Sustainability is the name of the game in today’s commercial real estate world. But a recent CBRE write-up suggests that owners and operators should approach decarbonization and green strategies proactively rather than reactively.
CBRE researchers relied on real-world experiences from management of its client properties, Galvanize Real Estate’s decarbonization approach linked to financial incentives, and Hudson Square Properties’ 345 Hudson’s retrofit to provide recommendations. The white paper’s authors also incorporated insights from the Rocky Mountain Institute and the Urban Land Institute in the following recommendations.
#1—Manage energy demand. CBRE accomplishes this through smart facilities management technologies. Galvanize Real Estate also prioritizes on-site renewable energy where feasible.
#2—Apply life-cycle-based incremental expense planning. 345 Hudson applied this by using the New York State Energy Research and Development Authority’s (NYSERDA) Strategic Decarbonization Assessment Tool for system condition evaluation and ROI.
#3—Align upgrades with trigger events. While 345 Hudson retrofitted space during tenant turnover, Galvanize aligned rehabs with property purchases and maintenance cycles.
#4—Phase in cost-effective quick wins. CBRE has focused on proactive energy-efficiency audits while leveraging financial models like energy-as-a-service (EaaS). Meanwhile, 345 Hudson focused on vacant floors and matched improvements with incoming tenant requirements.
#5—Deploy an integrated design approach. Galvanized plans its entire three-year retrofit at or before buying properties, while CBRE develops documentation for building and fuel types and HVAC systems.
#6—Consider risk overlays. 345 Hudson evaluated the “cost of doing nothing,” while Galvanize builds physical and transitional risk into each investment stage, especially underwriting. Meanwhile, CBRE monitors regulatory requirements and performs transition and market risk assessments.
The write-up suggested that readers consider a forward-looking approach to improve performance by:
- Preparing for system replacements before they fail
- Maintaining tenant comfort while minimizing life-cycle costs
- Achieving portfolio-wide decarbonization goals
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