Commercial Properties

What’s in YOUR Building?

By Mark G. Dotzour and Beth Thomas

Is your commercial building Leadership in

Energy and Environmental Design (LEED)

certified? If so, has it earned the basic

certification or silver, gold or platinum? What

is your building’s Energy Star design rating? A

growing number of local government officials

and prospective tenants want to know.

Cities across the nation are looking for ways to encourage

or mandate the private sector to build and renovate to LEED

specifications, also known as “green building” or “sustainable


Commercial Goes Green

Since 1999 the number of commercial buildings being

built according to the LEED Green Building Rating

System has grown at an average annual rate of 40 percent.

The LEED system has become the nationally accepted

benchmark for design, construction, and operation of highperformance

green buildings.

The City of Austin passed a resolution in June 2000 requiring

LEED certification of all public projects over 5,000 square

feet. Dallas officials have issued a resolution requiring all city

buildings larger than 10,000 square feet to have at least LEED

silver certifications. Houston adopted a similar resolution in


Plano’s city council recently adopted a building sustainability

policy. From now on, that city will use the LEED rating system,

requiring the highest level of LEED certification possible

for all city facilities.

The City of Hutto recently

became the 20th city

in Texas to sign the U.S.

Mayors Climate Protection

Agreement (CPA), which

calls for cities to meet the

goals set by the international

Kyoto Protocol to address

climate change. Although

the U.S. government did

not sign the Kyoto Protocol,

mayors of 755 U.S. cities

have signed the CPA, which urges state governments and the

federal government to enact policies and programs to meet or

beat the 7 percent greenhouse gas emission reduction target

suggested for the United States.

According to Energy Star, a joint program of the U.S. Environmental

Protection Agency and the U.S. Department of

Energy, 30 percent of the typical office building’s costs go to

energy use. In fact, energy is a property’s single largest operating

expense. That cost gets passed to tenants, who want as

much as possible of that operating cost off their bottom line.

As a result, the market is rapidly approaching the point at

which developments that are not LEED certified will be unable

to attract the anchor tenants needed to guarantee success.

In many large cities, if a new building is not LEED certified,

it has almost no chance of being classified Class-A or -AAA.

Consequently, that building might not rent at top market rates

nor will its value appreciate at a rate equal to energy-efficient

buildings of similar design. Relatively new Class-A buildings

not LEED certified could become Class-B simply because the

market does not consider them energy efficient.

These factors bring to light a huge problem in the U.S. commercial

building stock. The Commercial Buildings Energy

Consumption Survey estimates there were nearly 4.9 million

existing commercial buildings and more than 71.6 billion

square feet of commercial floorspace in the United States in

2003. In 2007, only 1,129 buildings were LEED rated; 8,566

under-construction buildings had applied for LEED certification.

Clearly, the nation’s commercial building stock will face

stiff competition as certified energy-efficient buildings come


Building owners and developers are being pressured from all

sides to go green. But while owners and developers understand

that green building has become a necessary marketing tool,

the perception remains among them that the added costs of

green building outweigh the benefits. Another misconception

is widespread — that energy savings cannot be measurably

proven or satisfactorily maintained.

Major problems occur when building owners implement

technological changes without knowing what energy technology

to install or how to operate and maintain it. In short, technology

alone does not equate to high performance. One size

does not fit all buildings.

As a result of these

challenges, a new breed

of real estate professionals

is emerging. Calling

themselves “building

commissioners,” these

experts perform quality

assurance, known as

building commissioning,

which can detect and

remedy most deficiencies

found in either new

or existing building design. Like engineers who design new

automobile engines and bodies for fuel efficiency, building

commissioners look for ways to streamline buildings for

energy efficiency.

Commissioning and Retrocommissioning

Building commissioning confirms a building’s energy

systems function according to criteria described in the

project’s construction documents and meet the owner’s

operational needs.

Retrocommissioning, also called recommissioning, is the

process of investigating, analyzing and optimizing system performance

in existing buildings. In this scenario, the building

commissioner functions like an auto mechanic who fine tunes

a car for maximum efficiency. After analyzing the current

systems, building commissioners make recommendations that

will improve operation and maintenance to ensure continued

high performance. Retrocommissioning helps make the building

systems perform interactively to meet the owner’s — and

the owner’s tenants’ — current facility requirements.

The market is rapidly approaching

the point at which developments

that are not LEED certified will be

unable to attract the anchor tenants

needed to guarantee success.


Cities are encouraging builders to develop commercial

buildings to meet energy-efficient LEED standards. Retrocommissioning,

the process of analyzing system performance

in existing buildings for the purpose of improving

operations and maintenance, is becoming more common as

owners struggle to maintain Class-A and -AAA ratings.

Building commissioners’ contributions include acting as

consultants, project managers/value engineers and facilities

managers. Their incomes are based on flat consulting fees, a

percentage of the annual cost savings realized, maintenance

programs involving key performance indicators, or a combination

of these.

