How To Navigate Building Performance Standards To Manage Risk, Drive NOI

Building performance standards, or BPS, are often seen in commercial real estate as strict compliance obligations.    

However, with more than 40 cities across the nation implementing these regulations to reduce carbon emissions, owners should start thinking of BPS as an integral part of their asset and/or portfolio strategy, rather than just a mandatory obligation. This is the advice of Rob Holdsworth, chief sustainability officer and head of engineering at Evolution Sustainability Group, a national sustainability consulting firm. 

“Owners should pay close attention to the compliance aspects of these rules and regulations, especially in those jurisdictions that have some pretty draconian financial penalties for not meeting targets,” Holdsworth said. “The last thing they want is to get a violation letter in the mail from the Department of Buildings for hundreds of thousands of dollars every single year until they comply.” 

Nearly 25% of all buildings in the U.S. are subject to BPS regulations. And even as these rules become more prevalent in today’s CRE market, many owners are still uncertain about how to properly address them. Oftentimes, owners don’t know much about these regulations until they receive a violation and a fine in the mail, Holdsworth said.

Navigating the ins and outs of these regulations can be an arduous task. This is where Evolution Sustainability enters the equation.

With clients across the country, Evolution Sustainability tracks all BPS laws, roughly 60 programs, monitoring compliance regulations, performance targets and any policy changes that occur, Holdsworth said. This is a comprehensive task that requires ongoing oversight and technical expertise to ensure properties remain compliant — expertise that asset owners and managers often don’t have in-house.  

Building performance standards require commercial buildings to hit certain energy and emissions targets that progressively get stricter over time. If owners miss these targets, they may face financial penalties. These penalties, of course, vary widely by jurisdiction, ranging from hundreds of dollars to hundreds of thousands of dollars.

Not all penalties are extremely burdensome, such as New York City’s Local Law 88, Holdsworth said. If an owner doesn’t comply with Local 88, the fine is an annual $1,500. Compared to doing hundreds of thousands of dollars’ worth of LED lighting upgrades and submetering work to comply, a $1,500 fine may seem like the least detrimental option, he said.  

But while fines like this may not seem pressing or expensive in the near term, they can add up over time — monetarily and otherwise. 

In some jurisdictions, if a building is in violation of a BPS ordinance, the owner also has a violation with the Department of Buildings. This is a big deal, because if owners don’t write a check to cover the fine in full, they may not be able to sell or pull permits for future work on the property until the violation is cleared. 

“These are real risks that a lot of building owners aren't aware of,” Holdsworth said. “It’s our job to give all options to our clients, including alternate compliance pathways, so they can decide what's best for them.” 

Though financial penalties are a major driver of compliance, many of Evolution Sustainability’s projects stem from owners looking to increase their net operating income. 

Since 2019, electricity prices have risen by almost 25%. The price of natural gas went up nearly 7% in 2025 alone. And in the 2010s, water and sewer bills increased by almost 45%, faster than any other utility during the same period. These price escalations, coupled with noncompliance fines, can quickly eat into an owner’s NOI. 

Some buildings may need only minor upgrades, but it’s just as likely that a building will need a “pretty dramatic” reduction in energy consumption, Holdsworth said. This translates to a major reduction in utility costs, which, in turn, has a positive impact on a property’s net operating income. 

By taking this proactive stance, stringent fines and penalties will also avoid hitting a property’s bottom line, said Chuck Hurchalla, founder and CEO of Evolution Sustainability. 

“When we conduct building audits and analyses, we're looking at it from a compliance standpoint as well as from a return-on-investment standpoint,” Hurchalla said. “We figure out if our client’s properties are in BPS territories, and for each one, we run an analysis of how they’re performing in relation to the ordinance, including greenhouse gas emissions, energy use intensity, carbon intensity and so on.”

From here, Hurchalla said, Evolution will lay out every feasible route to compliance and the timelines needed to achieve it. Some owners may only need to implement small upgrades to their HVAC systems, for example, but others may need costly building envelope repairs or major LED lighting work. Some may opt instead to buy carbon offsets or locally generated community solar.  

No matter the owner’s sustainability goals, executing them as far in advance as possible will give them a massive advantage — and help avoid any impending fines before they occur. 

“Getting our clients to where they need to be in the most cost-effective manner is our No. 1 priority,” Hurchalla said. “Our analyses can also be used for capital planning purposes. By mapping out building efficiency upgrades, we can work with our clients to prioritize the right improvements on a timeline that works best for them in improving the property's financial while meeting BPS targets across compliance periods. In today's market, where every dollar counts, this is so crucial.”

Evolution is working on projects stretching from coast to coast, including a solar project to satisfy Cambridge, Massachusetts' Building Energy Use Disclosure ordinance, as well as Building Energy Performance Programs in Philadelphia, Washington, D.C., Seattle, Denver, California, Madison, Wisconsin, and elsewhere. In 2025, the firm worked on 78 Local Law compliance projects in New York City alone. Its footprint is growing even further as more cities implement BPS regulations, Hurchalla said. 

While many of Evolution’s clients may need help clarifying their sustainability goals for just one property, others have very large portfolios that stretch across multiple states. For one owner to know and fully understand BPS regulations across many jurisdictions is extremely difficult. 

“The challenge for these large ownership groups is they don't necessarily have the in-house expertise to stay on top of the ever-changing and ever-growing number of BPS programs out there,” Hurchalla said. “We take on that responsibility for our clients, and we have all of the tools in-house to do so.”

This article was produced in collaboration between Evolution Sustainability Group and Studio B. Bisnow news staff was not involved in the production of this content.

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