Nils Kok

The Art of (Sustainability) Benchmarking

Silence on this blog typically means that things are a little hectic. Which they were, especially at the beginning of the year. Together with the now-expanded GRESB team (we just hired a new Head of Sustainability), housed in a spanking new office, I've worked hard to prepare the 2013 GRESB Survey. The online Portal is revamped (no more IT problems, I hope), the Survey has been optimized and further verification elements have been added, and all will be online on April 1 (until July 1). We expect an even higher number of property companies and funds disclosing their sustainability efforts this year, with some large investors joining the ranks (watch the GRESB website for some exciting announcements during the next weeks).

There is great traction in the commercial property market for energy efficiency and sustainability benchmarking. That leads to more players coming on the scene, which confuses the market. LEED, BREEAM, Energy Star, EPCs, DECs, NABERS, Green Star. Lots of labels, lots of stars. And as if there was not enough, there are also asset-level benchmarking initiatives by non-profits, such as the Green Rating Alliance and Greenprint (recently gobbled up by ever-hungry ULI), and for-profits, such as the International Sustainability Alliance. There are certainly differences between the three: GRA (a GRESB partner) also does physical building inspections, ISA is linked to BREEAM In-Use, and Greenprint has some footprint outside of the U.S. And there is are differences with some of the existing "ratings," such as Energy Star. Matthew Tippett of Upstream (a JLL outfit) in London has done a nice job of mapping the field in a couple of sheets, presented recently at the 40 Percent Symposium. Credits to him, but here is an overview:

As all of this takes place in the free market, technology start-ups start to smell profits as well. Being in the heart of the Bay Area, I often have the great privilege of listening to pitches. Some of those companies are not around very long, and I think we'll see more of a shaeout soon. But...there are some very promising companies. This week I was at Lucid, previously known for their building dashboard (showing how much a building consumes, renewable energy generated, etc). They've now transformed themselves into an online dashboard, "BuildingOS," with easy ways to collect building data directly from utilties. As soon as they have enough data, it's basically the perfect asset-level benchmark for real estate investment managers. Check this, quite funny teaser:

 

 Last month also brought the news that BuildingIQ, the company that provides unique building optimization software, raised $9mln from a consortium of VCs and big ESCOs. Check the press release. I might be biased, but I'm bullish on "smart buildings," that are not just one-way connected to the grid, but can also respond to signals. Very important, given the peak load that we'll increasingly have to deal with. And yes, I'm convinced that technology can do a better job than building managers, as much as I like human capital.

Ruin Porn

No, this title is not meant to increase the number of visits to nilskok.com (although I'll closely watch the impact on page views..). It's about a city tour of Detroit. After a great day in Ann Arbor (Michigan), where I gave a talk and met some bright students, and ever brighter faculty (check out Ryan Kellog's work on, and check into Dave Albouy's website), I had the pleasure of exploring Detroit with Andy Hoffmann (an environmental scholar with a background in contstruction, read his book !). Quick note about the Erb Institute at UMich: they offer a dual degree MBA from the Ross School of Business/Msc from the School of Natural Resources & Environment. The Ross School is a LEED Silver building and feels like a cool place. (Do students go there because of the LEED label? Well, ...). I gave an overview talk of 5-6 papers: all you ever wanted to know about the economics of green building. And more:

 

So, Detroit. And ruin porn. What a city. Losing 25% of population between 2000-2010 (more than the drop experienced in the 1970s!), and losing many more residents before, the city is a mess (Ed Glaeser wrote a nice piece on "the folly of the light rail" in the Wall Street Journal). Andy showed me some impressive/ depressing/ interesting places:

We also went to an opening of a Habitat for Humanity home. Thomas, a single father with a cute little son, got his own home, after living in a single-family home with 9 (!) people for the last couple of years. He put "sweat equity" in his home, and will get a no-interest loan to pay for the place. Habitat understands that more efficient homes lead to lower cost: this home was equipped with Energy Star appliances, additional insulation, double-glazed windows, an instant-boiler for hot water and water-saving faucets. The result: an expected utility bill of $100 a month. In cold Detroit, that's quite a feat. (Many poor families pay up to $600 a month for heating their home...!!). Vincent, the executive director of Habitat Detroit mentioned that he would love to get LEED certification for his homes. It's just too expensive.... My recommendation would be for the USGBC to provide free certification for Habitat Homes (as long as they fulfill the requirements, that is).

Apart from the energy savings, the home opening opened my eyes for the overwhelmingly strong social side of providing these homes: it leads to neighbourhood gentrification and will give Thomas' son a much better prospect for a succesful future. Seeing the whole family and the happy homeowner was very moving. I should start building homes, rather than talking about it... Of course, we drove around and I acted as a tourist, making pictures of the Grand Theater that now acts as a parking garage, the old Packard factory (miles and miles of abandoned property), and the homes that are falling apart.

It would be good for some European mayors to go Detroit -- rather than building homes, offices and shopping centers to attract more people, adaptation is the only way to deal with a decreasing population. Taking stock out of the market rather than adding it. For example, the area around Maastricht, in the south of the Netherlands, is shrinking with 1% per year. Will it become another Detroit?