Full Content: Sustainability Local Law 97

Sustainability Committee: Local Law 97 - What is it Going to Cost You?

March 2020



On Thursday January 30, the Sustainability Committee of CoreNet’s New York chapter held a symposium on Local Law 97, a new law that will require most New York City buildings over 25,000 square feet to limit carbon emissions. The law will impact over 50,000 buildings across the city with the goal of reducing building-based emissions 40% by 2030 and 80% by 2050.  There will be benchmarks during these years, the first one in 2024, with penalties for buildings that don’t comply.

So far most of the discussion has focused on how this affects building owners. With CoreNet, we wanted to expand the conversation to building occupiers and their service providers. The purpose of the panel was two- fold:

• To explain the law and discuss how prepared commercial real estate in New York City is to implement these changes
• To spread awareness about the law, so that members attending could take away information that could be used on their own projects. 

CoreNet invited three guest speakers who are intimately acquainted with the law and are already being proactive in its implementation.  These guests were:

• John Gilbert, Executive Vice President and Chief Operating Officer, Rudin Management
• John Mandyck, Chief Executive Officer, Urban Green Council
• Marty Cottingham, Principal, Avison Young

The symposium was moderated by Thomas Baade-Mathiesen, Vice President of Altanova, and the Chair of the CoreNet Sustainability Committee.

Understanding climate change in the context of real estate

• The panel kicked off with a reminder about real estate’s role in guiding the City’s environmental impact.
• The burning of fossil fuels is a major contributor to climate change
• Most buildings in New York City rely on fossil fuels to heat, cool and provide power
•  Carbon emissions, or the “carbon footprint” of a building is measured by totaling the carbon dioxide emitted into the atmosphere during the production of energy used to heat, cool, light and power the building
• These emissions are most typically the result of combustion occurring on-site as a result of using gas and oil boilers or off-site at a power plant that burns natural gas to generate electricity
•  As 70% of carbon emissions in New York come from buildings, real estate is the logical place to start

Why Local Law 97?
New York City approved this law, also called the Climate Mobilization Act, in April of 2019.  There and economic drivers for the law. John Mandyck described it like this:

• New York City is a coastal city affected by changes in the surrounding waterways.
• Incidents like Hurricane Sandy submerged buildings in lower Manhattan:  billions of dollars were spent to restore the buildings.
•  New York City currently has three trillion dollars of insured coastal property with waterways that are rising: New York Harbor has risen one foot in the past one hundred years.  Rising water levels combined with storms and hurricanes of increasing intensity will put that real estate in jeopardy if change isn’t addressed. 

What is required to be compliant?

There are a several ways owners can comply with Local Law 97. One option is to reduce the energy consumption of a building.  Another option is to switch to renewable sources of power. While some power can be produced onsite, almost all will need to be bought off local energy production. A future option under consideration is to “carbon trade” with other buildings that are well beyond their goals. John Mandyck was particularly excited about this option. It gives building owners an incentive to reduce carbon below their caps and to sell those reductions to other buildings that cannot meet the caps. Local Law 97 requires the Mayor’s Office to produce a feasibility study and implementation plan for carbon trading at the beginning of 2021.

In the meantime, Urban Green convened New York experts with those from Hong Kong, London, Singapore and Toronto to inform the required study in NYC and to jump start a global dialogue on this policy tool. “Cap and trade is not a new concept, but as a city-level policy tool to reduce the carbon emissions of buildings, it’s revolutionary,” said John Mandyck.

Challenges to meet compliancy

The challenges of reducing the carbon footprint can be enormous.  Marty Cottingham noted that recently built buildings like the Bank of America Tower described as “the world’s most environmentally responsible high-rise office building” will struggle to meet the Local Law 97 reduction criteria’s first deadline in 2024.  If that is true one can imagine how other, older buildings will be able to comply. 

According to John Gilbert, the law is unclear with regard to how certain unique buildings will be regulated.  For instance, 32 Avenue of the Americas, an important telecom/technology building with tenants that need power and air conditioning 24/7/365 should be excluded altogethter because of their role in providing telecom and cloud services around the clock.  Another building in the Rudin portfolio, 345 Park, has large customers that service global marketplaces and operate beyond your typical 9 to 5 day.  This building, whose core is efficient, will face fines because these tenants work long hours.  In this example the owner is doing everything they can to run an efficient operation. 

