(Building operations and management your passion? Watch for Better Buildings, a new supplement to Real Estate Forum, launching in our February/March issue.)
NEW YORK CITY-While energy prices have become much more volatile over the years, commercial real estate owners and managers still have the power to achieve cost-savings and reduce overhead. In navigating different legislation from around the country, participants during the 2012 BuildingsNY conference at the Javits Center discussed how real estate operators could obtain funding for green retrofits at the federal, state and local levels for office, industrial and multifamily properties.
Michael D’Onofrio, managing director of West Palm Beach, FL-based Engineered Tax Services, said under the Energy Policy Act of 2005, Congress passed legislation to encourage property owners to build energy efficient real estate properties to promote reduction in energy consumption. As part of section 179D of the act, federal tax deductions are available for the design of energy-efficient upgrades for lighting, HVAC, building envelope and new construction, which allows to a value of $1.80 per square foot.
D’Onofrio explained that the deduction is eligible to the entity, which funds the investment on a private property, or to the designer of a public or government owned property. He said by implementing these strategies, projects could realize valuable tax savings, and significantly improve project ROIs and annual cash flow. “It is typically overlooked and misunderstood,” he said. “But it’s pretty powerful given the fact that it’s been retroactive back to 2006, and it’s not just for new buildings, but for renovations and retrofits.”
According to the National Electrical Manufacturers Association, the legislation also covers accelerated depreciation for smart meters and smart-grid systems; extensions for energy-efficient improvements to existing and new homes; extensions for wind and renewable technologies; and the renewal and extension of the research and development tax credit for green buildings.
Recently, Congress brought the economic stabilization act of 2009 back to life, which extends the benefits of the energy policy act of 2005 through 2013. D’Onofrio said the legislation could be increased to $2 or $3 per square foot if extended into 2020, and could evolve from a deduction to a credit, similar to other renewable energy credits on the market.
On the local level, local laws 84,87 and 88 have sharpened the focus on energy consumption in large buildings. Using Manhattan as an example, panelists said New York City has implemented the Greater Greener Buildings Plan under Mayor Bloomberg's plaNYC initiative, which requires all owners of commercial buildings of 50,000 square feet or more to benchmark and disclose annual energy usage by May of every year.
Marshall Chapin, senior director of business development at EnerNOC, said the company worked on the retrofitting of Morgan Stanley's headquarters at 1585 Broadway in Times Square, which saved $125,000 in the first 18 months after getting green project was complete.
Check out more coverage of Buildings NY tomorrow morning on GlobeSt.com.
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