April 22, 2010
Kristian Peterson, SR Inc’s Director of Consulting, is the co-author of an IFMA white paper that is soon to be released. The white paper entitled the Economics of Sustainability in Commercial Real Estate is a practical, real-world study of the incentives and motivations of real estate managers to invest in energy efficiency retrofits. In the paper, Peterson explains why some investments are made over others and presents an economic framework to evaluate competing capital investment decisions, including deciding between energy efficiency upgrades and cosmetic improvements.
Peterson and co-author Ross Gammill interviewed decision-makers throughout the real estate management chain, including property managers, asset managers, portfolio managers, and institutional owners and investors. They explore primary and secondary drivers of investment decisions and present a financial model to compare competing alternative capital investments.
Among Peterson and Gammill’s findings:
The paper includes a case study on energy efficiency retrofits at the Empire State Building, where project managers aim to reduce energy use by 38 percent. The case study details the eight projects selected among dozens and describes how managers arrived at a 38 percent energy savings goal.
Relevant industry questions answered by Peterson & Gammill in the paper include:
The paper (available here) provides a superb overview of the economic drivers of energy efficiency retrofits to help portfolio managers, asset managers, and building managers make the case to owners and investors that energy efficiency retrofits can increase NOI, thus increasing the bottom line. The full paper is available on here the SR Inc website.