The New Normalization: Revised benchmarking

THE NEW NORMALIZATION

REALPAC Adapts Methodologies for Pandemic-Level Densities

EFFECTIVE benchmarking almost invariably entails an extra layer of analysis to account for variables — in climate, occupancy and/or function — that can skew building-to-building comparisons. Enhanced standardized methodologies for gauging energy-use and water-use intensity are now freely available for building owners/managers seeking a consistent, accurate and userfriendly tool to reckon key variables and assess performance across their office building portfolios.

Newly released updates to the REALPAC normalized energy-use intensity (NEUI) and normalized wateruse intensity (NWUI) methodologies further refine formulas that were initially developed to support benchmarking efforts that the prominent Canadian commercial real estate organization sponsored last decade. Namely: the 20 by ’15 campaign, a national challenge to achieve an average annual energy-use intensity of 20 equivalent kilowatt-hours per square foot (ekWh/ft2/yr) by 2015; and REALPAC’s 2012 water benchmarking pilot, which analyzed at least 12 months of water-use data from 83 participating office buildings.

Those normalization methodologies have proved instrumental for pegging baseline performance and measuring energy and water-saving progress in a Canadian office inventory scattered across six climate zones, and exhibiting a range of operational pressures and functional constraints. However, the 2021 versions address some emerging needs.

By Barbara Carss

“COVID-19 exposed that the original methodologies had reduced effectiveness in the evaluation of building performance in periods of very low occupant density,” reports Neal Bach, President of Energy Profiles Limited, which led the update project. “Years of analysis of hundreds of buildings also revealed other opportunities for improvement. Both methodologies have been rebuilt to provide renewed clarity on building performance in the present day, and to unleash the next wave of investment in energy, water and carbon reductions over the coming decades.”

Similar to the originals, the updated NEUI and NWUI methodologies begin with a calculation of actual energy-use or water-use intensity. They then apply a series of adjustments to achieve a normalized reading that accounts for asset-specific variables in energy and water demand due to local climate conditions, occupant density and operational timeframes, as well as anomalies such as exceptional energy and/or water demand in enclosed parking areas, data centres, call centres, fitness facilities and restaurants.

Along with Energy Profiles Limited, a 17-member subcommittee stacked with engineering, smart analytics and building performance expertise from REALPAC member companies and industry service providers reviewed and provided comments on the updated baseline model, adjustment factors and computation tool. The latter produces the normalized readings — in an ekWh/ft2 or litres per square foot (L/ ft2) metric — after users input the required information.

Among changes to the 2021 version, the new NEUI differentiates vacant space, where landlords have flexibility to curtail heating and cooling, from unoccupied sublets, where they are obligated to condition the space. It also introduces new options to determine normalized energy-use intensity in leased space with lower-thanaccustomed (versus pre-pandemic) occupant densities.

FOSTERING CONFIDENCE This all aligns with REALPAC’s goal to provide a transparent, simple and credible tool that can facilitate wider uptake of energy and water-use benchmarking and yield further insights and spinoff benefits from an expanded universe of participants. For example, normalization factors to recognize exceptional energy and water-use have proven fruitful for reaching and encouraging owners/managers who might otherwise be reluctant to divulge actual consumption or compare performance against a greater number of more conventional office buildings.

“Many landlords have concerns regarding their office buildings being ‘special’ or ‘different’ and thus not being eligible to participate due to factors such as tenant energy or water consumption,” REALPAC’s stated underpinning principles acknowledge. “The REALPAC

“Both methodologies have been rebuilt to provide renewed clarity on building performance in the present day, and to unleash the next wave of investment in energy, water and carbon reductions over the coming decades.”

NEUI and NWUI methodologies must therefore be broadly applicable and inclusive of most, if not all, types of office buildings and tenant mixes.”

