Green building

Improve Portfolio Performance

Property managers can reduce costs with an EPA-approved program.

Since commercial buildings’ energy use accounts for approximately 18 percent of all U.S. greenhouse gas emissions, the commercial real estate industry can benefit from and promote using tools to measure its environmental footprint. The U.S. Environmental Protection Agency’s Energy Star Portfolio Manager, which generates an energy performance rating for buildings and portfolios, is considered the industry standard energy performance metric that can help property owners and managers reduce energy costs.

By focusing on energy efficiency, Transwestern, a Chicago-based commercial real estate and development company, has lowered its energy consumption an average of 20 percent. These reductions are gained largely through strategies that preclude any capital investments. Using Portfolio Manager will not only help other commercial real estate companies reduce carbon emissions, but it also can help reduce their properties’ environmental impact.

Getting Started

Transwestern’s focus on energy efficiency was one of the most effective routes to reducing its environmental footprint while adding value to the assets it manages. The starting point for these efforts was to first gain a solid understanding of the portfolio’s energy performance.

The EPA Energy Star rating serves as the performance metric for the U.S. Green Building Council’s Leadership in Energy and Environmental Design certification and provides the foundation for the U.S. General Services Administration’s property leasing and development practices for federal agencies. The EPA rating also is the basis of evaluation criteria for efficiency and environmental programs established by the National Association of Real Estate Investment Trusts, the American Hotel and Lodging Association, the Building Owners and Managers Association International, and the Continental Automated Buildings Association as well as various state, county, and municipal government programs.

Portfolio Manager can be used to establish performance ratings for more than 65 percent of the total square footage of U.S. commercial property, including offices, supermarkets, hotels, general retail, schools, hospitals, dormitories, and warehouses. According to the EPA, more than 4 billion square feet of real estate has been rated using this system.

Applying the Product

To use Portfolio Manager, property managers collect and input the necessary space usage and energy consumption data into the online tool, which is both free and secure. A property’s energy performance is compared to an independently collected and unbiased data set for each building type. Portfolio Manager then generates normalized and comparable performance ratings for each property.

Transwestern uses its energy performance ratings as benchmarks. This beneficial practice allows property managers to measure performance, make more-informed decisions, and identify and implement opportunities for improvement. Transwestern benchmarks each new property added the company’s portfolio within 45 days of its acquisition and maintains accurate benchmarks for all properties in its office portfolio each year.

In addition to benchmarking individual property performance, Portfolio Manager also aggregates data to create a picture of an entire portfolio’s performance. This gives Transwestern the visibility to better manage its portfolio’s energy consumption from the top down. An aggregate EPA energy performance rating for the whole portfolio provides a normalized and comparable metric of portfolio performance. After establishing a baseline rating, the company can use that information to track portfolio-wide improvements and monitor progress toward energy-saving goals.

Energy-Conscious Features

Portfolio Manager’s powerful capabilities enable property managers to monitor the carbon emissions associated with energy consumption, along with emissions avoided due to energy performance improvements. This unbiased source for calculating carbon savings is instrumental for all commercial real estate companies in today’s climate-conscious business environment.

Portfolio Manager also calculates and tracks other metrics for individual properties and whole portfolios, including reductions in energy consumption, financial savings, and capital expenditures. This has allowed Transwestern to take better control of energy consumption and costs and to communicate the financial value of improvements to clients and tenants. Since energy is the largest controllable operating expense in commercial buildings -- and energy costs are increasing every day -- taking advantage of these features is crucial for the company’s clients. Portfolio Manager also can evaluate which individual properties are performing best and which are not meeting goals.

Organizing information into customized views that match a company’s management or geographical structure, or any other logical arrangement, is another key feature of Property Manager. For example, properties can be grouped by the specific property manager, which enables commercial real estate executives to understand portfolio performance from various perspectives, each of which can illuminate different insights and spur new ideas.

Property Manager also has the ability to see which buildings in a portfolio have earned the Energy Star label for superior energy performance, which have qualified but not yet applied, and which have applications in process. Buildings earning an energy performance rating in the top 25 percent of all buildings nationwide qualify for the Energy Star label, a broadly recognized symbol for excellent energy management in commercial buildings. The Energy Star label has distinct marketing and public relations benefits for Transwestern’s clients, especially since CoStar gives top billing to buildings that have received this label as well as LEED certification.

By taking advantage of Portfolio Manager’s features, Transwestern and other commercial real estate companies can use the power of information to better manage their portfolios’ energy performance. The improved cash flows that result from energy efficiency can help fund more-expensive green strategies that also impact energy use. By packaging cost-effective energy improvements with other green efforts, Transwestern has been able to take a more strategic and holistic approach, demonstrating better overall results. Monitoring portfolio-wide energy savings and dollar savings and preventing carbon emissions are just the beginning for managing energy performance.

Dennis Thurman

Dennis Thurman is senior vice president and director of energy programs at Transwestern in Chicago. Contact him at dennis.thurman@transwestern.com. Log on to on EPA’s Energy Star Portfolio Manager for more information.

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