Friday, December 11, 2009

Should Commercial Real Estate Energy Consumption Benchmarking Be Re-focused?

The difficulties and complexities associated with benchmarking the energy consumption of commercial buildings are well known. It would appear that until such time as a truly representative (for each property class, type property within each class, and geographically distributed) and statistically supportable building energy consumption database is developed, building energy consumption benchmarking should either not be done or be relegated to comparisons against other similar buildings in an owner's portfolio. Who better than the building owner will know what properties are truly comparable? For example, an experienced owner of a portfolio of hotel properties would easily be able to compare the energy consumption of a candidate hotel to be acquired with the energy consumption of similar hotels in the portfolio. Considerations for this comparison might include the presence on-site of restaurant facilities, retail establishments, conference facilities, a pool, an atrium, the shape of the building envelope (e.g., tall and box-like, short and spreadout, etc.), the age of the building and when the last major renovation occurred.
For states such as California or cities such as New York to pass legislation that includes labeling the energy consumption of buildings and disclosure to prospective purchasers, tenants or lenders makes sense to facilitate improved energy efficiency; however, these results should not at this time be compared with other buildings, unless of course it can be guaranteed these "other" buildings truly are similar. Unfortunately, today the odds of these "other" buildings truly being similar are very low. Moreover, there is too much at stake in the highly competitive commercial real estate market for seriously deficient analyses to be passed off as "acceptable." This must be resisted at every level. It is only natural that prospective purchasers, tenants and lenders want to know how a building compares with other buildings, and undoubtedly there will be considerable pressure to do benchmarking. However, if you cave into this pressure, there is a very strong possibility that your benchmarking conclusions will be inaccurate and misleading. The importance of true building similarity can not be overstated.
As indicated in previous blogs, U.S. DOE's Commercial Buildings Energy Consumption Survey (CBECS) database of less than 5,000 buildings is used by Energy Star and many others for benchmarking, despite the fact that it is wholly inadequate in addressing the many significant differences between buildings in the same property class. It clearly is too small a sample to represent the more than 5 million existing buildings in the country today. Interestingly, there is an effort underway in Washington to get DOE to expand the number of buildings included in the survey to at least 15,000-20,000. Even if this was possible to accomplish in 2011, it would still be at least 2013 before the data would become publicly available. The fact is that at this time we simply do not have an adequate database for benchmarking
So what is the bottom line? The bottom line is that if any benchmarking is done at all today, it should be done by the property owners themselves who are in a much better position to compare the energy consumption in a building being considered for acquisition with truly similar buildings in their portfolio. These individuals typically are experienced in commercial real estate and intimately familiar with the nuances between buildings in the same property class. At the same time, we as an industry must demand a better building energy consumption benchmarking database that truly is statistically representative of the myriad of buildings out there in the commercial real estate market, and vocally reject anything short of this!


Mark said...

The numbers are the numbers. You are confusing the score with the benchmark. I agree the scoring can be improved. But the benchmark number is pure and simple and does not relate to anything other than your facilities EUI = energy/area/yr.

Tony said...

In order to benchmark correctly, my point is that you must be comparing similar buildings. If not, the numbers are meaningless. Unfortunately, the EUI numbers in benchmarking databases such as Energy Star are only meaningful if the buildings being compared to yours are truly similar. And as you know, there are office buildings, and there are office buildings!

Anonymous said...

What is the diff. between realestate benchmark and estate scores?

Tony said...

Benchmarking a building's energy consumption against its peers is used to establish a score. Hence, benchmarking is at the heart of all scoring. For example, in Energy Star your building's energy consumption is compared to that of a "peer" group (benchmarking) and depending upon where you stand against your peers, you may or may not be eligible for an Energy Star label on your building. As another example, ASHRAE, in its building labeling system, uses benchmarking to ultimately get you a score (or grade) for the building.