A City in the Rockies Paves the Way for Net-Zero Energy Leases

Boulder, Colorado, is a national leader in sustainability—especially when it comes to the built environment. The City of Boulder has the most aggressive new construction energy code in the country, the nation’s first voter-approved tax dedicated to addressing climate change, and a benchmarking policy that requires efficiency actions in addition to building energy performance awareness. These initiatives have successfully led to reduced energy consumption in commercial and industrial buildings, which is important because those buildings account for 54 percent of the city’s greenhouse gas (GHG) emissions.

But to meet Boulder’s aggressive climate goal of 80 percent carbon reduction by 2050—an ambitious target shared by cities such as New York City and San Francisco—Boulder must also address its leased buildings. More than 50 percent of Boulder’s commercial and industrial buildings are leased—producing as much GHG emissions as the entire transportation sector! Currently there is only one net-zero energy (NZE) leased project in Boulder and only a handful of LEED- and ENERGY STAR-certified leased buildings.

The City of Boulder tapped Rocky Mountain Institute (RMI) to accelerate the adoption of advanced green lease practices in Boulder. We’ve written quite a bit lately about the importance of innovative lease structures to scale NZE leased commercial buildings based on our experience with Boulder Commons. Now, along with the City, we are helping to make this opportunity a reality in our own backyard. RMI will provide tailored trainings to building owners, tenants, and brokers, and work directly with four property owners in Boulder to provide consulting and assistance around NZE and advanced green leasing. These trainings will discuss key components to include in an advanced green or NZE lease and will help build the business case for building owners and tenants to strive toward NZE buildings. Boulder is a flagship city for many sustainability initiatives, and now it will pave the way in innovative commercial NZE leasing as well.

Why Building Owners Should Be Interested in NZE Leased Buildings

For building owners, there is a clear business case for targeting NZE in new construction buildings and getting on a path to NZE in existing buildings:

• Boulder’s benchmarking ordinance presents a unique opportunity for existing leased buildings to start on the path to NZE.
  • Transparency: Boulder’s benchmarking ordinance will make energy consumption transparent for all commercial and industrial buildings above 20,000 square feet. This transparency could be a wake-up call and prompt dialogue between tenants and landlords around what actions both parties can take to improve building efficiency. Alternatively, this transparency could help market aggressive sustainability goals, such as NZE, to tenants.
  • Efficiency requirements: Boulder’s benchmarking ordinance requires retro-commissioning, energy assessments, and mandatory lighting upgrades for projects that don’t achieve a certain level of efficiency. Buildings that achieve NZE or demonstrate a pattern of significant and consistent improvements in energy efficiency are exempt from these requirements. For buildings that don’t plan to hit the sustainability requirements for exemption, RMI’s training will help get the right components in new leases and tenant improvement standards, so the required efficiency projects will benefit the building owner instead of resulting in unexpected costs with no return.
  • Unlocking savings opportunities: From benchmarking 50 percent of Boulder’s commercial and industrial building area, the City of Boulder identified opportunities for 467,000 MMBtu of energy savings and 94,000 metric tons of carbon savings, which would average a 2.5-year payback period. These projects could be home runs for building owners and a key first step in bringing their buildings closer to NZE if they have the right components in their leases to get a return on their investments. RMI’s trainings will help building owners ensure their leases are set up to promote future efficiency projects.
• Boulder tenants care about sustainability, and are even requesting it when looking for new office space, so building owners that provide that offering will differentiate their buildings from the rest of the market. National research shows efficient leased buildings have 3 to 8 percent higher occupancy rates, 5 percent rent premiums, and 13 percent higher sale value. Although an NZE building may cost more upfront to construct, it actually results in increased profits for building owners compared with a standard efficient building.

Why Should Tenants Be Interested in Leasing Space in NZE Buildings?

For tenants, residing in an NZE building carries multiple benefits to their brand and bottom line. NZE buildings tend to have better daylight, thermal comfort, and indoor air quality, which has been shown to improve employee satisfaction and productivity. A study commissioned by the American Society of Interior Designers found that 51 percent of employees surveyed said the physical workplace would impact their decision to leave their job. Employee retention is important since it typically costs an employer about 6 to 9 months pay every time an employee leaves. But even more important to an employer’s bottom line is employee productivity. Although studies of how efficient buildings impact employee productivity vary widely from 1.9 percent to 16 percent, because the average Boulder employer spends 14 times more on employee costs than on rent, even minor increases in productivity result in significant savings to the employer.

Tenants’ needs often drive building owners’ actions, so tenants need to learn to ask for more efficient buildings and work with their existing landlords to improve the buildings they rent. RMI’s trainings will help tenants understand how to start that conversation with their landlords and successfully make the ask.

Get Involved: Join the Boulder Energy Challenge

Boulder-based commercial landlords and tenants can click here to stay informated about local events. Two upcoming trainings to put on your calendar include an event cohosted with C-PACE and Boulder County on April 25 and an event cohosted with the Urban Land Institute on May 18. If you are unable to attend the local events or just want to get a head start on learning more about advanced green leasing, here are a few resources worth reviewing:

• Boulder’s Guidance for Overcoming Split Incentives document
• Boulder’s sample green lease
• RMI’s Best Practices for Leasing Net-Zero Energy Buildings
• A case study for Boulder Commons, Boulder’s first NZE leased building

Beyond Boulder, we encourage developers to consider the value-add of pursuing advanced green or NZE leased buildings, as many of the economic drivers apply broadly. Getting on the path to NZE will build your bottom line. Contact us if you have any questions about the resources above, or to share information on your own NZE commercial project.

Image courtesy of iStock.