State of BPS

National model energy codes that impact new construction are moving toward decarbonization, but new construction represents only 1-2 percent of the building stock annually. Existing buildings have long presented a greater challenge for regulation. With 5.9 million existing commercial buildings in the U.S., we know that solving this challenge is the key to unlock the potential for reaching our climate goals.

New Buildings Institute (NBI) is working with an increasing number of cities and states to develop mandatory policies and resources for improving the performance of existing buildings. BPS will accelerate deep energy and carbon neutral building retrofits of the vast existing building stock, making it possible for cities and states to deliver on their climate and energy goals. The National BPS coalition, joined by thirty-three jurisdictions and supported by NBI, has committed to design and implement equitable BPS by 2024.

Map of BPS Coalition Members |Credit: IMT

BPS policies already exist in eight leading jurisdictions. Most current policies that target existing buildings are limited to benchmarking and transparency with some mandatory update requirements. Transparency policies require building owners to benchmark their building’s performance and report the results publicly. Mandatory update policies require owners to complete some energy upgrades at the time of a “triggering” event such as a building sale, lease renewal, or on a prescribed cycle. These types of policies, such as those in force in Washington D.C. and California, provide building owners visibility into how to plan for their building’s operations, equipment replacement, and capital improvements. They also provide a starting point for measuring progress and taking action towards energy efficiency or decarbonization goals. BPS will require owners to take the next steps to meet performance targets along a prescribed and progressive timeline.

Future-Ready Buildings

Making a building or portfolio “Future-Ready” should begin with the end in mind, with building and portfolio owners planning now to meet future zero energy and carbon targets in a clearly articulated timeframe. Capital planning for investment is not a new concept, but its careful application to meet BPS may shift the way planning occurs, treating each building retrofit and renovation as a piece to a larger puzzle, not just a singular end of useful life need. To engage in future-ready planning, building owners will need to assess where the building stands in comparison to a target and proactively perform system-by-system review, considering the unique durability cycles of each system and projected system end-of-life opportunities. Intentionally planning pro-active capital investments that view system replacement as an opportunity, will help meet energy and climate goals while positioning assets to realize higher rental and occupancy rates and lower operating costs, among other benefits.

Here we compare a traditional capital planning process to a future-ready building capital planning process. Note that the traditional capital planning process is focused on equipment replacement at the end of useful life versus a future-ready process that begins with the goal of zero energy.

To meet long-term performance targets, every replacement should be treated as an opportunity to reduce energy use and carbon emissions by optimizing systems and electrifying equipment. When repositioning assets, owners, managers, and operators should leverage large scale investment to move beyond aesthetic functions of a building a “face-lift,” and plan inclusion of deep decarbonization strategies, such as envelope efficiency and air leakage upgrades, electrification of heating and water heating, updating building controls, and grid-integration of systems and equipment. Taking these actions during repositioning will give real estate assets a leg-up on meeting forthcoming performance standards while simultaneously increasing asset value.

According to a guide by RMI, high-performance net-zero energy (NZE) buildings command a 3-7 percent higher occupancy rate, 3.5 percent higher rental rates, and a 13 percent higher sale value than non-NZE buildings. These factors, combined with occupant demand for healthier indoor environments and corporate environmental, social, and governance (ESG) goals, make improving the performance of existing buildings a win for all. High-performance buildings will fare better in a BPS regulatory environment and avoid concerns about facing fines or worse yet, obsolescence in a changing market.

Future Ready Buildings: Preparing the built environment for the rest of the 21st century and beyond (DiNola) 2010 AIA NW and Pacific Region Conference, October 15, 2010

Building Performance Standards are Coming to a City or State Near You

Building Performance Standards are coming and building owners can take steps now to make real estate assets future-ready including:
• Owners and managers should start by benchmarking building performance and understanding future energy or carbon targets that will be integrated into new BPS.
• Then, owners and managers should develop capital plans that identify the ultimate energy or climate performance target.
• From there, owners can chart the path for building system-level improvements over time that build toward that overall energy and climate target and goal.

Building owners, managers, and design professionals can learn more about the technical and policy aspects of BPS by visiting NBI’s BPS webpage, consulting with our team of experts, and staying tuned for more updates from NBI.

by Ralph DiNola, CEO, New Buildings InstituteRalph DiNola




Top photo: Wayne Aspinall Federal Building & Courthouse in Grand Junction, CO | David Lester Photography


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