The methodologies are offered as a tool to support building and portfolio owners/managers with internal benchmarking exercises and are not currently part of any formal voluntary or mandated energy or water benchmarking and reporting program. However, given the profile of REALPAC’s membership, which includes many of Canada’s largest commercial real estate companies and investment asset managers, the normalization methodologies have been influential in generating a growing pool of consistent data that can inform a range of ESG (environmental, social, governance) initiatives.

“Creating solid and trusted metrics is critical for successful energy, water, carbon and waste reductions. REALPAC has been the leader in the field for commercial properties and this is great progress on the alignment of metrics so that different organizations can all talk the same language,” observes Andrew Pride, an

CONTINUED GROWTH IN GRESB PARTICIPATION

GRESB, the global assessment of environmental, social and governance (ESG) performance for commercial real estate portfolios and infrastructure assets, has recorded another impressive surge in participation for 2021. A 26% gain in reporting entities follows an 18% increase in 2020.

“We are pleased to see such a high level of participation in this year’s GRESB benchmark coverage, particularly considering the business disruptions we have all experienced over the past year and a half,” says Sebastien Roussotte, Chief Executive Officer of GRESB BV.

The 2021 real estate results, slated to be released later this fall, will draw from a database of 1,520 entities collectively reporting on 117,000 assets valued at USD $5.7 trillion. Participants include 1,187 non-listed property funds, 326 listed companies and REITs and seven governmental entities. A 24% increase in respondents this year — up from 1,229 in 2020 — also boosts the numbers of assets in the database by nearly 22% and the value of assets under of management by nearly 19% compared to 2020.

Meanwhile, another 31 funds joined GRESB’s infrastructure fund assessment, lifting 2021 participation to 149, while 132 assets were added to the asset-level assessment. The latter exercise now encompasses 558 assets located in 69 countries and collectively valued at USD $738 billion.

GRESB’s investor membership now stands at 140 institutional and financial investors with more than USD $47 trillion in assets under management. They mine the data to monitor the performance of their holdings and to inform their investment decisionmaking.

“Increased engagement with a standardized benchmark demonstrates a strong industry commitment to ESG transparency and collaborative action,” Roussotte maintains.

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2051 Williams Parkway, Units 20 & 21 Brampton, Ontario L6S 5T4 t (905) 792-7792 DAVROC.COM engineer and energy management specialist who serves as Chair of the National Research Council’s standing committee on energy efficiency in buildings. “The updated metrics are especially timely with so many partially occupied buildings due to COVID-19. It would be great to see the normalization methodologies extended to other property sectors and to include waste also.”

REALPAC hints that could be a possibility, and the computational tool may be augmented so that users will be able to calculate carbon emissions associated with their energy and water-use intensity.

“The REALPAC NEUI and REALPAC NWUI methodologies will be updated periodically over time through feedback and review from industry to ensure that they remain current and valuable to users,” affirms Kristopher Kolenc, REALPAC’s Research and Sustainability Manager. “The methodologies are currently only designed for commercial office buildings, but may be expanded to other asset classes in the future.” zz

For more information about the new energy- and water-use intensity methodologies, see REALPAC’s website at www.realpac.ca.

PANDEMIC RELIEF FOR LANDLORDS AND CONDO BOARDS

Balancing today’s financial and tenant challenges

Being a landlord can be a challenge during the best of times. Throughout the pandemic, however, fi nancial hardships and logistical obstacles have added to the stresses (and costs) of landlords and boards of directors responsible for managing residential and commercial properties.

It’s no stretch to say that the pandemic has elevated the risks (and headaches) of being a landlord. Today, landlords, boards and property managers face more challenges on every front, including: • Stressed tenant relations: The landlord-tenant and condominium owner and board’s relationships have been under considerable strain for the past year and a half. On one side, there is a signifi cant number of renters and owners who have faced -- and continue to face -- legitimate fi nancial challenges that make

it diffi cult to pay rent or condominium fees resulting in defaults and arrears. On the other side, however, are landlords and boards with their own critical expenses to bear. Both parties are doing what they can to weather the storm, but competing fi nancial challenges created by pandemic conditions have added tensions to the relationship. • Health and safety necessities: Keeping renters and condominium owners safe has remained a top priority throughout the COVID-19 pandemic. That said, investing in enhanced cleaning programs, health and safety technologies, staff training, and other measures, in addition to regular overhead for property maintenance, repair and emergencies, adds considerable expense and cost to operations.

