Commercial Real Estate Advocacy and the Energy Debate

Summer 2015

NAIOP has helped build a coalition that supports sound energy policy for the built environment.

IT HAS BEEN ALMOST a decade since the U.S. Congress passed a comprehensive energy bill and longer still since the federal government adopted a vision for addressing the nation’s energy appetite. With many vital issues affecting the debate, including climate change, pollution, increased demand, grid reliability and efficiency, there is little consensus on how or where to move forward. As the energy issue is discussed at length in committees in both the House and Senate, real estate and other industries are called upon to educate policy makers regarding provisions that could affect their businesses.

The commercial real estate industry has already made great strides toward the advancement of efficiency gains in buildings, largely without the help or direction of the federal government. While there are various reasons for these advancements, including geographic location, tenant demand, energy prices, cultural shifts and corporate responsibility, the biggest incentive remains cost savings. Another thing has remained certain: not all markets are created equal, nor can they support the same levels of investment. This principle has formed the basis of NAIOP’s advocacy as it has fought off one-size-fits-all mandated approaches.

When Congress first started discussing energy efficiency as it pertains to building codes, the House of Representatives passed several unrealistic proposals that were never enacted. These included mandated building code targets, with zero-net energy buildings as the objective, and building energy benchmarking with full public disclosure requirements. As these ideas took hold, NAIOP aggressively lobbied against the requirements. While its efforts proved successful, NAIOP has long felt that a more positive debate was needed. The association has always believed that energy efficiency, from a business perspective, makes economic sense. When building owners and occupants reduce energy consumption — a building’s largest controllable operating cost — they save money. While this simple premise is complicated by differing lease structures, there is an inherent advantage to maximizing efficiency in a cost-effective manner.

NAIOP’s message has been consistent: Federal efforts to increase energy efficiency in buildings need to recognize that not all development projects can support the same level of expense associated with advanced building systems, energy efficiency components and design. Furthermore, most developers cannot implement energy saving measures with more than a five-year payback. Electricity prices vary greatly across the country. Because energy prices in one state can be twice as high as those in other states, a simple payback methodology demonstrates that recouping costs often depends on factors outside the control of developers.

As NAIOP fought off a variety of ill-conceived efficiency mandates, its proactive message and commitment to sustainability and energy efficiency were being undermined by advocacy groups that criticized efforts to include market realities in the debate. The association had no desire to operate defensively, and wanted to bridge the divide between efficiency advocates and those pointing out market realities. The nature of the conversation had to be changed.

In 2011, Senators Rob Portman (R-Ohio) and Jeanne Shaheen (D-N.H.) introduced the Energy Efficiency and Industrial Competitiveness Act for the first time. The legislation was the culmination of months-long negotiations between environmental groups and business interests. No one came to the table with the same ideas, but eventually all parties agreed that they have a shared goal — to improve energy efficiency in the built environment — and that compromise was needed to find a path forward. At the end of the process, the concepts of cost/benefit, return on investment analysis and realistic payback schedules were given due consideration, along with energy efficiency targets and advanced building codes. For the first time in legislation, NAIOP succeeded in making its case and helped build a coalition that supported sound energy policy for the built environment.

The Portman-Shaheen bill has been brought to the Senate floor several times, and similar legislation has been offered in the House. A strong bipartisan effort to pass this bill is now underway, and NAIOP hopes that this Congress will make it a reality. As the larger energy policy debate looms, Congress should take note of this successful effort at compromise, which should serve as a road map for how to reach consensus on a complicated issue. Elected officials, industry leaders and environmental groups can roll up their sleeves and work to find common ground. This coalition has proved it is possible for groups from opposite sides of the political spectrum to come together on energy efficiency legislation. The nation would most likely be better off if others involved in the broader energy debate followed suit and began planning for the energy demands of our future.