As Regulations Ramp Up, Building Owners Turn to Technologies that Track Green Performance

Government policies are pushing landlords to meet new sustainability requirements, heaping pressure on investors to back up their efforts to go green.

In response, more owners are relying on AI and other technologies to help them meet the challenge and avoid steep financial penalties, according to a post by JLL. 

Platforms, such as Hank, which was acquired by JLL earlier this year, work by creating a digital twin of a building to learn how it operates and then generating a full system audit that details where it can make efficiency adjustments and autonomously deliver actions that span energy savings, asset longevity, comfort scores, and indoor air quality.

“From regulations to local laws to investors demanding more transparency around capital allocation, there is a tremendous push on impact investing,” Ramya Ravichandar, VP sustainability products at JLL/T, said in the post.

“While sustainability is the big theme across the board, we see a technology like Hank—the first of many disruptive tech that we are going to own—as being a necessity if you want to make a move in the space. Their capabilities around improving tenant comfort, reducing energy consumption, and bettering indoor air quality, are just the beginning.”

But it’s not just new regulations that are pushing change. 

“When it comes to socially responsible investing, it’s not just the stick⁠⁠—it’s the carrot, too,” Omar Rihani, VP and residential sector lead, Project Management Advisors, tells GlobeSt.com. “The reality is that you can’t force change only by adopting new codes and ordinances.” 

Some of the largest building owners in the world have already committed to carbon neutral and net zero goals, signaling that ESG goals are being championed by the investment community, he said. “Certainly, codes and ordinances can catalyze change, but perfection can’t be the enemy of progress⁠—owners and investors will make necessary moves to become better stewards of all our resources.”

Fines Totaling Hundreds of Thousands

Still, it can’t be denied that some of these new laws pack a punch. Take New York Law 97, which goes into effect in 2024. It applies a financial penalty to buildings that breach a set limit, with potential costs rising into the hundreds of thousands of dollars, JLL notes. 

Such regulations are targeting aggressive energy reduction measures for commercial buildings that are typically capital intensive. Examples include everything from shifting space temperature setpoints for offices to upgrading expensive heating and air conditioning infrastructure.

Advisors, meanwhile, are banging the drum about the new regulations. 

Conor McGuire, LEED AP, WELL AP, CPHB, director of sustainability, N. Reading, Mass.-based Columbia, a construction management firm, tells GlobeSt.com that he’s seeing lag time between Boston’s BERDO 2.0 (Building Energy Reduction & Disclosure Ordinance) released in fall 2021, the impact to landlords’ decisions, and the enforcement that will start in 2025 and beyond.

“Even though buildings will not be grandfathered in, most projects we’re working on were well into design or construction in fall 2021, so we’re not yet seeing a lot of project-specific impacts from BERDO 2.0, but we are bringing it up with all Boston (and Boston area) clients to help them prepare for this seismic shift for energy reporting to emissions requirements,” he says. 

Steering Capital to Green Tech

Some  developers, of course, have been well ahead of the curve. 

For instance, a 16-story tower in Manhattan’s Hudson Square, when completed next year, will exceed New York City’s 2030 climate targets for office buildings by 45% and align with the city’s 2050 carbon neutral targets.

However, countless existing properties in the city have much further to go to comply with Local Law 97, which will apply a penalty of $268 to every tC02e above the set limit. 

JLL gives as an example a 300,000 square foot office building that uses 7.5 million kWh of electricity per year and 80,000 therms of natural gas. That building would exceed initial limits by 54.1 tC02e, a penalty of $14,500, which would increase to $330,470 in 2030 as limits harshen.

Ravichandar says as energy reduction mandates become increasingly common, investors must have policies in place as anchor points.

Asset managers are increasingly tackling the mandates by investing in AI platforms that help them understand how energy is being used in their buildings and allow them to create more efficient systems through predictive technology.

Sustainability Measures Affect Employees

Kurt von Koch, CEO, FM:Systems, tells GlobeSt.com that he has been seeing demand for quality environmental data throughout buildings grow quickly over the last few years.

“Pre-Covid, being able to track environmental data and analyze it over time was primarily used to improve employee experience and productivity,” von Koch said.

“Employees could choose where they wanted to work in-office based on data that showed the most optimal light, temperature, and even noise levels. COVID-19, of course, amplified the added benefits of environmental sensors’ ability to track indoor air quality (IAQ) to support employee health and wellness, and, ultimately, their safety.” 

And now, with increasing pressure for property owners to meet new sustainability requirements combined with buildings already accounting for about 30% of carbon emissions, this level of reliable environmental data will go a long way to understanding how facilities are actually performing, he said.