Absorbing these additional costs can be diffi cult, particularly during the pandemic when landlords are unable to collect full rent. • Increased maintenance costs: The pandemic has underlined the need for reliable ventilation systems and consistently healthy indoor air quality (IAQ). In response, many apartment owners, condominium boards, and stakeholders have invested in more effective HVAC systems to keep their occupants safe. Paying for these upgrades or retrofi ts may be a necessity, but it’s stretching maintenance budgets to their limit and in some cases beyond.

• Maintenance backlogs: A number of non-critical repairs and replacements have been put on hold over the last year and a half. Once we are past pandemic conditions, however, those same maintenance tasks will be waiting. Recognizing this, landlords, boards and property management teams will face a tsunami of increased costs as they struggle to remobilize people and resources to tackle this inevitable backlog. • Limited contact: Social distancing protocols have made it more diffi cult for landlords and boards to interact directly with tenants and unit owners. And while e-mails, phone calls, and video streaming do the trick, lack of face-to-face contact and social distancing makes it hard for property managers and maintenance contractors to do their jobs effectively and effi ciently, and often at additional time and cost.

Landlord and Condo Support These are diffi cult and costly days to be a landlord. And while Canada is making progress in its fi ght against the pandemic, property managers of every kind will likely fi nd themselves balancing fi nancial anxieties and tenant relationships well beyond the crisis.

“The landlords have been giving relief to the tenants to help them survive, and many will need to continue doing this as the economy takes time to recover,” says Winnie Tsui, Director of Operations with Living Properties, a GTAbased property management fi rm. “Having said that, it’s likely that landlords will still have trouble collecting full rent even after the pandemic and, at the same time, maintaining operating costs, repairs, maintenance, and any number of expenses.”

It’s enough to make any building management professional lose sleep. The good news, adds Tsui, is that landlords have access to their own supports: “Our President has insisted that our primary obligation is to share the burden with our landlord clients through this diffi cult time, which is why we’re prepared to offer new clients up to 30% discount on our services for two years.”

Think of Living Properties as a “one-stop property solution,” she continues. With its team of certifi ed and experienced property managers, the fi rm provides a full suite of services, from leasing to rent collection to back-offi ce accounting, unit inspections to maintenance management, managing inspections, regulation enforcement, and beyond.

Living Properties management package comes with 24/7 access to emergency service and support for all aspects of a tenant’s move-ins and move-outs, including conducting reference checks, arranging move-out/ move-in dates, and issuing collection and evictionrelated notices, when needed.

“The job of a landlord is always changing, which means we’re always keeping an eye on evolving regulations and trends, and employing the latest technologies and systems, to help landlords stay ahead,” adds Tsui.

“This 30% discount for new clients is just another way we’re helping them respond to today’s challenges,” she adds.

Experience is also an asset, especially as landlords look ahead at post-pandemic recovery. Established in 1983, Living Properties’ team has spent decades helping clients navigate an ever-changing landscape. Over those years, the fi rm has also aligned itself with industry partners, becoming a fully-licensed member of the Condominium Management Regulatory Authority (CRMAO) and the Canadian Condominium Institute (CCI), and a member of the Association of Condominium Managers of Ontario (ACMO) and Federation of RentalHousing Providers of Ontario (FRPO).

“We have the best resources for the landlord, and we offer a very competitive rate; but more importantly, we believe in applying a personal approach to property management that benefi ts both landlords and their tenants,” adds Tsui.

Living Properties Inc. is a full-service property management company providing investors, property owners, and condominium boards with peace of mind and quality service since 1983. Learn how new clients can receive 30% off Living Properties’ services. Visit www.livingproperties.com or call 905-477-2090.