Monday, January 19, 2009

Building Energy Consumption Disclosure on the Way

I am sure you are all aware that the nation’s first green building code was adopted last summer by California, a move that I believe sets an important precedent for similar codes being considered elsewhere. It will require a 15% cut in energy consumption in all new construction and a 20% improvement in water efficiency when it becomes mandatory in 2010. If you are breathing a sigh of relief that this does not impact your existing building, California has also done something else that will impact you.

It happened in California on January 1, 2009. A law that passed in 2007, AB 1103, became effective. This law is specifically directed at energy use in existing commercial buildings. It promotes energy conservation by requiring electric and gas utilities to maintain records of the energy consumption data of all non-residential buildings in the state to which they provide service, in a format compatible for uploading to U.S. EPA's Energy Star Portfolio Manager. This will allow commercial building owners to see how they stack up against their peers in terms of energy consumption. I believe this definitely is a harbor of things to come elsewhere in the country.
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But the real impact on existing property owners will come in 2010. As of January 1, 2010, the law also requires building owners or operators to disclose the building's Energy Star energy performance rating for the most recent 12-month period to a prospective purchaser, lender or leasee. This means that a year from now, anyone looking to buy, finance or lease a building in California will be entitled to obtain the building’s energy performance data and compare it to other similar buildings. There is no question in my mind that this will eventually result in a rental discount and a loss of competitiveness in the marketplace for less efficient buildings. So if you have a building in California, you have a year to prepare for this new reality!
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Interestingly, this has already happened in the UK where existing commercial properties (down to approximately 26,000 square feet) must have energy performance certificates prepared when a building is being built, sold or rented. These energy performance certificates indicate the energy efficiency rating of the building and provide potential buyers and tenants with a way to compare buildings they may wish to purchase or rent. Sound familiar!
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A prudent property owner or manager, no matter where your property is located, should prepare for this new reality now.

1 comment:

peter said...

As CA goes, so goes the nation!!