Navigating the Permitting Maze Course Highlights Continuing Education and Association’s Advocacy

On September 21 and 28, NAIOP Massachusetts University presented Navigating the Permitting Maze: A Crash Course in Environmental Permitting to 40+ students from a range of backgrounds looking to master real estate permitting fundamentals in Massachusetts. This course, led by VHB instructors and complemented by several industry experts and panelists, centered on introducing permitting basics, including development of an early permitting strategy and timeline with colleagues and state and local regulators, as well as more complex issues, such as transportation analyses, historical property concerns, climate resiliency, appeals, and much more.

Not only did this course provide valuable education for new and continuing real estate professionals, it made connections to NAIOP members’ experience with advocacy at the legislative, regulatory, and judicial level.

Basics of Environmental Permitting, and Trends from State and Local Directors

During the first day, students started the morning with sessions led by Kyle Greaves and Lauren DeVoe of VHB, on the Massachusetts Environmental Permitting Act office (MEPA) review process which coordinates public review of a development’s environmental impacts. Next, students received instruction on the Boston Planning & Development Agency (BPDA) Article 80 regulations and process. Over the last five years, MEPA has analyzed about 1,300 large developments, with the majority (60%) culminating the review process with an Environmental Notification Form, and the remainder split between needing an Environmental Impact Report or a more in-depth process. For developments in Boston, Jonathan Greeley, Director at BPDA, which has approved over 11 million square feet for development in 2018 alone, emphasized that successful projects start with community outreach early in the process. Jonathan served on a trends in development panel with MEPA Director Deidre Buckley and moderator Greg Peterson of Casner & Edwards LLP during day one of the course.

greeleypresentsIMG_0504-cropJonathan Greeley, Director at Boston Planning & Development Agency

Permit Extension Act Protects Developments During Great Recession

Mary Marshall, Partner at Nutter McClennen & Fish, presented the final session on Day 1 on the Post Entitlement Permitting Stage. Mary made a connection between NAIOP’s legislative advocacy and environmental permitting, stating that during the recession, when many developments stalled due to the economy and financing, NAIOP formulated the Permit Extension Act, which was signed in 2010 by Governor Patrick (and expanded in 2012) to allow projects to maintain permits so that they could be “shovel-ready” when the market improved – avoiding several years spent reapplying for permits. Tamara Small, Senior Vice President of Government Affairs, added that a more recent advocacy connection with permitting is that NAIOP successfully changed the railroad-right-of-way statute in the 2018 economic development bill signed by Governor Baker this August. This means that developers will have more clarity about whether and when they must coordinate with MassDOT on building on former railroad rights of way.

Commercial Real Estate Professionals Advocating for Industry

On the second day of the course, individual sessions were designed for “deep-dives” into more technical areas. Jamie Fay, a waterfront planning expert at Fort Point Associates, a TetraTech company, led a session on the Massachusetts waterfront planning Act (Chapter 91) and how it affects development. Jamie is an active member of NAIOP’s government affairs committee and served as an advocate for reasonable regulation of the waterfront when the legislature worked on the issue and passed legislation in 2007 — and in the years following, as the Department of Environmental Protection promulgated regulations. New developments like Clippership Wharf and Encore Boston Harbor are subject to Chapter 91 rules. Stephanie Kruel, a climate resiliency planning expert at VHB, walked through climate resiliency checklists and analysis during the project planning phases. Stephanie serves as co-chair of NAIOP’s climate resiliency committee – a subcommittee of the government affairs committee.

To bring the areas of waterfront issues, historic resources issues, climate resiliency and environmental permitting together in a real-life example, the course ended with a project spotlight and panel presentation by four individuals from the General Electric Innovation Point team: Elizabeth Grob, VHB, Jeff Porter, Mintz Levin, Peter Cavanaugh, GE and Todd Dundon, Gensler.

