Tenant Energy Performance in Commercial Office Buildings NRDC Center for Market Innovation

U.S. COMMERCIAL OFFICE REAL ESTATE IMPACT 12 billion square feet = $20 billion in annual energy costs 2

TENANT OPPORTUNITY Over 50% of a building’s energy use comes from tenant spaces in commercial office buildings  Optimize energy performance, quality of spaces and building services through owner/ tenant collaboration  Base building energy efficiency goals and performance recognition ratings are enhanced through better tenant energy performance 3

TENANT OPPORTUNITY  Workplace quality, occupant comfort and satisfaction improvements are often cited as motivations for high performance tenant space.  Soft benefits have the potential for greater economic impact than energy cost savings.  A process of evaluating and quantifying soft benefits is necessary driver to increase the demand for high performance tenant space. 4

VALUE PROPOSITION 5 TENANTS: ↓ energy consumption ↓ operating & maintenance costs ↑ workplace comfort ↑ employee attraction/retention ↑ occupant satisfaction ↑ corporate responsibility & investor recognition REAL ESTATE OWNERS: ↓ energy consumption ↓ operations & maintenance cost ↓ capital plan & infrastructure upgrade cost ↑ occupancy & tenant quality ↑ tenant satisfaction ↑ renewal probability ↑ asset class, value & recognition

TENANT ENGAGEMENT Challenges: 1)Data proving payback of energy investments 2)Project process/ execution expertise 3)First cost funding solutions 6 Optimizing energy performance at time of build-out, renovation or capital work maximizes ROI and minimizes incremental cost and disruption

ENERGY SAVINGS OPPORTUNITIES 7

QUANTIFIABLE RESULTS 8 Baseline energy use can be reduced by 30-50%, optimizing energy performance with a payback of 3-5 years, while providing a more comfortable and better performing building

QUANTIFIABLE RESULTS 9 Baseline energy use can be reduced by 30-50% compared to: 1)Existing office space 2)Code standard new tenant space 3)Code standard new tenant space + Pre-retrofit base building

QUANTIFIABLE RESULTS 10 Baseline energy use can be reduced by 30-50% compared to: 1)Existing office space 2)Code compliant standards 3)Code compliant standards + Pre-retrofit base building

TENANT SPACE ENERGY SAVINGS OPPORTUNITIES 11 Optimize energy performance by addressing all end uses: 1)Reducing loads 2)Installing efficient equipment 3)Managing behavior

LEASE CYCLE ENERGY OPTIMIZATION PROCESS

TENANT SPACE ENERGY SAVINGS OPPORTUNITIES 13 Tenant Energy Performance Measures (EPMs) (Optimize results by packaging a group of measures) Building Owner Support to Tenant EPMs (Showcase EPMs in a model office suite) Strategies Provided by Building Owner Sub-metered by space/ floor/ net leaseProvide specifications to tenant engineer Building envelope (windows, window film, radiative barrier)Provide tear sheet with details on capital work EPMs Strategies with No or Low Additional Incremental First Cost Select building with natural daylight accessLocate equipment away from windows Design open office layoutLocate equipment in core, design pre built Paint walls white or light colors to reflect lightPaint walls white if space is ‘white boxed’ Seal perimeter walls/ openingsPre seal if perimeter if space is ‘white boxed’ Occupancy sensor/ vacancy sensor lighting controlsInstall in pre-build model space Short Payback Measures High Efficiency LightingProvide specifications and vendors list for competitive bids Optimize HVAC UnitsProvide specifications and vendors list for competitive bids Plug Load ManagementProvide list of technologies and strategies, meet after move-in IT/ Server Room Load ManagementProvide best practices and temperature set points Medium Payback Measures Daylight Harvesting Lighting ControlsProvide specifications and vendors list for competitive bids Demand Control Ventilation (CO2 Sensors)Coordinate building control systems Ongoing Management End use sub-metering- Lighting, plug load, HVAC, IT loads Ensure building infrastructure supports tie in of multiple electrical panels Energy Modeling- Use energy predictive analysis during design, incentive filing, and measurement and verification Provide whole building energy model to Tenant’s engineer

