Embracing Strategies for Market Transformation

June 1, 2008

BOMA Intl. highlights strides in implementing widespread energy- and carbon-reduction measures

Most real estate professionals, energy engineers, and policymakers agree on one thing: There are many barriers (both real and perceived) to implementing widespread energy- and carbon-reduction measures in the commercial office building industry. Split incentives, lease structure, short hold periods, lack of control in tenant space, and lack of tenant demand are perhaps the most commonly cited barriers. Over the past several years, BOMA Intl. has made it a mission to identify the barriers and work to find solutions to remove or lessen their negative impact.

7-Point Challenge
BOMA's 7-Point Challenge calls upon BOMA members and the commercial real estate industry to reduce the use of natural resources, the use of nonrenewable energy sources, and waste production. It advocates coordination among building management, ownership, and tenants to demonstrate leadership and decrease energy consumption by 30 percent across portfolios by 2012 (as measured against an "average building" measuring a 50 on the ENERGY STAR® benchmarking tool in 2007).

In 2008, BOMA Intl. is working to educate its members and local associations on the goals of the challenge, and to encourage widespread acceptance. As of mid April, 30 member companies and 35 local BOMA associations had formally endorsed the goals of the challenge and are now taking steps to implement them across their portfolios. Endorsing companies range from large U.S. companies (e.g. CB Richard Ellis, RREEF, Cushman & Wakefield, and Transwestern) to much smaller regional and single-market companies.

Clinton Climate Initiative
In May 2007, the Clinton Foundation's Clinton Climate Initiative (CCI) announced its new Energy Efficiency Building Retrofit Program, aimed at accelerating the speed of market transformation to the existing building stock around the world. CCI began by forming partnerships with several large energy service companies (ESCOs), and secured financing commitments from large banks willing to each make $1 billion available to finance energy retrofits. CCI is also working to negotiate bulk purchase agreements to lower prices of available technologies. Shortly after the program's announcement, BOMA Intl. and CCI signed a Memorandum of Understanding (MOU) to define the collaborative relationship between CCI and BOMA to accomplish shared goals of improving energy efficiency and reducing greenhouse-gas emissions in the world's large cities, as well as throughout major U.S. and international real estate portfolios.

Since then, BOMA has been working with CCI staff, as well as some of their ESCO and lender partners, to streamline the negotiation/contracting process to finance major energy retrofits in order to make ESCO performance contracting or third-party financing a more usable tool for owners and managers of multi-tenant office buildings.

Green Lease
Two of the most commonly cited barriers to implementing green and energy-efficient building practices are the split incentives resulting from a typical triple net lease and a lack of tenant demand, which BOMA believes is, at least in part, fueled by a lack of tenant education. BOMA Intl. believes it has identified a solution that will provide the right incentives to owners and tenants: the Green Lease.

The association assembled a team of experts (i.e. members with experience in executing lease agreements who also had experience in building, operating, or managing a green building) to identify parts of a typical lease agreement that should be "greened" for facilities operating as high-performance buildings, regardless of the certification or rating system used, or if the owner/manager is implementing his/her company's specific sustainable building practices.

In addition to addressing issues of who pays for what services, the BOMA Green Lease addresses operations issues, recycling and waste management, maintenance and repairs, alterations and tenant improvements, end-of-lease considerations, janitorial, and contractor rules and regulations.

The end result will serve not only as an enforceable document designed to outline tenant obligations, but will also provide invaluable education for the tenant, at the time of negotiating the lease, on what exactly it means to occupy space in a high-performance building. The BOMA Green Lease will be available this summer.

An important aspect of market transformation continues to be advocacy. BOMA Intl. is working closely with Congress to tell the story of the great accomplishments made every day by the commercial real estate industry to implement energy- and carbon-reduction strategies on a voluntary basis, free of government mandates. BOMA local associations are doing the same with municipal and state leaders. The message is clear: The private sector is committed to being part of the solution and is making great strides. Public policy needs to support these efforts, not hamper them through the imposition of needless and costly mandates.

For more information on this and other issues, call BOMA Intl. at (202) 408-2662 or visit www.boma.org.

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