Special Report: Financial Incentives Likely to Be Part of Any Energy Legislation

Chicago–With his oath of office in 2009, President Barack Obama brought hope to the industry of some legislation standardization with regard to energy usage. Now, with different parties controlling the House and Senate, it seems unlikely that the administration will be able to pass any legislation on the issue, according to panelists at a session titled “The Impact of Energy Legislation on Real Estate” at the 2010 Greenbuild International Conference and Expo.

While job creation is currently Congress’ number-one priority, it’s important that the policymakers don’t make matters worse for the real estate sector, asserted Duane Desiderio, vice president and counsel of the Real Estate Roundtable.

Regulation is necessary because so many aspects of the real estate world do not currently have a national standard (though some states and localities do), pointed out Dan Probst of Jones Lang LaSalle. These include codes and standards, reporting and benchmarking, audits and retro-commissioning, labeling and certification, and financial incentives.

While incentives are often difficult to keep up with, Probst emphasized the importance of keeping up-to-date and being ready to jump in when new initiatives are offered. Learn about what is going on, he said, and keep pace with new technologies and tools that are available.

And, while disclosure has not become a national requirement just yet, transparency does enable better buying (and selling) decisions, Probst noted, adding that he believes there will be a push for disclosure in the U.S., and companies should know where they stand before this becomes a requirement.

Despite this lack of standardization, however, many real estate companies do voluntarily measure, track and report the performance of their buildings, pointed out Probst. And, he explained, there are a few reasons why they do this, including (among others): to be perceived as progressive, as well as international accords; since many large companies are multinational, they have to comply with other standards overseas. The physical impact of weather-related emergencies can also have a tremendous impact on the industry, especially since the insurance industry now considers climate change to be the number-one risk.

Desiderio predicts that, if any energy legislation is passed with the new Congress, financial incentives—particularly for retrofits—are likely to come into play, particularly since 2014, with $1.4 trillion of commercial real estate debt coming due, will prove to be an opportune time to begin such projects.

Any mandatory federal green building standard, Desiderio concluded, would likely be a prescriptive code, because a performance-based approach wouldn’t be cost effective. And multi-tenant commercial spaces, including multifamily and shopping center space types, would find any requirement difficult unless data and privacy concerns surrounding utility bills are resolved.