realestate

Energy Star's demise: Commercial real estate implications

Over 8,800 commercial buildings earned the Energy Star last year, saving $2 billion and reducing emissions by over 5.7 million metric tons.

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version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. The newsletter covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors, and large public companies. Sign up to receive future editions straight to your inbox.

    Energy Star is more than just a blue sticker on energy-efficient appliances. It's a public-private partnership administered by the U.S. Environmental Protection Agency that sets strict energy-efficiency guidelines for builders, developers, and manufactured housing firms. Over 2,500 participants in the Energy Star Residential New Construction program have earned its designation, while last year over 8,800 commercial buildings earned the Energy Star, saving more than $2.2 billion and preventing over 5.7 million metric tons of emissions.

    The EPA's Energy Star Portfolio Manager tool is a software platform that connects utilities to landlords and state and municipal governments who rely on it for energy tracking across commercial real estate. This tool supports $14 billion in annual energy cost savings, according to Leia de Guzman, co-founder of Cambio, a real estate operations platform.

    Industry organizations are fighting for the program's existence, citing concerns that if Energy Star loses federal backing and is managed by a private entity, costs will increase and compliance will become complicated. "It provides hundreds of billions of dollars of savings for consumers and businesses in its current form," said Nicole Upano, director of public policy for the National Apartment Association.

    The EPA announced massive job cuts and restructuring in early May, but did not specifically mention Energy Star. An EPA spokesperson stated that they are continuing to work on implementing reorganization plans, but declined further comment. Landlords rely on Portfolio Manager data to maintain compliance with state and municipal regulations and gauge energy performance of buildings in their portfolios.

    Cambio is offering building owners and managers the option to back up existing data, but cannot tap into future data if the EPA takes its system down. Industry organizations are urging the EPA to reconsider its plans for Energy Star, citing concerns about increased costs and compliance issues if the program were managed by a private entity.

Energy Star logo, commercial buildings, and a graph illustrating declining ratings.