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We're Beginning To See The Light

By: Nick Lombardi

January 27, 2014

Among the groundbreaking package of laws and regulations that comprised Mayor Bloomberg's Greener, Greater Buildings plan, the Local Law 84 Benchmarking requirement (LL84) was designed to be simple and straightforward, intended to lift the veil that concealed the energy use details of New York City's commercial building stock.

Access to new information generated by benchmarking and disclosure would, it was hoped, transform real estate transactions by introducing energy considerations into the space and investment markets decision chain. Now, three years in, there seems to be some appetite to take stock and measure the true effectiveness of LL84, and to respond to some bubbling sentiment in New York City that it hasn't really "worked" as intended.

Let's start with the take-away; despite what feels like a long time since its enactment, it's still far too early to make such declarations, and the evidence we do have suggests LL84 has indeed started to have its intended impact.

There are three primary reasons why the assertion, now, that LL84 hasn't "worked" misses the mark:

  1. We are still in the infancy of establishing the data set and need much more data and further study before we can draw a full menu of meaningful, actionable conclusions.
  2. Despite still being in this early stage of the law, we have already been able to see significant signals in the data and draw some important initial conclusions, and, perhaps most importantly, we're learning what other questions need to be asked and what other data need to be collected in order to really, truly understand and address energy consumption in the built environment.
  3. The real estate community has yet to master benchmarking and use it to drive building management decisions, beyond those who were already doing it.

To understand the limitations of the data gathered thus far, let's examine what new information has come out of LL84 in order to understand what we are doing with it. According to one of the lead researchers working with the City's benchmarking data, Dr. Constantine Kontokosta, Director of the Center for the Sustainable Environment at the NYU Schack Institute of Real Estate and Deputy Director of the NYU Center for Urban Science and Progress, even the limited LL84 data has already yielded some important results.

"We're beginning to understand the things that we don't know that are important," says Kontokosta. "The energy consumption of a building is driven of course by its physical characteristics, its occupancy and tenancy characteristics, its building systems; and then there's this additional component that's about building management and other behavioral issues that might be different across different buildings. Disclosure policies have done a lot to help us understand the characteristics piece, and now we're seeing new research start to fill in the gaps around these other elements."

As a result of the questions raised by his benchmarking work, Dr. Kontokosta has undertaken a study to explore the relationship between tenant characteristics and energy use with CBRE, one of the world's leading property management firms with operations across the globe, and with the premier national environmental advocacy organization Natural Resources Defense Council. He is also now analyzing the data from the third year of LL84 and adding a new, extremely important dimension to our understanding of building energy use: time.

"We've matched up about 6,000 buildings that we have three years of data for, and it's beginning to tell some interesting stories. The challenge is that there are a lot of variables that affect energy consumption, and many of these variables are changing over time, as is the amount of energy a building is consuming. So, to begin to assess whether a building is becoming more efficient can be challenging unless you're normalizing for occupant density and operating hours, for example, and other changes to the building over those years, and that's something that, because of data limitations, hasn't been done much in the past."

We're just now getting to the point where we have this data over a long enough period of time to really make use of it and understand it. The implications of Dr. Kontokosta's work and of all of the studies now emerging from it are broad and important, and it will take more research to really understand how all of these variables work together. This pace is entirely proper for innovative policies and industry practices. Premature judgments of the effectiveness of LL84 risk wasting the progress made by Dr. Kontokosta and his colleagues and squandering the vast potential of what their continued efforts might yield.

For the real estate community, it's still too early to rule on LL84's success. Here, it's illustrative to compare those who have been benchmarking for years voluntarily and those to whom this process is entirely new under LL84. For example, at Cushman & Wakefield, another of the world's leading property management firms, many building managers have been using EPA's ENERGY STAR Portfolio Manager® for years, tracking ENERGY STAR scores and using benchmarking information to drive energy upgrades. For them, LL84 compliance is no more effort and requires no new learning beyond what they had prior. But for some of the buildings new to C&W, many property managers were learning Portfolio Manager for the first time, requiring training and support from C&W's more experienced staff to deliver the expected level of service.

According to Eric Duchon, C&W's Manager of Sustainability Strategies who heads up LL84 compliance, "The knowledge about benchmarking definitely improved across the board from year one to year two. And the guys who have been doing this for years who really know it and understand how all of the different inputs affect the rating of their buildings are the ones who use it the most to improve energy performance."

C&W has the internal resources to provide that kind of training and support, but many firms and individuals tasked with LL84 compliance don't, and an expectation of mastery after such a short period of time is unrealistic. The real estate community will see the benefits of benchmarking only after it becomes as familiar with it as it is with rent rolls, and impatience, again, risks foregoing substantially all of the future benefits of LL84 and rendering these first three years of learning meaningless.

It's easily forgotten that just a few years ago the vast majority of New York City buildings were virtual black boxes when it came to energy consumption. In a short time, largely due to benchmarking, energy use has become a subject of regular discussion among those in and around the real estate community. That, in and of itself, is a major accomplishment, but the real gains to be made are still yet to come. More time needs to transpire before anyone can make any sweeping judgments about the efficacy of LL84, so let's appreciate the value of the things we have already learned, and let's be patient and let it play out over the intended timeline.

Nick Lombardi is a writer, energy efficiency professional, and a proponent of market oriented solutions for environmental challenges, with experience in building commissioning, green building design and construction, and land conservation. He is the Program Manager for New York City at Conservation Services Group, a freelance contributor to Greentech Media, and Chairman of the Advisory Board for the Center for the Sustainable Built Environment (SBE) at the Schack Institute of Real Estate at New York University. You can follow him on Twitter at @eefficionado.

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