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Title: Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High-Performance Office Buildings

Abstract

Evidence has shown that owning and operating energy-efficient, high-performance, “green” properties results in multiple benefits including lower utility bills, higher rents, improved occupancy, and greater net operating income. However, it is difficult to isolate and control moderating factors to identify the specific drivers behind improved financial performance and value to investors that results from sustainability in real estate. DOE is interested in facilitating deeper investigation of the correlation between energy efficiency and financial performance, reducing data acquisition and matching challenges, and developing a stronger understanding of how sustainable design and energy efficiency impact value. DOE commissioned this pilot study to test the logistical and empirical procedures required to establish a Commercial Real Estate Data Aggregation & Trends Analysis lab, determine the potential benefits available through the lab, and contribute to the existing body of evidence in this field.

Authors:
 [1];  [1];  [1]
  1. JDM Associates, Falls Church, VA (United States)
Publication Date:
Research Org.:
JDM Associates, Falls Church, VA (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE), Building Technologies Office (EE-5B)
Contributing Org.:
Building Technologies Office Corporate
OSTI Identifier:
1419623
Report Number(s):
DOE/EE-1568
7851
Resource Type:
Technical Report
Country of Publication:
United States
Language:
English
Subject:
32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION; 29 ENERGY PLANNING, POLICY, AND ECONOMY; Utility consumption; tenant retention/renewal rate; leasing velocity; net operating income; green certifications

Citation Formats

Cloutier, Deborah, Hosseini, Farshid, and White, Andrew. Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High-Performance Office Buildings. United States: N. p., 2017. Web. doi:10.2172/1419623.
Cloutier, Deborah, Hosseini, Farshid, & White, Andrew. Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High-Performance Office Buildings. United States. doi:10.2172/1419623.
Cloutier, Deborah, Hosseini, Farshid, and White, Andrew. Mon . "Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High-Performance Office Buildings". United States. doi:10.2172/1419623. https://www.osti.gov/servlets/purl/1419623.
@article{osti_1419623,
title = {Utilizing Commercial Real Estate Owner and Investor Data to Analyze the Financial Performance of Energy Efficient, High-Performance Office Buildings},
author = {Cloutier, Deborah and Hosseini, Farshid and White, Andrew},
abstractNote = {Evidence has shown that owning and operating energy-efficient, high-performance, “green” properties results in multiple benefits including lower utility bills, higher rents, improved occupancy, and greater net operating income. However, it is difficult to isolate and control moderating factors to identify the specific drivers behind improved financial performance and value to investors that results from sustainability in real estate. DOE is interested in facilitating deeper investigation of the correlation between energy efficiency and financial performance, reducing data acquisition and matching challenges, and developing a stronger understanding of how sustainable design and energy efficiency impact value. DOE commissioned this pilot study to test the logistical and empirical procedures required to establish a Commercial Real Estate Data Aggregation & Trends Analysis lab, determine the potential benefits available through the lab, and contribute to the existing body of evidence in this field.},
doi = {10.2172/1419623},
journal = {},
number = ,
volume = ,
place = {United States},
year = {Mon May 01 00:00:00 EDT 2017},
month = {Mon May 01 00:00:00 EDT 2017}
}

Technical Report:

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  • Results are presented of an effort to develop comprehensive and reliable energy consumption data for office buildings. A survey was conducted of readily available energy consumption data and the literature that describes the factors which drive energy use in such buildings was analyzed. Information on heating, ventilating, and air conditioning (HVAC) systems was assembled. A number of building energy use simulation programs were reviewed to determine their suitability for estimating energy consumption by function and the effects of tradeoffs in building design and operating parameters on building energy use. Simulations using the AXCESS program were conducted. The 1975 data basemore » of the Building Owners and Managers Association (BOMA) was obtained and analyzed. Data describing energy use on a regional and national basis were developed, and regression equations based on these were obtained. The ability of these equations to predict average energy use was then confirmed by applying them to four office buildings not in the BOMA data base. A number of proposals for the further improvement of the equations were developed, including additional data collection. Specifically, the survey of actual and simulated data on a regional basis is reported in Section 2. HVAC systems are discussed in Sections 3 and 4. BOMA obtains annual data on about 1000 buildings covering such items as location, floor area, height, age, average occupancy rate, average number of employees, types of tenants, type of air conditioning, and energy consumption by fuel and the description and analyses of the BOMA data are presented in Sections 5 and 6.« less
  • In previous reports, we have identified two potentially important issues, solutions to which would increase the attractiveness of DOE-developed technologies in commercial buildings energy systems. One issue concerns the fact that in addition to saving energy, many new technologies offer non-energy benefits that contribute to building productivity (firm profitability). The second issue is that new technologies are typically unproven in the eyes of decision makers and must bear risk premiums that offset cost advantages resulting from laboratory calculations. Even though a compelling case can be made for the importance of these issues, for building decision makers to incorporate them inmore » business decisions and for DOE to use them in R&D program planning there must be robust empirical evidence of their existence and size. This paper investigates how such measurements could be made and offers recommendations as to preferred options. There is currently little systematic information on either of these concepts in the literature. Of the two there is somewhat more information on non-energy benefits, but little as regards office buildings. Office building productivity impacts can be observed casually, but must be estimated statistically, because buildings have many interacting attributes and observations based on direct behavior can easily confuse the process of attribution. For example, absenteeism can be easily observed. However, absenteeism may be down because a more healthy space conditioning system was put into place, because the weather was milder, or because firm policy regarding sick days had changed. There is also a general dearth of appropriate information for purposes of estimation. To overcome these difficulties, we propose developing a new data base and applying the technique of hedonic price analysis. This technique has been used extensively in the analysis of residential dwellings. There is also a literature on its application to commercial and industrial buildings. Commercially available data bases exist that, if supplemented with engineering survey for equipment and materials use, could be analyzed statistically with a hedonic price model for the valuation of both the energy-saving and productivity effects of building technologies. Uncertainties about technology performance can cause investors to delay deploying new technologies. This behavior is explained by the ''investment under uncertainty'' literature. This literature suggests that under conditions of irrecoverable (''sunk'') costs, uncertain outcomes, and the ability to defer deployment, decision makers focus on potential losses and demand risk premiums and a few support the notion of focusing on losses, the so-called ''bad news principle.'' We describe a series of approaches to isolating buyer perceptions of uncertainty and means for reducing uncertainty.« less
  • The following chapters are included: government energy policies, production and energy consumption, the energy future, understanding energy conservation in real estate, thermal comfort and design principles, measuring and improving the energy efficiency of existing structures, environmental control systems, solar energy, investment analysis, and guidelines and aids for making the most of energy in real estate. (MHR)
  • The textbook accompanies the workshop entitled, Making the Most of Energy in Real Estate. Other workshop materials include nine slide/tape shows which are part of this packet and a manual providing step-by-step assistance for planning and implementing the workshop. The goals of the textbook are to increase knowledge and build the confidence of the real estate professional with regard to energy effects on real estate and to develop the reader's competence about performing the evaluations needed to incorporate energy factors into the business routines. Government regulations and activities are discussed and general information about energy sources is provided. How propertiesmore » use energy is reviewed and various energy-conserving building design features are described. How energy use can be measured is reviewed; some of the energy-efficient items which can be retrofitted into existing properties are listed. How energy systems work and improvements that can be made, with emphasis on solar systems, are discussed. Methods of investment analysis which are useful in evaluating energy-efficient items are outlined. Practical suggestions and aids for helping each sector of the real eastate community both to adjust its business routine to current energy-related market conditions and to anticipate future adjustments which may be needed are presented. (MCW)« less
  • Guidelines are presented for implementing a one- or two-day workshop entitled: Making the Most of Energy in Real Estate. Energy information is presented so that the participants in the real estate sector are well informed about energy matters so that real estate decisions will reflect the scarcity of dwindling energy supplies. A step-by-step guide for persons implementing the workshop is given and checklists and forms which may be useful to workshop planners at various stages are shown. Examples of the kinds of promotional materials necessary for the workshop are described. Lesson plans for the use of nine slide/tape shows whichmore » are available for the workshop are given. Lesson-by-lesson lists of all handouts are presented. The script necessary to present the information on the slide/tape shows is presented in this guideline. (MCW)« less