The Case for Doubling Down on Sustainability

With commercial real estate responsible for approximately 39% of global carbon emissions (28% attributable to building operations and another 11% from building materials and construction), an onus lies with the industry to take action. The United Nations Secretary-General Antonio Guterres has described climate change as humanity waging a suicidal war on nature. Both China and the US have pledged to achieve net-zero emissions. But what are specific steps for the real estate industry to take/?

Making Ecologically Responsible Construction Happen

Andrew Bernheimer, the owner of Bernheimer Architecture and an assistant professor of architecture at Parsons School of Design in New York, sums up a major problem: “If they [developers] don’t have the money, they don’t have the money. What am I going to do? Am I going to start yelling for something they can never afford?”

“Agencies in the state and city need to mandate performance benchmarks and then provide assistance to meet those mandates,” states Bernheimer.

Climate Accounting Technology

Rudin Management, a New York City real estate company, foresaw the need to invest in technology to reach its environmental goals. With KPMG, one of their tenants at 345 Park Ave., they’ve embraced climate accounting. 

Rudin’s tech company, Prescriptive Data, had developed Nantum, an operating system that collects building and occupancy data to improve efficiency, including energy use. Michael Rudin, SVP of Rudin Management, explains that in complying with government-set caps on carbon emissions, building owners can trade carbon credits, make cost-benefit analyses and avoid penalties. Using Nantum, KPMG created a blockchain-based system of record that tracks carbon emissions, offsets, trades and credits.

Industry Change Will Affect Economics

Wider adoption of sustainable services and products will drive costs to come down, according to Matt Root, a senior project manager at the environmental consulting firm Integrated Eco Strategy. “As newer technologies gain a foothold and become more popular and see a greater market demand, the manufacturers find ways to make them more efficiently and less expensively,” he says. 

Rudin Management is a member of the Urban Land Institute (ULI) Greenprint initiative. The group of leading real estate owners, investors and related businesses are aiming to reduce carbon emissions by 50% by 2030 and to reach net-zero carbon operations by 2050. These goals are slightly more ambitious than New York City’s Local Law 97. This legislation requires that buildings over 25,000 square feet cut emissions 40% by 2030, and 80% by 2050. Building owners must begin submitting emission reports by 2025 or face substantial fines.

Addressing Problems in Legislation

Rudin supports Local Law 97 but says it has fundamental flaws. “One of the ways to come below the cap is by buying renewable power. There is not enough renewable power to buy in New York City, right now,” he states.

Another issue is the tenants’ energy usage. In Rudin buildings, for example, the owner accounts for an average of 40% of the total energy consumption, while tenants use the other 60%. Few incentives motivate tenants to change their behavior. “We can do everything we can feasibly do and move the needle but it will never move the needle enough,” comments Rudin. Even rolling back the owner’s 40% of energy usage to net-zero, the building still could exceed its carbon cap.

Three Ways to Improve Building Sustainability

To lower greenhouse gases, developers need to reduce the “embodied carbon.” Manufacturers need to heat materials such as concrete and steel at extremely high temperatures during production, often burning fossil fuels. Companies are looking at alternate materials such as green steel and concrete, made with less carbon-intensive methods. Mass timber is more sustainable, lighter weight, renewable and fire resistant. Bernheimer says building codes need to be updated to allow wood construction, which would also help ease the affordable housing shortage.

Next, developers must reduce “operational carbon,” which results from running buildings. Many companies are focused on upgrading mechanical and electrical systems, HVAC, plumbing, elevators and escalators. Operational efforts also include using technology such as Nantum and the KPMG climate accounting infrastructure.

Root recommends, when possible, that buildings develop onsite renewable energy. Space requirements limit solar and wind energy production in dense, urban areas. In those instances, he suggests progression towards electric buildings that purchase energy from green sources.

Getting Financing 

Disbursements from federal COVID-relief and infrastructure allocations, which flow to the state and local levels are sources for buildings to reduce their carbon output, opines Bernheimer. Root notes that government incentives would help drive the market in transitioning buildings to cleaner alternatives.

Rudin suggests that owners and operators review New York State Energy Research and Development Authority (NYSERDA) programs and grants. He also points to Commercial Property Assessed Clean Energy (C-PACE) financing for capital improvements that boost energy efficiency.

Finally, President Joe Biden’s $2.3 trillion American Jobs Plan, released on Wednesday, proposes allocating $213 billion to affordable and sustainable housing. It focuses on jobs and transitioning to green energy.