Building Performance Standards, financial implications for building owners and tenants.

In recent years, the conversation around sustainability and climate change has grown increasingly urgent. Cities, as hubs of economic activity and population centers, play a crucial role in mitigating environmental impact. One significant tool in the arsenal of urban planners and policymakers is Building Performance Standards (BPS). These standards are designed to regulate the energy efficiency and environmental impact of buildings, intending to create more sustainable urban environments.

Many of the largest cities in the United States have enacted laws that require buildings to meet certain emissions standards. These include New York City’s Local Law 97,  Boston’s BERDO, and Seattle’s BEPS, among others. Greenhouse gas limits will get tighter in the years to come, with hefty fines for non-compliance.

Owners. In 2019, New York City passed the first Building Performance Standards in the nation – Local Law 97, as part of the Climate Mobilization Act with goals of reducing building-based emissions 40% by 2030, and 80% by 2050. Local Law 97 affects more than 50,000 privately owned buildings in the city.

Complying with Local Law 97 (and similar BPS) requires a long-term, whole-building decarbonization strategy that incorporates energy modeling, capital planning, and tenant leasing and fit-outs. Asset values of NYC buildings are already being affected, with buyers discounting prices to mitigate emissions fines. Buildings that meet or exceed current (and future) standards realize quicker lease up, reduced turnovers and vacancies (think lower energy bills), and enhanced property values at sale or refinance. The cost of non-compliance can reach into the $millions per year and in many jurisdictions, fines follow the building forever as a lien on the property if not paid.

Tenants. Triple-net (NNN) leases transfer significant financial responsibilities to tenants, who are obligated to cover taxes, insurance, and maintenance on top of rent and utilities. The development of environmental, social, and governance (ESG) reporting standards has raised questions about accountability for energy consumption and carbon emissions. Despite tenants using the building, ESG frameworks typically require building owners to disclose and manage energy efficiency data, creating complexities for landlords with triple-net leases. New regulations like New York’s Local Law 97 further stress building owners to actively monitor and improve building performance, regardless of lease agreements where tenants control utility data access.

To address these challenges, landlords are increasingly adopting green leases as a solution. Green leases facilitate collaboration between landlords and tenants by including clauses that authorize landlords to access utility data. These leases often stipulate cost-sharing mechanisms and require tenants to comply with energy efficiency measures such as submetering and equipment commissioning.

Construction and Design Professionals. As cities continue to grow and face the challenges of climate change, Building Performance Standards are likely to play an increasingly important role. They represent a proactive approach to sustainability, encouraging innovation in building design and operations while driving down emissions and resource consumption.

Building Performance Standards can make cities more resilient to climate change by reducing energy demand and dependency on centralized energy grids. Deep Retrofits which include enclosure upgrades can result in 40% to 80% reductions in Greenhouse Gas Emissions (GHG). 70% of buildings standing today will be standing in 2050 – retrofitting can result in 50%-70% less carbon than building from scratch.

CLADIATOR patented Thermally Broken Cladding Attachment Systems as part of high-performing rainscreen facades support thermal efficiency, enhanced resilience, and lower emissions as part of a wholistic BPS compliance strategy for both new construction and façade retrofits.


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