Gilbert went on to say that the law also discriminates against buildings wishing to densify existing space.  A tech company for instance will have far more employees in a space as compared to a law firm.  This denser space will be more resource efficient per person yet consume more energy per square foot.  Consequently, the denser space gets penalized by current law.  He argued that modifications should be made to correct this environmental contradiction.  Gilbert went on to say that the lack of consideration for this is a major flaw of the law along with its discrimination against density. A fin tech firm for instance will typically have far more staff on a floor than a law firm. That denser space will by many measures be more resource efficient per person yet consume more energy per square foot. Consequently, the denser space gets penalized by the law. He says that hopefully the Law will be modified to take these issues into consideration. 

Nevertheless, John Gilbert emphasized that the law is indeed a law, not a bill, and that it’s here to stay, saying it’s futile to believe it will go away. It may even become more stringent upon further review.

Besides the energy efficiency challenges, there are challenges associated with switching to renewable sources of power too.  The compliance option for sourcing renewable energy requires that this be done locally. Currently there are minimal renewable sources of energy within the designated area.

This is slowly changing.  Governor Andrew Cuomo’s “Green New Deal”, for instance is investing 1.5 billion dollars to support 20 new solar, wind energy storage projects.

John Mandyck pointed out that some large projects are under way, such as the offshore wind projects, but these are not expected to start powering the grid before earliest 2025.

Proactive measures for compliancy

While there are challenges, they come with opportunities.

Gilbert and his team at Rudin Management are being proactive.  They have developed a SAAS (software as a service) system called Nantum which collects data on energy usage of all its tenants and helps manage this. Through this data they have been able to work with tenants to decrease energy consumption.  At one company for instance although the lease provided air conditioning on weekends, Nantum indicated that only one or two of the 16 floors were being used those days. 

This knowledge informed a conversation that ultimately tweaked the lease saving both sides energy and operational costs.  Rudin has used the tool both for its own portfolio and for others. Under Gilbert’s stewardship Rudin has managed to reduce carbon by 44%, and electricity by 41% and steam by 48%. Externally the opportunities were so large that they spun Nantum off as part of a new company called Predictive Data.

“Although well intended, LL 97 can be improved by incentivizing owners and tenants to work together.  The success of this new law depends on it as each party cannot do it acting alone.” Says Gilbert. 

Education means preparedness

Marty Cottingham stressed brokers’ instrumental role in making Local Law 97 work. They guide collaborative conversations between the landlord and tenant, from site selection to lease structuring. Moreover, they can advise clients about project objectives, and ultimately who to call on for energy efficient designs.

Cottingham cited projects like the New York Times building, where there was a commitment from the beginning between developer and tenant to design the headquarters using energy reduction concepts as a focus of the building design. “As more projects like the NY Times are built, there will be more incentive from both owners and tenants to be responsible and compliant” Cottingham states. In addition to educating by building example Cottingham also cited the opportunity for education between tenant and owner. 

John Mandyck added that the law will drive a large demand for talent. The Urban Green Council estimates that compliance with Local Law 97 will drive over $20 billion in investments if owners choose retrofits for compliance. Most of the brains and qualified installation labor needed to carry these out do not exist yet. There is an immense opportunity for New York’s universities, skilled trades and labor unions to build this new workforce.

Attendees at the event were encouraged to take this information and educate their colleagues. 

“We have big opportunities here for new services and jobs that are opening up, students that are coming in to studies that prepare them for these, we know the universities bring all kinds of life, we have an all-encompassing law that is not just hitting us at work, but actually at home, and we have a language that lets us interact with this law, called data, enabling us to visualize, analyze and act on it in so many ways.     So, I hope that when you open your eyes tomorrow morning and head into this wonderful city of ours, you stare this entrepreneurial opportunity in the eyes, and start planning for it!” closed Thomas Baade-Mathiesen.

New York City, considered by many the greatest city in the world, has lost some of that greatness over schisms that have occurred over the years:  uber wealthy vs. middle class, landlord vs. tenant, developer vs. administration, designers vs. developers.    

Climate change is a crisis that affects everyone.  This law may reduce these schisms as we work together to make our city a global leader in climate action.

Elisabeth Post-Marner, AIA, LEED AP, WELL AP

Click here to view the video recording from the event.