'Every Single Owner Is Struggling' To Meet Boston's New Building Emissions Mandates
Six months after Boston enacted a sweeping new law that will require building owners to drastically reduce their carbon emissions levels in the coming years, the commercial real estate industry is still struggling to wrap its head around the regulations.
The BERDO 2.0 law — an update to the city's Buildings Emissions Reduction and Disclosure Ordinance — was signed by then-acting Mayor Kim Janey in October after the city council passed it the prior month. It requires buildings of 20K SF or more to report building emissions and meet carbon emissions caps that will become mandatory in 2025.
After 2025, the emissions caps will become lower every five years until 2050, when it requires buildings to become fully carbon neutral. This will make a meaningful dent in the city's overall carbon footprint, as 70% of Boston's emissions come from the building sector, according to Boston Environment Department Commissioner Alison Brizius.
"2025 is coming soon, in capital planning cycles that's pretty soon," said Brizius, speaking April 7 at Bisnow's Boston Construction & Development event. "We want to work with all of you to help building owners understand and make a plan to meet these carbon targets."
"There’s going to be a lot of growing pains, I get that," Brizius added. "We want to hear from you how best can we help."
That help may be needed soon, as developers and other real estate professionals speaking at the event said they are having a difficult time preparing for the new mandates.
"We're still getting our arms around it; this is a big undertaking," said Samuels & Associates Vice President of Development Julie Wynyard, whose Boston-based firm has developed 8M SF of commercial real estate and manages 2,000 apartments.
"As we're digesting what it means to report back and perform these standards, each building needs a custom-tailored solution, and we're still working it out," Wynyard said. "There's also the logistical challenge that I think shouldn't be underestimated. It's not a blank slate. You have tenants in place, and as a landlord you only control so much of the building."
Samuels is far from the only developer in Boston wrestling with these challenges. Katie Raymond, a senior consultant with Epsilon Associates who works with developers on greenhouse gas analysis, said BERDO's passage has dramatically changed developers' mindsets around the issue.
"This issue is front and center in every project we're involved in," Raymond said.
Previously, she said developers were focused on meeting the existing requirements needed to get through permitting, but she said the passage of BERDO 2.0 has forced them to look ahead to make sure their new buildings will be compliant for the next few decades.
"That discussion now is painful, and every single owner is struggling with the new business as usual," she said. "The old business as usual will get you through permitting, but it wont get you to those driven-down carbon emissions levels set by BERDO that you have to comply with."
TA Realty Head of Environment, Social, Governance and Resiliency Anne Peck said her firm, which has a large national portfolio of industrial, office, multifamily and retail properties, is still working to evaluate its emissions before beginning to implement widespread changes.
"Honestly we're not there yet; my company is not there yet," Peck said. "We're also hoping and counting on the grid itself to be cleaner."
Brizius said Boston's law allows building owners to take advantage of the electricity grid becoming more green when tracking their building's carbon footprint, a lesson she said the city learned from watching challenges New York City faced with its similar law, Local Law 97.
The variations of different carbon emissions standards across states presents a challenge for real estate firms with nationwide portfolios, Peck said. TA Realty has offices in Boston, Dallas, Newport Beach, California, and Palm Beach Gardens, Florida, and has invested in projects across 30 markets.
"There is no regulation across the U.S. that says everyone has to do it," Peck said. "Europeans are a lot farther ahead of us, they have regulations where everyone has to be at the same standard. The problem here is we don't all have the same standards. My standard to calculate across my portfolio is different than my buyer if I sell my asset."
The Davis Cos., the second-largest commercial real estate developer in Massachusetts, is also working to decrease the carbon footprint of its portfolio.
Davis Cos. Vice President of Construction Gretchen McGill said the company is focusing on electrifying its buildings and reducing its overall energy usage.
"We do understand that these things are going to be iterative, it’s not going to be perfect today, and we’re going to make progress over time," McGill said. "It’s about trying to find space and make sure we leave things for optionality in the future, trying to be flexible, and also having realistic expectations."
One way that property owners can finance improvements to their buildings' environmental performance is through the C-PACE program. This program has struggled to take off in New York, Bisnow reported earlier this week, but companies like Nuveen Green Capital are working to expand the program.
Nuveen Green Capital Associate Director of Market Development and Strategy Arran Cooper focuses on expanding the firm's C-PACE lending practice, and he said he sees a big opportunity in Boston.
"We view Boston as huge growth market for us with a lot of opportunity," Cooper said. "When it comes to BERDO, we can fund the energy upgrades needed to get into compliance, so there's a massive opportunity there, and the development pipeline in Massachusetts and Boston is so robust, there's a lot of deals in the pipeline."
Technological innovation can play a big role in bringing down building emissions, McGill said, especially in the Boston area where many entrepreneurs start new companies and try out their products.
"As we look at those environmental initiatives, we're looking at technology to manage those buildings. There's a huge wave of technology," McGill said. "[We're looking at] which ones to pursue, which ones will tenants pay for, which ones genuinely have energy reduction and which ones just shift energy consumption somewhere else."
A variety of technologies that could help bring down building emissions are coming out of Greentown Labs, a climate technology incubator with a 100K SF facility in Somerville. The incubator has nearly 200 startups aimed at decarbonizing all sectors of the economy, and Greentown Labs Chief Operating Officer Ryan Dings said those focusing on building emissions have received an enormous amount of funding in recent years.
"There is an intensive amount of capital going into technologies and materials and systems that are going to help us decarbonize buildings," Dings said.
One of the most impactful innovations in the works, Dings said, is creating carbon-free cement, an idea that he said two Greentown Labs startups are tackling.
"If you have carbon-free cement, that reduces emissions so drastically in buildings and in our planet," Dings said. "If cement was a country, it would be the third-largest greenhouse gas emitter in the world."
He said many of the technological advances won't be ready in time to help buildings meet the 2025 emissions targets, but he said they could be hugely impactful for reducing building emissions in 2030, 2035 and beyond.
"There’s this 'be patient and hurry' approach we're going to have to be comfortable with," he said. "This is going to be a two-decade sprint."