TENANT CASE STUDY: LF USA 14

TENANT CASE STUDY: LF USA 15

TENANT CASE STUDY: LF USA 16 Phase 1 (3 Floors) Energy Performance Measures Annual Electricity Reduction (kWh/yr) Percentage of Electricity Use Reduction from Baseline Annual Electricity Cost Savings Incremental First Cost Simple Payback Daylight Harvesting Controls30,9683.9%$5,359($41,850)7.8 yrs High Efficiency Lighting55,7467.1%$9,646($30,000)3.1 yrs Right Sized HVAC Units{ 00%$0 N/A } Demand Control Ventilation (CO 2 Sensors) 21,1472.7%$3,659($47,520)13.0 yrs Plug Load Management103, %$17,946($45,000)2.5 yrs Combined EPM Package (Without incentives or energy modeling costs) 218, %$37,766($164,370)4.4 yrs Net NYSERDA Incentives-- $36,940 Energy Modeling Soft Costs-- ($6,600) Combined EPM Package (With Incentives and energy modeling costs) 218, %$37,776($134,030)3.5 yrs

TENANT CASE STUDY: LF USA 17 Phase 1 Build-Out (3 Floors) Leased Premises 137,400 sq. ft. Modeled Energy Reduction28% Total Electricity Savings over Lease Term3,273,780 kWh Incremental Implementation Cost (w/o incentives)$164,370 State Incentives (net of review and filing costs)$36,940 Energy Modeling Soft Cost$6,600 Adjusted Incremental Implementation Cost$134,030 ($0.98/ft 2 ) Total Electricity Cost Savings over Lease Term$566,495 Present Value of Electricity Cost Savings over Lease Term$392,002 Net Present Value of Project Investment$257,972 Return on Investment (ROI) over Lease Term192% Annual Rate of Return27% Payback Period3.5 years

TENANT CASE STUDY: LF USA 18 Total Build-Out (9 Floors) Square Footage 412,200 sq. ft. Modeled Energy Reduction31% Total Electricity Savings over Lease Term 10,519,320 kWh Incremental Implementation Cost (w/o incentives)$511,110 State Incentives (net of review and filing costs)$124,876 Energy Modeling Soft Cost$19,800 Adjusted Incremental Implementation Cost$406,034 ($0.99/ft 2 ) Total Electricity Cost Savings over Lease Term$1,813,733 Present Value of Electricity Cost Savings over Lease Term$1,255,062 Net Present Value of Project Investment$849,028 Return on Investment (ROI) over Lease Term209% Annual Rate of Return29% Payback Period3.4 years

LESSONS LEARNED 19 Make it easier to get to “yes”:  Start early  Involve top leadership/ decision makers  Incorporate an integrated process  Facilitate knowledge sharing  Design tiers of performance solutions  Provide economic frameworks  Time and iterate the value analysis  Document and measure results

LESSONS LEARNED 20 Motivators:  Recognition/ marketing  Better workplace quality  Energy cost savings

TENANT DEMONSTRATION PROJECTS 21 1)LF USA: Empire State Building/ Malkin Holdings 2)Coty: Empire State Building/ Malkin Holdings 3)Bloomberg LP: 120 Park Avenue/ Global Holdings 4)Reed Smith: 3 Logan/ Brandywine Realty Trust 5)INTEC: 3 Flint Hill/ First Potomac Realty Trust 6)Relay GSE: 40 W. 20 th / NRDC

TENANT RESOURCES 22 Process guides: Energy Performance Opportunities in Commercial Buildings (10-step Lease Cycle Energy Optimization Process) Energy Performance Optimization (Project Development and Value Analysis Process) Tools: Energy Modeling RFP Template Energy Modeling Report Template Incremental Costing Template Value Analysis Calculator Case Studies: Li & Fung USA SKANSKA NRDC DC

TENANT ENGAGEMENT SOLUTIONS Challenges: 1)Data proving payback of energy investments 2)Project process/ execution expertise 3)First cost funding solutions a)Tiered Tenant Improvement Allowance b)3 rd Party Energy Service Agreement Model c)NYCEEC Pilot 23

FOR MORE INFORMATION: Wendy Fok Project Director, High Performance Tenant Demonstration Project Center for Market Innovation Greg Hale Director of Efficiency Finance Center for Market Innovation 24