Real Estate’s Commitment to Green Continues to Grow
This post was co-authored by Dan Sakaguchi.
Whether it is President Trump’s proposed budget or Scott Pruitt’s rollback of EPA policies, the federal government appears to be walking backward when it comes to progress on sustainability. However, the real estate community is running forward; in cities across the U.S., more buildings are green certified than ever before. This is a promising sign that even as federal priorities wander, building owners and operators recognize that efficiency continues to make sense.
The National Green Building Adoption Index study released this month is the fourth in an annual series laying out a snapshot of which cities are leading the way in building efficiency. The researchers from CBRE, the world’s largest commercial real estate firm, and Maastricht University compiled data on the proportion of office buildings that received LEED and ENERGY STAR labels in the 30 cities with the largest office markets. This year, Chicago has taken first place with an impressive 66 percent of its office space (by percentage of square footage) now green certified, advancing from second place last year.
However, while Chicago certainly deserves kudos for this achievement, this report demonstrates reassuring progress across all cities studied. Overall, 38 percent of all commercial office space is now certified under LEED or ENERGY STAR, up one percent from last year and nearly an eightfold increase from 2005.
In particular, this series of studies points at the impressive success of the LEED and ENERGY STAR programs. Over 37,000 commercial projects have met LEED requirements and nearly 31,000 properties are currently certified by ENERGY STAR. The growth of these programs shows that many businesses are proud to signal their commitment to sustainability and that such certifications are becoming increasingly necessary to remain competitive.
Beyond this, the continued growth of ENERGY STAR certifications shows that operators of underperforming buildings are racing to keep up with the rest of the pack. One-third of current ENERGY STAR certified buildings initially scored below the required threshold when they first began benchmarking their consumption. These buildings improved operations and/or made energy efficient upgrades on their path to becoming ENERGY STAR certified. Moreover, because the certification is based on a relative performance compared to other similar buildings, these improving buildings are raising the bar on efficiency and pushing America’s building stock to more aggressive standards.
NRDC, in partnership with the Institute for Market Transformation, works closely with thirteen of the cities recorded in the study through the City Energy Project (CEP), a national initiative to create healthier and more prosperous American cities by improving the energy efficiency of buildings. The report shows that these cities continue to perform strongly on the Green Building Adoption Index, with ten of these thirteen cities making it into the top twenty ranked cities in the study.
As seen from data compiled for the report, most CEP cities saw high increases in certified office space between the years 2007 and 2010. Since then, most cities have seen slow, but continual, rates of expansion. Several cities have maintained strong expansion of green certification since 2010, however. In particular, Atlanta, Chicago, Boston, Philadelphia and San Jose have all expanded their green-labeled office space coverage by more than ten percentage points over the past seven years.
A key policy tool many cities are using to increase energy efficiency and reduce greenhouse gas emissions is the implementation of benchmarking and transparency ordinances. Data from the report makes it increasingly clear that these ordinances play an important role in incentivizing efficiency upgrades and certifications. Nine of the top ten markets ranked in the survey have implemented benchmarking ordinances, and several cities, such as Kansas City and Atlanta, have seen significant coverage increases since passage of their ordinances. The researchers also performed a simple regression analysis on the index results, finding that even after controlling for differences between cities, implementing a benchmarking ordinance is correlated with a 21 percent increase in green-certified office space.
Of course, these results are limited—for example, they do not demonstrate causation, nor do they consider the impacts of ordinances in cities with smaller office markets such as Austin or Seattle. However, these tentative results contribute to an increasing bevy of reports that suggest a significant, and likely causal, relationship between benchmarking ordinances and energy savings. David Pogue, CBRE’s Global Director of Corporate Responsibility points out that “while it is still too early to make a definitive correlation between benchmarking ordinances and the rate of growth in ‘green’ buildings, this year’s findings do begin to establish a link that will be studied closely in the future.”
It’s worth noting this report focuses on top performers among large cities, which will remain key arenas for major efficiency improvements in the future. However, it is important to highlight the many other cities that have made progress whose successes are not as well documented. Many other, albeit smaller, cities, including seven in the City Energy Project, are not ranked. These smaller cities are passing benchmarking ordinances, participating in DOE’s Better Buildings Challenge and making great strides on energy efficiency. Additionally, many lower-performing buildings have made significant improvements but have not yet achieved or sought out an ENERGY STAR or LEED label. Just as leadership cities and buildings are showcased in the National Green Building Adoption Index, the community should also develop tools to recognize cities and buildings that are making meaningful carbon reductions and improvements across the spectrum.
Despite contrary signals from the federal government, the momentum of cities towards sustainability is unchecked. We continue to see a flurry of efficiency commitments from cities, and even just this year St. Louis and South Portland passed their own benchmarking ordinances. CBRE’s reports show the private sector continues to place importance on green rating systems and labels and we anticipate more real estate owners will prioritize efficiency investments over time.