How to Leverage Unique 2021 Real Estate Landscape to Prepare for Local Law 97

A year ago, New York City’s commercial real estate industry was grappling with the recently passed Climate Mobilization Act and Local Law 97, the nation’s most stringent energy and carbon emissions law for existing buildings. Building owners reviewed their emissions performance and calculated their potential fines, some of which were millions of dollars per year. Leading real estate owners got to work developing energy and carbon reduction strategies to get ahead of the limits.  

And then, the NYC’s CRE industry (and the entire economy) slammed into one of the largest upheavals in Its history. From vacancies to lost rent, to searching for solutions to challenges never contemplated in the city, building owners dropped everything to address the COVID pandemic and protect the health and safety of their tenants.

But Local Law 97’s deadlines continue to draw closer. There are still challenges ahead for commercial real estate, and one of the best ways for building owners to protect their investments is to reduce risk and lower operating expenses. Preparing for Local Law 97 achieves both goals. Local Law 97’s 2024 emissions limits are rapidly approaching, and reducing building energy use is still the most cost-effective way to prepare for compliance, since building owners will save on their utility bill and reduce potential LL97 fines.

Building owners should use 2021 to (re)start developing a LL97 compliance strategy. Here are some tips on how to take advantage of these unprecedented times to get a jumpstart on LL97 planning.

Where to Start

Local Law 97 set greenhouse gas (GHG) emissions limits for all buildings over 25,000 square feet that go into effect in 2024. The first step in developing a compliance plan is knowing how your building compares to the limit, what your potential fine could be if you do nothing, and how far you have to reduce to meet the limit.

You can find an estimate of your GHG intensity in your Local Law 84 Energy Star submission. However, we recommend a more detailed calculation that evaluates each type of space within your building and measures the energy use of each of your tenants to pinpoint energy hogs. CodeGreen Solutions has provided this analysis to more than 150 buildings across the city as a foundation for their LL97 compliance planning.    

Improve Building Controls

New vacancy patterns brought on by the pandemic have uncovered new opportunities for energy savings. While many office buildings saw occupancy drop by 80-90%, most saw whole-building energy use fall by only 15-20%. There are several reasons for this, but it highlights a tremendous opportunity to reduce energy waste by improving controls for HVAC (heating, ventilation and air conditioning) and lighting to mirror occupancy more closely.

Most large office buildings weren’t designed to operate across the occupancy levels we are currently seeing. And, even before the pandemic, many buildings with central plants were wasting considerable energy heating and cooling the entire building to accommodate one or two tenants with unusual schedules.

Improving zonal HVAC and lighting control will reduce wasted energy and improve tenant comfort by reducing hot and cold calls and saving building operations teams time and money. More granular building controls will be invaluable as occupancy patterns continue to diverge.

More granular system controls can also be used to adjust and limit energy use at specific times, enabling a building to earn money from local Demand Response programs, and potentially take advantage of on- and off-peak energy prices and carbon emissions factors under Local Law 97.        

Take Advantage of Low Office Occupancy

Tenants consume 50-75% of the energy in a typical office building and a similar percent of the carbon emissions. With many office spaces vacant or near vacant, now is the time to evaluate the HVAC and lighting systems within tenant spaces and see how they are impacting your building’s carbon emissions.

Building that have tenants with leases that extend beyond 2024 should review lighting and HVAC for potential upgrades and retrofits in 2021, since it will be easier and cheaper without after-hours work or the typical tenant disruptions. 

In addition, Local Law 88 requires that lighting throughout the building, including tenant spaces, be upgraded before January 1^st, 2025. 

If You Can’t Measure it…

“You can’t manage what you can’t measure” — It’s been said a thousand times, because it is so true.

Local Law 97 compares whole-building carbon emissions to the established limits and assigns a fine to the building owner if the limit is exceeded. The law doesn’t care which part of the building or which tenant is to blame, but building owners need to know so they can target systems or tenants that are wasting energy.

Many commercial buildings across New York still have tenants that pay for energy as a fixed portion of rent or ERI (electric rent inclusion). Since this energy use is not measured, tenants and landlords have no idea how much energy is being consumed and are not incentivized to reduce. 

Local Law 88 requires that all tenants 5,000 square feet and over in buildings of more than 25,000 square feet are to be submetered for electricity use by January 1^st, 2025.  Now is a great time to survey your building and identify which tenants need submeters.

Submeter installation typically requires power to be cut temporarily, so this is a great time to do it with minimal tenant disruption. Submetering your tenants will help incentivize them to reduce excess usage, and improve visibility into where and when excess energy is being used.

Energy Code Compliant ≠ LL97 Compliant

As building owners plan for lease renewals and start signing new tenants, they should make sure tenants are not only meeting the energy code with their fit-outs and renovations, but also are exceeding it in order to comply with LL97.

Frustratingly, meeting the current NYC Energy Code does not guarantee that a space will meet the LL97 emissions limits. So, building owners should use an energy model to calculate the emissions of planned tenant work, and evaluate additional efficiency measures to reduce energy use in HVAC, lighting, and even plug loads to align with LL97. The New York State Energy Research and Development Authority’s (NYSERDA) Commercial Tenant Program offers generous funding for 50% or more of this analysis to help improve energy efficiency in commercial tenant spaces.

CodeGreen works with more than 150 million square feet of commercial property in New York City, and over 600 million nationwide, in developing, implementing, and tracking comprehensive energy and carbon reduction programs. Our engineers help identify energy reduction measures in base building and tenant spaces through energy audits, retro-commissioning, and educational training for tenants and building staff. 

We help clients calculate their current emissions and build a multi-step process to address excessive energy use throughout the building. We also keep our clients up to date on developments with the law that may impact their compliance strategy.   

Get to work!

Building owners should use 2021 to develop a comprehensive LL97 compliance strategy, starting with the areas that can be addressed more easily because of low occupancy. Reducing energy use and developing a LL97 strategy will lower utility bills in the short term, and reduce risk over the long term, improving asset values for current and future owners.