Author: Carli Schoenleber
Contributors: Jennifer Web, Emma Huizar-Felix, Nikolas Mirando, Kaitlin Bruskin, Elissa Brown, Jackie Royds (graphic design)
June 7, 2023
With issues like climate change rapidly pushing the commercial real estate (CRE) industry toward more sustainable practices, effective management of building utility data (i.e., energy, water, and waste) has become increasingly critical. Industry leaders are moving beyond traditional applications of resource efficiency and cost reduction to additionally leverage utility data for stakeholder engagement, setting and achieving climate targets, and optimizing portfolio-level performance. However, collecting high-integrity utility data remains a challenge, particularly when tenants are responsible for utility costs. To help owners navigate this evolving landscape and meet market expectations, this article delves into the main drivers for advanced utility data management and presents current best practices to overcome data collection challenges to achieve full data coverage.
Drivers for more advanced utility data management
Regulatory requirements
For decades, CRE companies have been held to mandatory benchmarking regulations that require disclosures on building energy usage and performance. In recent years, emerging sustainability regulations have become pivotal in driving the creation of even more complex utility databases that include factors like greenhouse gas emissions or renewable energy generation. Key regulations include the U.S. SEC's proposed climate disclosure rules, New York City’s Local Law 97, as well as the EU’s Taxonomy Regulation, Sustainable Finance Disclosure Regulation (SFDR), and Corporate Sustainability Reporting Directive (CSRD).
Investor demand
As more investors consider factors like climate change and tenant satisfaction to be financially material and within the scope of their fiduciary duty,[i] CRE companies have felt increasing pressure to report utility performance data to investor-facing frameworks like GRESB, CDP, and S&P Global CSA. Providing comparative scores and highlighting industry leaders, voluntary disclosure frameworks have been central in motivating real estate companies to compete with peers and improve performance year after year.[ii]
Resource efficiency and value creation
Collection and management of utility data facilitates value creation. By tracking energy, water, and waste data, CRE companies can more easily identify opportunities to improve efficiency and reduce operating costs — leading to benefits like higher rental premiums, occupancy rates, and valuations.[iii]
Improved stakeholder engagement
ESG data can also act as a powerful communication medium when engaging tenants, investors, and the public. By benchmarking assets and showing year-over-year performance improvements, CRE companies can quickly relay an impactful, data-driven story that illustrates their commitment to sustainability. Depending on the audience, strategies for stakeholder engagement could include annual ESG or corporate social responsibility reports, presentations, company websites, and social media platforms.
Supply chain collaboration
As more companies set portfolio-wide decarbonization targets, many are expanding their focus from scope 1 and 2 emissions (i.e., emissions within operational control) to include scope 3 emissions — those associated with companies across their supply chain, including tenants, materials manufacturers, waste managers, and other stakeholders associated with commercial real estate projects. By sharing energy and emissions data and collaborating on solutions and best practices, companies can more effectively work toward shared targets, improve transparency, and comply with regulations across multiple jurisdictions.
Utility data collection challenges
Despite the growing need for reliable and detailed utility data, there remain significant barriers hindering landlords' ability to achieve full data coverage across properties. In the case of triple-net-leases (i.e., NNN lease) — where tenants are responsible for utility costs — landlords can typically only access utility data from landlord-controlled areas (e.g., lobbies).
In the case of triple-net-leases (i.e., NNN lease) — where tenants are responsible for utility costs — landlords can typically only access utility data from landlord-controlled areas (e.g., lobbies)...To achieve high data coverage in these cases, landlords must request utility data from tenants individually, often an onerous and time-consuming task.
Landlords also lack visibility when buildings are missing a master meter that tracks the entire building’s utility use; use of only sub-meters (which capture tenant-level data) is especially common in multifamily and office buildings. To achieve high data coverage in these cases, landlords must request utility data from tenants individually, often an onerous and time-consuming task.
Overcoming challenges and identifying solutions: utility data collection best practices
To meet industry standards for ESG data transparency, real estate companies are working to set up new lease structures and building systems that mitigate data capture challenges and aim toward portfolio-level data coverage. Here we outline current best practices and emerging solutions for utility data collection, useful for regulatory compliance, voluntary reporting, and optimizing efficiency.
Start by tracking and reporting landlord-controlled utility data
Improving utility data capture and coverage should start with landlord-controlled spaces such as lobbies, restrooms, and fitness centers. Because this data is readily accessible and requires no tenant collaboration or permission, it is a convenient avenue to set a baseline for energy/water management and refine data collection and analysis processes.
Aim for whole-building, portfolio-level utility data
Obtaining whole building data is a critical next step toward benchmarking all properties and effectively tracking and managing portfolio-wide targets for performance and cost savings. Whole-building data can be obtained through a variety of avenues, each with different costs and levels of coordination with tenants and utility providers.
Data-sharing clauses in green leases
Green leases enable landlords to require utility data sharing, encourage higher performance, and create a foundation for tenant engagement on sustainability.[iv] Data sharing clauses typically specify how tenant data should be collected and transmitted (e.g., paper bills, utility automation software, direct access to sub-meter); how often (e.g., monthly, quarterly), and how data will be used (e.g., sustainability reporting, energy benchmarking). Once in place, landlords can more reliably collect tenant data with minimal coordination.