Analyzing Efficiency

Traditional consulting firms, which include Arthur

Little, Deloitte, and Bearing Point, perform “business

sustainability value analysis,” but may or may not

perform or oversee the suggested cost savings initiatives, depending

on their client. Some consulting services may include

tracking the success of the client’s implemented changes. Most

service only high-income clients who own high-square-footage

buildings (upward of 500,000 square feet), representing a small

percentage of the U.S. commercial building stock.

Real estate firms such as Cushman & Wakefield, CB Richard

Ellis and the Staubach Company are expanding into facilities

management through “value engineering,” which describes the

process of commissioning new or recommissioning existing

facilities to operate at maximum efficiency.

Cushman and Wakefield’s George Denise, project manager

for the Adobe Systems Inc. headquarters located in downtown


Towers in San Jose, California, was

retrofitted with energy-efficient luminaires

and advanced lighting controls.

government agencies and reduced operating costs by some $1.2

million annually. The project had an average payback of 9.5

months with return on investment netting a whopping 121

percent. Notably, even though these buildings were relatively

new at the time of recommissioning, the payback still proved

worth the expense.

Commissioning and recommissioning buildings is proving

extremely valuable to the client. According to Energy Star,

along with realized cost savings, recommissioned buildings

typically sell for about 5 percent more than similar nonrecommissioned


In a study entitled “The Cost-Effectiveness of Commercial-

Buildings Commissioning,” analysis of 224 buildings totaling

30.4 million square feet across 21 states found that commissioning

has far broader relevance than simply optimizing

energy-efficient systems. Knowledge of day-to-day systems

operations is essential. Cost savings are directly impacted by

the extent to which energy efficiency research, development

and deployment programs are combined with quality assurance

in design, delivery and operations maintenance.

For example, a fan study conducted by the Environmental

Protection Agency found that 60 percent of building fan systems

are oversized by an average 60 percent. The 224-building

study found chillers were oversized by 50 to 200 percent.

Across the nation, improper installation, inaccurate

sizing and poor maintenance are negatively affecting

building efficiency. Building commissioners apply an emerging form

of cost-effective quality assurance procedures

that provide a way to define measurable performance

targets and evaluate as-built and as-operated


As part of an integrated strategy for improving building

energy performance, commissioning is an effective

and far-reaching means of improving energy efficiency

across the U.S. building stock.

Commissioning professionals are risk managers

helping to ensure funds are spent wisely and

that intended energy savings targets are actualized.

Commissioning provides a way to define measurable

performance targets and evaluate existing operating


With more than 99 percent of the nation’s existing

building stock facing market demand and local

governmental pressure for recommissioning, expect

to see demand for building commissioning professionals


Dr. Dotzour (dotzour@tamu.edu) is chief economist and Thomas (bthomas@

mays.tamu.edu) is a research assistant with the Real Estate Center at Texas

A&M University.

San Jose, Calif., has documented phenomenal success with

value engineering. Adobe’s headquarters are in three buildings

known as Almaden Tower, East Tower, and West Tower,

which are 17, 16 and 18 stories, respectively, and at the time

of recommissioning were three, nine, and 11 years old. Combined,

the buildings total 989,358 square feet of office space,

situated above an additional 938,473-square-foot enclosed parking


After analyzing the three towers, Cushman & Wakefield

implemented energy saving techniques that reduced peroccupant

electricity use by 35 percent, natural gas use by 41

percent, domestic water use by 22 percent, CO2 emissions by

23 percent, and landscape irrigation by 76 percent. In addition,

they are diverting solid waste by up to 87 percent. Adobe spent

just over $1 million, received about $389,000 in rebates from


Texas A&M University

2115 TAMU

College Station, TX 77843-2115



Director, Gary W. Maler; Chief Economist, Dr. Mark G. Dotzour; Communications Director, David S. Jones; Associate Editor, Nancy McQuistion; Associate Editor,

Bryan Pope; Assistant Editor, Kammy Baumann; Art Director, Robert P. Beals II; Graphic Designer, JP Beato III; Circulation Manager, Mark Baumann; Typography,

Real Estate Center.

Advisory Committee

D. Marc McDougal, Lubbock, chairman; Ronald C. Wakefield, San Antonio, vice chairman; James Michael Boyd, Houston; Catarina Gonzales Cron, Houston;

David E. Dalzell, Abilene; Tom H. Gann, Lufkin; Jacquelyn K. Hawkins, Austin; Barbara A. Russell, Denton; Douglas A. Schwartz, El Paso;

and John D. Eckstrum, Conroe, ex-officio representing the Texas Real Estate Commission.

Tierra Grande (ISSN 1070-0234) is published quarterly by the Real Estate Center at Texas A&M University, College Station, Texas 77843-2115. Subscriptions

are free to Texas real estate licensees. Other subscribers, $20 per year. Views expressed are those of the authors and do not imply endorsement by the

Real Estate Center, Mays Business School or Texas A&M University. The Texas A&M University System serves people of all ages, regardless of

socioeconomic level, race, color, sex, religion, disability or national origin. Photography/Illustrations: Real Estate Center files, p. 1;

Courtesy of Cushman & Wakefield, p. 3.