GEpanel4IMG_0529-cropJeff Porter (Mintz Levin) moderates Project Spotlight Panel on GE Innovation Point joined by Peter Cavanaugh (GE), Elizabeth Grob (VHB) and Todd Dundon (Gensler)

NAIOP would like to thank all of the many experts whose time and energy made this course such a success. Due to popular demand, the permitting course will return in 2019.

Make sure to check out all of the NAIOP Massachusetts University offerings including the upcoming Real Estate Finance Fundamentals course on October 26, 2018. Have ideas on other courses NAIOP could offer? Let us know!

 

 

How Much Are Smart Buildings Really Worth?

smartinfographicMITCourtesy of the MIT Center for Real Estate and Real Estate Innovation Lab – Get Smart, Connected & Green

Arguably, the premier commercial office space market in the U.S. – New York City – is showing signs that office tenants will pay a significant premium on rent for space in a ‘smart’ building.

Compared to office leases in the city for non-smart buildings, MIT Center for Real Estate researcher Alfredo Keitaro Bando Hano (2018) found that office properties with smart building attributes attracted rents that commanded a 37 percent premium on effective rent per net square feet. The sample included 454 non-smart building properties and 223 smart office leases using the Compstak transaction database for Manhattan for 2013 and onwards. The MIT Real Estate Innovation Lab continues to research and report on smart, connected and green buildings.

Thanks to new technologies and devices, occupiers now have the possibility to measure and analyze the activity that occurs inside their structures. Companies are not focused on location only anymore; they now they look for more productive and efficient areas, and smart buildings rise as a possible answer to this new requirement.

In search of flexibility and agility, users have pushed changes in architectural and interior design to improve employee satisfaction, health, and engagement, hence better productivity.

Smart buildings are self-sensing. For the purposes of Keitaro’s study, a smart building must have installed one or more smart amenities that go beyond sustainability and aim to improve the occupier experience. Smart amenities include occupancy sensors, automatic windows, cameras with emotion recognition algorithms, and other technologies that capture and provide information to tenants and landlords. Ultimately, a smart building is one that adapts to the needs and preferences of the building’s occupants. And, in the office environment, responding to workers’ needs and preferences stand to significantly increase employee productivity and well-being.

We can predict that in the future, new smart amenities will come to market and offer commercial real estate developers, owners, and investors opportunities to incorporate smart technology in the building’s plans and reap the financial benefits.

That being said, the New York City sample did not delve into the cost of constructing and operating a smart building compared to a non-smart facility. It is not yet clear whether the rent premiums offset the costs to construct, renovate, and operate smart buildings. Further, due to other factors (like location) not all the projects will immediately obtain these premiums just by embracing a smart strategy. Nevertheless, it is worth emphasizing that smart buildings have value.

NAIOP Massachusetts is an industry partner to the MIT Center for Real Estate. Alfredo Keitaro Bando Hano wrote The Incremental Value of Smart Buildings Upon Effective Rents and Transaction Prices (2018) as a master’s thesis.

For more information about the MIT Center for Real Estate’s research, please go to: https://mitcre.mit.edu/ or to the MIT REILab:  http://realestateinnovationlab.mit.edu/

 

Senate Energy Bill to Require Home Energy Audits & Labeling

Tomorrow the Senate will be voting on its version of an energy bill that passed the House in early June. The bill includes a new requirement that single family homes, multifamily properties with less than 5 units, and condominiums must undergo an energy audit prior to the property being listed for sale. The results of the audit would need to be disclosed when the property is listed. The bill also requires the Department of Energy Resources (DOER) to establish a home energy rating and labeling system, which would be based on, but not limited to, a property’s energy consumption, energy costs, and greenhouse gas emissions. The property’s energy rating and label would also need to be disclosed. In addition, DOER would track and publicly report the number of home energy audits conducted and energy ratings and labels issued.

NAIOP has serious concerns with the impact this could have on the housing market, particularly in low-income communities where homeowners may not have the means to make upgrades and properties would be potentially devalued with a low score/label. NAIOP supports the Mass Save program and believes that incentives, not penalties, will do more to address energy efficiency in the Commonwealth.

