April/May 2009

Chapter News

The Reality of Case Studies: Extracting Value From NAIOP's Highly Criticized Building Cost Report

By Courtney France

For most projects, a challenge to balance environmental responsibility and developmental profitability still exists.  In an attempt to further this understanding, the National Association of Industrial and Office Properties (NAIOP) , a leading organization for the commercial real estate development community, released a report to investigate the economic impacts related to achieving specific energy savings for low-rise office buildings.  The February 2009 report was essentially a ‘cost feasibility gut-test’ of the commercial building efficiency targets, all proposed in some current and drafted mandates throughout the country.

Unaware of the pending dialogue that would result from NAIOP’s report, I digested the information presented in the study titled “Achieving 30% and 50% over ASHRAE 90.1-2004 in a Low-Rise Office Building .”  ConSol , an independent energy modeling firm based in California, prepared the report and analysis for NAIOP using the Department of Energy’s EnergyPlus v2.2 simulation program. 

The following parameters were used in ConSol’s analysis:

Under the premise that the building in the modeled case was designed ‘as-is’, the report evaluates common best practice energy enhancements and the associated cost impact and payback period. 

The ConSol report published the following results:

The results reveal that the best scenario model would achieve 23% energy savings in Chicago with a payback in slightly under 10 years. 

To advocate the best public policy for its members, NAIOP’s report presents the argument that using the most practical and economical design efficiency strategies may not be capable of achieving targeted goals like 30% and 50% over the ASHRAE 90.1-2004 baseline standard.  With best intentions, NAIOP endeavored to provide a resource to policy makers and its members, demonstrating the financial impact range of ‘one-size-fits-all’ energy mandates.

Within weeks of the report being published, multiple organizations (USGBC, ASHRAE, ACEEE, etc.) condemned the message translated in NAIOP’s report.  The discrediting critical feedback on blog reports and online commentary forums ranges from “this study is part of a disinformation campaign,” and “results were artificially constrained,” to piercing comments such as, “plain wrong” and “a disservice to the development community.” 

It is recommended that you read the brief 19 page report yourself, and draw on your own conclusions; in the meantime, the following is a summary of the controversial reviews of NAIOP’s commissioned report.

Complimentary Report Highlights: 

• A study represents an increased level of green messages targeting Policy Makers.

• The building analysis was based on a real building (representing, according to Co-Star, 50% of the Class-A commercial new construction today ).

• The effort engages the commercial development industry to understand the relationship between energy efficiency and building profitability.

• The study and resultant industry responses have instigated NAIOP to conduct additional refined studies for various building types (high-rises, industrial, etc.) .

Criticized Report Deficiencies:

• The study lacked integrated design efficiencies, or a ‘holistic design’ approach.  It essentially focused on a ‘bolt-on’ efficiency approach to a building.

• The analysis used average commercial utility rates, rather than actual rates, which may invalidate the cost feasibility calculations presented in the results.

• The study focused on regulated loads only, which are affected by jurisdictional energy codes and mandates, eliminating the developer’s role to improve tenant-related energy efficiency measures.

• Federal, State, and Local incentives, which are increasingly available and applied to projects today, were not considered in the report’s cost or payback calculations.

• The study used a 10 year payback analysis, which may be unrealistic for the majority of developers that use 5-year-or-less payback models.

• Debates continue regarding the selected energy cost measures that were applied in the analysis, and if they represented the most reasonable strategies (i.e. daylight harvesting measures were not included, etc.)

Based on the information presented by ConSol and valuable insights from sustainable building experts responding to the research results, we can extract the important themes from NAIOP’s honorable mission:

• The study is not perfect, but it provides a general sense of what proposed mandates for 30% efficiency by 2010 means for properties.  In addition, the study brings attention to how site area, geographic locations, tenant lease rates and even building delivery methods can influence the cost pro-forma for your next sustainable project.

• Standard, economical, best design practices for sustainability are capable of achieving 20%+ energy efficiency in buildings.  The NAIOP report, and many other past cost studies have now confirmed this level is achievable in today’s market.

• Where there are incentives, there will be more cost-effective sustainable strategies implemented.  As predicted, Federal/State/City incentives attract more green projects to the development market than locations lacking financial enticements.

• The analysis underlies the importance for policy makers to collect sufficient performance data on a cross-section of buildings in order to justify implementing ‘one-size-fits-all’ mandates. 

• Oddly enough, the study emphasizes the urgency of our proposed energy efficiency targets – this is not 5-10 years out to plan for, this is critical to addressing within the next year to meet the planned reduction goals.

• Most importantly, it re-emphasizes to the building industry that to achieve the goals of any sustainable commercial development project…the building must be profitable.

www.naiop.org

http://www.naiop.org/governmentaffairs/pdf/consol.pdf

http://www.consol.ws/

http://www.naiop.org/about/naiop_energyeff_faq.pdf

www.globest.com interview with Mr. Bisacquino, current NAIOP President

CBG /April/May 2009