In the age of non-traditional working hours, when companies have round-the-clock and weekend staffing to serve a global customer base, it is not unusual for an office tenant to negotiate a non-traditional leasing arrangement in which the tenant, rather than the building owner, has direct control over HVAC and energy usage in its space.
For building owners – especially those who strive to be energy efficient – this can become a vexing problem in balancing efficiency with flexible tenant operations.
My building operations team and I resolved to overcome this challenge in 2011. By that year, my firm, Monday Properties, had already achieved ENERGY STAR certification across nearly all of the owner’s entire existing building portfolio. The sole exception: 1440 Broadway. We also achieved BOMA 360 and LEED-EB Gold for four buildings, including 230 Park Avenue, the first pre-war and New York City landmark building to be crowned with this designation. Three additional buildings are now on course to achieve LEED Gold.
Unlike the vast majority of office tenants in the New York market, the tenants at 1440 Broadway controlled roughly 75% of the building’s energy usage. They had no real incentive to become energy efficient because they all had traditional leases in which utilities were included as part of their rent or sub-metering directed the cost from the building to the tenant. In all cases, these long-term occupants neither realized the extent of their own energy consumption, nor saw the energy conservation opportunities available to them.
In a precedent-setting program, the tenants of 1440 Broadway agreed to coordinate with Monday Properties to reduce consumption on their own. Our property management team instituted a formal energy conservation and efficiency training program for tenants. In turn, the tenants utilized this training to change their consumption habits through more efficient operating practices.
It started with a detailed energy benchmark survey that offered eye-opening results. For example, workers leaving the building on Friday afternoon in the summer often left tenant air conditioning equipment running all weekend. The same situation occurred on winter weekends, when the heating was turned up and left on. Lighting was left on when offices were vacated after the nightly cleaning crew had gone home.
However, with training and consumption data provided by our third-party contractor (the energy experts at AtSite and Code Green), the situation improved significantly step by step. Today, 1440 Broadway is LEED Gold and ENERGY STAR certified.
Since the program started in 2011, 1440 Broadway has cumulatively saved more than 5.2 million BTU, equivalent to a $300,000 savings. The building has also avoided the emission of over 1,190 metric tons of CO2, equivalent to taking 250 cars off the road for a year or powering 175 homes for a year.
The New York City market’s traditional office leasing expectations – with its “comfortable offices on weekdays from 8 to 6” and “utilities provided in the rent” offerings – do not encourage a proactive owner/tenant mindset for energy efficiency and conservation.
Most office leases include energy costs in a tenant’s rent. This is because HVAC – the major energy consumer – is under the control of the owner’s operational staff in both tenant spaces and common areas. Roughly 65-75% of energy costs are controlled by the owner, and about 25-35% – mostly lighting – is controlled by the tenant. Moreover, tenants understand that “utility costs included” represents a fairly small portion of their overall rent.
However, as demonstrated at 1440 Broadway, that mindset can change as an engaged tenant community participates in smarter operations. In today’s 24/7 business world, tenants and owners know that sustainability and economics are two sides of the same coin. Working together, we all win.
Hani J. Salama, PE, LEED AP, is the senior vice president for property management and operations at Monday Properties.