A number of concerning amendments to the bill have also been filed. Amendment #8 is the climate change legislation that was passed by the Senate earlier this year. NAIOP is strongly opposed to this language due to the confusing and vague language it contains and the substantial adverse impact it would have on development. It would require all “commonwealth certificates, licenses, permits, authorizations, grants, financial obligations, projects, plans, actions, and approvals for any proposed projects, uses, or activities in and by the commonwealth” to be consistent “to the maximum extent practicable “with a yet to be developed climate plan. Clearly, this language could delay and potentially halt countless public and private projects.

Amendment #68 would mandate electric vehicle charging stations. NAIOP does not believe the building code is the right place to advance the growth of specific technologies or sectors of the economy.

Following the Senate’s vote, the bill will go to conference committee where members will have to agree to compromise language. That version of the bill would then need to go back to the House and Senate for a vote before the end of the session on July 31.

ViewPoint: A new stretch energy code is not justified

This OpEd appeared in the Boston Business Journal on June 3, 2016.

In March 2015, Governor Charlie Baker signed Executive Order 562, initiating a comprehensive review process for all regulations. Only those regulations which are mandated by law or essential to the health, safety, environment, or welfare of the Commonwealth’s residents would be retained or modified, making Massachusetts a more efficient and competitive place to live and work.

Agencies must demonstrate, in their review, that there is a clearly identified need for governmental intervention; the costs do not exceed the benefits; a regulation does not exceed federal requirements; less restrictive and intrusive alternatives have been considered and found less desirable; and the regulation does not unduly and adversely affect the competitive environment in Massachusetts.

Based on these specific criteria, the business community is concerned that the Board of Building Regulations and Standards (BBRS) is currently considering a new Stretch Energy Code as it develops the 9th edition of the statewide building code. Besides the fact that this Stretch Code undermines the statutory requirement that there be a uniform State Building/Energy Code, there is no good reason for it. This proposed energy code is unnecessary and fails the regulatory review standards, and the Baker Administration and the BBRS should not advance it.

The Stretch Energy Code was originally adopted in May 2009, despite strong opposition from the business community.  The code required commercial and residential construction in those communities that voted to adopt it to be approximately 20% more energy efficient than the statewide code. The new stretch energy code would require a 15% increase in energy efficiency over the current code. The Stretch Code has caused confusion among local building inspectors and developers.  Due to this and several other reasons, a new version of the Stretch Energy Code has never been adopted, even when the statewide code changed.  In fact, at the close of the Patrick Administration, the BBRS voted not to advance a new draft of the Stretch Energy Code.  However, in April 2015, this decision was reversed.

Massachusetts is already the most energy efficient state in the nation, with the most aggressive energy efficiency targets.  Furthermore, Massachusetts will be one of only a handful of states in the nation to adopt the 2015 International Energy Conservation Code (IECC) statewide.  Since the Green Communities Act requires the adoption of the latest IECC (every three years), the Commonwealth’s position as a national leader in energy efficiency will be ensured even without a Stretch Code.  Anything beyond that is overly burdensome and creates a significant competitive disadvantage for Massachusetts.

It is important to note that there is no statutory requirement to adopt or update a Stretch Energy Code.  There is no mention of it in any statute, and it is only the Department of Energy Resources’ (DOER) policy that encourages the creation of this code.

According to DOER, the changes to the Stretch Code would take effect automatically in stretch code communities without any local vote.  Many municipalities had no idea they would be subject to an automatic upgrade.

The business community continues to support a uniform statewide building and energy code.  We believe a new Stretch Energy Code is unnecessary, will hinder economic development, and would impose an unfair and difficult burden on local building officials and the construction industry.  We urge the Baker Administration and the BBRS to eliminate the Stretch Energy Code, once and for all, and acknowledge the latest version of the IECC as the only energy code in Massachusetts.

David Begelfer is the CEO of NAIOP Massachusetts, the Commercial Real Estate Development Association.

