Jim Newman, Founder and Principal and Marcus Springer, Principal, Linnean Solutions
Abstract
The prolonged office rental downturn has left many property managers struggling to maintain tenancy and rental rates in their buildings. Renovations for energy efficiency can also improve the tenant experience, potentially costing less than tenant replacement and preserving income levels. In most markets around the USA, tenants have the upper hand in lease negotiations, leading to higher than normal office rental turnover rates. For property managers, tenant turnover is an expensive proposition, leading to drastically lower net operating income and, thus, lower valuation of the real estate asset. Maintaining existing tenants has become a priority for property managers. Energy efficiency related projects can play an important role in maintaining tenancy and enticing tenant renewals. Reducing energy loads translates into either reduced landlord operating costs or reduced effective rent for tenants and, in many cases, both. Utility costs, almost exclusively energy, account for around 25 per cent of building operating costs. Reductions of utility expense by 50 per cent are quite achievable, translating to a reduction in operating costs of over 5 per cent. Energy focused capital projects can also enhance tenant space and amenities. Many projects that reduce operating costs through energy use reductions also directly affect tenants. Projects such as lighting upgrades and window replacement can be part of a tenant space improvement programme while also reducing overall energy use in the future. Savvy property managers will enter into tenant negotiations with a list of possible improvements, knowing what positive operating cost effects can be achieved with what they can offer a tenant to encourage lease renewal.
Keywords
performance, efficiency, energy conservation, valuation, tenant retention
Jim Newman is Founder and Principal of Linnean Solutions, bringing experience and a focus on the presentation of complex information for decision makers. Jim was formerly the Director of Strategy and Business Development at BuildingGreen, LLC. In this capacity he worked with design and construction related firms and agencies to bring green design into their standard practice. He also led a number of high-profile projects, including the development of the BuildingGreen Suite (BuildingGreen.com), through funding from the New York State Energy Research and Development Authority, and a research and writing project to create Green Guideline Specifications, funded by the Environmental Protection Agency. His work included leading the development of the recently launched LEEDuser information resource. Jim is the Vice Chair of the Board of the Massachusetts Chapter of the US Green Building Council, a board member of the Green Resources Institute, and has spoken at numerous conferences and seminars around the USA.
Marcus Springer is a Principal at Linnean Solutions and has worked for 20 years as an architect and planner for commercial and academic clients around the world. He brings a broad knowledge of buildings and design, specifically that of energy efficient and integrated design. He was educated at Queen’s University at Kingston, Ontario, Canada, and the Architectural Association School of Architecture in London, UK. He is a Charter Member of the Royal Institute of British Architects, and is an International Associate Member of the American Institute of Architects. He is also a LEED Accredited Professional, a member of Governor Deval Patrick’s Zero Net Energy Buildings Task Force, as well as serving on Mayor Thomas Menino’s Climate Action Committee. He is the founder of the US Green Building Council Massachusetts Chapter Advocacy Committee and serves on the Boston Society of Architecture’s Legislative Affairs Committee and the Committee on Advancement of Sustainability. Marcus was instrumental in drafting advisory language that led to the Massachusetts Green Communities Act 2007. He has also worked as an architect at firms including Sasaki Associates Inc., Kohn Pedersen Fox International and Foster and Partners.
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