{"id":1004117104,"date":"2015-04-08T08:48:40","date_gmt":"2015-04-08T16:48:40","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004117104"},"modified":"2022-12-07T07:01:24","modified_gmt":"2022-12-07T15:01:24","slug":"water-and-energy-a-new-cost-model","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/water-and-energy-a-new-cost-model\/","title":{"rendered":"Water and Energy \u2013 A New Cost Model"},"content":{"rendered":"

By Manuel Fishman, Real Estate Attorney, Buchalter Nemer\"Fishman\"<\/a><\/em><\/p>\n

While some parts of the country have experienced one of the most severe winters, in California the winter failed to produce sufficient rain and snow to regenerate the State\u2019s water reserves, and the State is officially in a drought.\u00a0 On April 1, 2015 (without a nod to April Fool\u2019s day), the State\u2019s Governor issued an Executive Order directing the State Water Resources Control Board to impose restrictions that would achieve a 25 percent reduction in urban<\/span> water usage from 2013 levels by February 2016.\u00a0 The directive is applicable to commercial properties as well.\u00a0 Most importantly, the Water Board is directed to \u201cdevelop rate structures and other pricing mechanisms\u201d to maximize water conservation.<\/p>\n

On a related front, last year California\u2019s Energy Commission implemented new regulations to the State Building Code (applicable to all cities) that are the first step in the State\u2019s goal to lower commercial energy use by 30 percent by the year 2020 (current estimates are that commercial buildings represent 37 percent of all of California\u2019s electricity consumption).\u00a0 The first step was mandatory lighting and plug load requirements.\u00a0 Hearings to implement the second round of regulations are currently ongoing and the State has enacted legislation that requires commercial properties to reduce lighting energy use between 2007 and 2018 by 25 percent.<\/p>\n

What does this mean to owners and operators of office buildings and other commercial properties?\u00a0 Let me focus on three impacts:\u00a0 First, whether you go through the LEED (Leadership in Energy and Environmental Design) process or some other process, identify ways to make your buildings more energy efficient.\u00a0 One of the major unanswered questions raised by the Governor\u2019s Executive Order is \u2013 how does a building that went through the LEED process and implemented water and energy conservation protocols to achieve a \u201cGold\u201d or \u201cPlatinum\u201d LEED rating \u2013 achieve another 25 percent reduction in water consumtion?\u00a0 Second, it is time to start pricing energy and water based on what that resource is worth \u2013 not based on its actual cost.<\/p>\n

Once a business exceeds base line consumption, the charge to consume more energy and more water needs to rise, sometimes significantly, to reflect that real impact of the excess use.\u00a0 In order to do this, a new leasing model needs to be implemented \u2013 an \u201cindustrial gross\u201d model, where utility costs are passed through on a direct, net, basis and direct metering of tenants is the norm, not the exception.\u00a0 Owners should review language in their leases that address watts per square foot, and kilowatt hour consumption.\u00a0 Finally, the cost of tenant improvements, already higher because of the increase in hard construction costs, is likely to increase more based on compliance with governmentally mandated energy conservation requirements, both in new construction and tenant alterations.\u00a0 Lighting controls, timers, tinted windows, automatic window shades, and other energy reducing controls may all creep their way in to construction rules and regulations for tenant build outs.\u00a0 How owners handle this in their lease agreements and in their rent modeling becomes very important.\u00a0 Certain building may have a competitive advantage in the market place based on their ability to invest capital in the energy efficient improvements.<\/p>\n

What is happening in California does affect property owners with assets in other States, especially those with assets in the Western United States, where the issues noted above reflect a regional change.\u00a0\u00a0 In addition, policy makers may develop long range solutions to the transportation of certain resources from one region to another.<\/p>\n

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By Manuel Fishman, Real Estate Attorney, Buchalter Nemer: The best ways to make your buildings energy and water efficient.<\/p>\n","protected":false},"author":1166,"featured_media":1004096951,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004117104","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nWater and Energy \u2013 A New Cost Model - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/water-and-energy-a-new-cost-model\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Water and Energy \u2013 A New Cost Model\" \/>\n<meta property=\"og:description\" content=\"By Manuel Fishman, Real Estate Attorney, Buchalter Nemer: The best ways to make your buildings energy and water efficient.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/water-and-energy-a-new-cost-model\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-04-08T16:48:40+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-07T15:01:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/05\/Fishman.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"276\" \/>\n\t<meta property=\"og:image:height\" content=\"235\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Manuel Fishman\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/water-and-energy-a-new-cost-model\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/water-and-energy-a-new-cost-model\/\",\"name\":\"Water and Energy \u2013 A New Cost Model - 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