Federal “Tenant Star” Report Promotes Energy Efficiency in “Next Gen” Commercial Leased Spaces

The U.S. Department of Energy (DOE) just published its Energy Efficiency in Tenant Leased Spaces feasibility study that highlights both opportunities and barriers to implementing energy efficient technologies in multi-tenant commercial spaces.

The study was required by Congress as a part of the Energy Efficiency “Tenant Star” legislation that was passed into law last April. The hope is that this voluntary program will encourage higher energy performance in leased spaces in commercial buildings. Market driven branding incentives have worked well with building owners through the voluntary Energy Star program. Now, this program will attempt to motivate building tenants to increase their energy efficiencies and reduce their energy consumption.

The DOE study finds that “American businesses can occupy more energy-efficient spaces that help improve their bottom line, attract and retain the best workers, and increase their competitiveness.” About half of commercial real estate is occupied by tenants, who could directly benefit from greater energy efficiency. The study further finds that tenant space can be built to save 10-40% energy compared to a typical space.

The study also examined the persistent problem of a lack of energy data. It was determined that a significant increase in sub-metering of tenant spaces would help overcome this barrier. Another persistent problem is the “split-incentive” issue between owners and tenants, with owners paying for the improvements and the tenants benefitting. Accelerated 15-year depreciation of leasehold improvements, can potentially provide real estate owners with greater certainty to undertake property improvements over the typical lease term and economic life of those assets (7-10 years).

Furthermore, the DOE report also encouraged the creation of a federal tenant space recognition system, similar to Energy Star.

The real estate community is supportive of these voluntary, market driven programs that have already shown tremendous results across the country.

Fraunhofer CSE’s Living Lab – The Future of Sustainable & Energy Efficient Building Technology

LIving Lab

NAIOP’s Gavel members recently toured the Fraunhofer Center for Sustainable Energy Systems (CSE) Living Laboratory, a cutting-edge R&D center for the advancement of sustainable energy systems. Born out of a 2013 energy-retrofit of a 100-year-old building in the Channel Center neighborhood in South Boston, the Lab leverages cutting-edge design concepts and historic architecture alongside in-house research facilities, including a pilot solar module fabrication line, dedicated thermal testing laboratory, and extensive characterization/environmental testing resources. Its mission is to foster economic development through the commercialization of clean energy technologies for the benefit of society.

Besides providing clients with services like testing the energy efficiency of exterior wall designs and new photovoltaic panels, the building is an exhibit for new technologies in HVAC systems, lighting, and energy efficient fenestration.

Fraunhofer CSE’s Building Energy Technology Group applies its expertise in four main areas:

  • Working with clients from industry, academia and government to develop new products
  • Field testing of novel building technologies and materials
  • Evaluating product performance through laboratory testing, field deployments, and modeling, simulation, and analysis.
  • Demonstration projects to acquire real-world performance data

NAIOP members may be interested in learning more about the cutting edge research now underway at the Living Lab. Tours are available by appointment.

President Obama Signs Energy Efficiency Improvement Act of 2015

Energy BillPresident Obama recently signed into law the Energy Efficiency Improvement Act of 2015 (S. 535), which creates a new “Tenant Star” to encourage energy efficiency in leased commercial spaces. Tenant energy usage can account for 50 percent or more of a building’s total energy usage. Like its predecessor, “Energy Star”, Tenant Star is a voluntary, market based, cost free program that is expected to encourage optimum energy efficiency in leased commercial spaces, helping the environment by cutting greenhouse gases.

This program has been championed by the real estate industry through the direct efforts of the Real Estate Roundtable. The U.S. Environmental Protection Agency, in consultation with Department of Energy, will start developing standards for the Tenant Star designation within 180 days.

Along with Energy Star (which is aimed at encouraging energy efficiency within the building core), this new designation will encourage office tenants with their landlords to design and construct cost-effective energy investments in the building’s leased spaces.

NAIOP believes that the Tenant Star program can be an effective educational program that leads to voluntary, smart, cost-effective energy efficiency investments.