Utility automation providers
Once tenants authorize data sharing, landlords can leverage data automation providers that aggregate tenant and landlord utility data to provide a full picture of building performance. Until recent decades, it was standard practice to track utility data manually from paper bills, but today, low-cost software is available that automatically collects and categorizes energy, water, and waste data. Developed by the U.S. Environmental Protection Agency, ENERGY STAR Portfolio Manager is the most popular software for CRE; other options include Measurabl, Conservice, and Scaler Global. Automating data collection comes with myriad benefits, including improved data quality, reduced labor costs, less dependence on property teams, and portfolio-level data analysis tools and insights.
Automating data collection comes with myriad benefits, including improved data quality, reduced labor costs, less dependence on property teams, and portfolio-level data analysis tools and insights.
Direct access from utility providers
Instead of relying on tenant permission to access data, many utility companies can authorize landlords to access aggregated utility data for the entire building, covering both landlord- and tenant-controlled spaces. Tenant permission may be initially required to set up the agreement, depending on local regulations and whether data sharing clauses were already in place. Once established, no tenant coordination is required. However, this option may not be available if utility providers lack sophisticated metering infrastructure. It is also worth noting that some utilities will only provide aggregated data without tenant authorizations when the property exceeds a certain number of meters.
Shadow meters
Shadow meters can present a streamlined option if utilities don’t offer whole-building data. Growing in popularity, shadow meters are landlord-owned utility meters that collect utility data independently alongside utility-owned meters. While expensive to install, shadow meters provide a long-term solution to automatically collect real-time, granular, whole-building data with little to no coordination with tenants. Though permission may be required initially, once installed, landlords can continuously collect data without approvals from new tenants.
Conclusion
As ESG performance becomes more important to the success of commercial real estate, owners are turning their attention to the quality and coverage of building utility data. Aiming to collect whole-building utility data across portfolios not only helps meet investor expectations and regulatory requirements; it can also play an important role in maximizing resource efficiency, reducing costs, and improving stakeholder engagement and collaboration. To achieve high utility data coverage, owners can take a variety of paths, each associated with different levels of tenant coordination and data quality. Owners should always start by tracking their own utility data but should work to expand collection of tenant data using best practices like data sharing clauses, direct access from utility companies, and shadow meters.
To remain competitive as expectations evolve, CRE companies should continue striving for portfolio-level data coverage and stay updated on emerging technologies (i.e., Internet of Things (IoT), sensors, AI technologies) that stand to further reduce data collection effort and improve decision making.
To learn more, see our webinar: “ESG Essentials: Data Management 101”
Authors and Contributors
Carli Schoenleber
Carli is an ESG Content and Engagement Specialist for Verdani Partners. She has a decade of experience in the sustainability field, working across diverse roles in environmental communication research, environmental planning, marketing, and wetland science. She holds a B.S. in Environmental Science, Policy, and Management from the University of Minnesota and a M.S. in Forest Ecosystems and Society from Oregon State University.
Jennifer Web
With over eight years of experience in the sustainability industry, Jennifer offers expertise in green building certifications, energy modeling, benchmarking, and ENERGY STAR ratings. At Verdani, she works on multifamily and industrial properties, supporting her clients on ESG reporting frameworks, including GRESB and CDP. Jennifer has a bachelor’s in Environmental Science and a master’s in Urban Sustainability.
Emma Huizar-Felix
Emma is an Associate ESG Manager for Verdani Partners. She holds 10+ years of experience in the international sustainability field at public and private sectors, working in diverse roles ranging from managing a real estate sustainability program spanning 150k multifamily units, being a guest lecturer, participating in speaking engagements in Mexico, US and London, to being the first women leading the O&D department at the Energy Commission of the state of Baja California in Mexico. She holds a master’s degree in Energy Management from ESCP Europe and a double bachelor’s degree from ASU in Sustainable Development and Design Management.
Nikolas Mirando
Nik is a data analyst with a passion to advance sustainability in the built environment. Using his background in data science and corporate sustainability, he aims to create and drive portfolio-wide results through data analysis and interpretation. Nik holds a Master of Science in Sustainability Management and is currently working part time towards an MBA, both from the Stevens Institute of Technology.
Kaitlin Bruskin
Kaitlin came to Verdani Partners with several years of experience in the energy management and education fields. At Verdani, Kaitlin manages technical sustainability data for two real estate portfolios’ ESG programs and advises on a third. She is also a part of Verdani Technical Services, helping to conduct building-level ENERY STAR certifications. She holds a Bachelor of Science in Integrated Science and Technology, with a double concentration in Energy and Environment, from James Madison University.
Elissa Brown
Elissa is a Sustainability Analyst with the Technical Services team that serves Verdani's largest client, providing expertise in data management, analytics, reporting, and strategic planning. With her own educational background focused on environment and ecology through the lenses of art and landscape architecture, Elissa enjoys applying design thinking and her analytical aptitude toward improving the efficiency and accuracy of the complex data processes that are critical to ESG reporting, insights, and progress.
Jackie Royds
Jackie is a graphic designer with a strong visual sense, knack for problem solving, and exceptional collaborative skills. She is passionate about applying her creative aptitudes toward creating high-quality annual reports, white papers, newsletters, and presentations.
References
[iii] Leskinin, N., Vimpari, J., & Junnila, S. (2020). A review of the impact of green building certification on the cash flows and values of commercial properties. Sustainability. https://doi.org/10.3390/su12072729
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