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NYC landlords could face $10B if they don’t decarbonize

Fifth Wall’s whitepaper reveals CRE’s impact on climate change.

Venture capital firm Fifth Wall recently released a whitepaper, “Keyed in on Climate Change, Real Estate’s Climate Imperative”, which focused on the commercial real estate industry’s impact on climate change. The report, written by Mikal Lewis, featured a number of interesting facts about CRE and climate change, including the fact that buildings contribute 40% of greenhouse gases globally.

“In the coming decade, there will be a shift in consumer sentiment, capital markets and public policy that will force real estate owners and operators to rethink buildings from the ground up,” Lewis wrote. “Owners already face substantial financial headwinds from new regulations geared toward a greener future and a smaller carbon footprint—impacting design, construction, operations and energy consumption. The industry’s massive scale affords CRE the opportunity to have a proportionately sizeable impact on the fight against climate change.”

New York landlords could be financially motivated to decrease carbon footprint

Fifth Wall’s whitepaper brought the climate subject local with a focus on New York City. The report noted that NYC CRE owners could owe an estimated $10 billion per year if they don’t take action to reduce their carbon footprints. That equates to an extra $9 per square foot above market rates.

Lewis and Fifth Wall drew these estimates from an assessment of current and target emissions rates, penalties for non-compliance and estimated square footage per Local Law 97. This law includes emission guidelines by usage type, mandatory reporting requirements, a 40% reduction rate by 2030 and more.

“As similar legislation passes across the nation, the financial impact could balloon to hundreds of billions of dollar in fines assessed to the real estate industry domestically,” Lewis wrote. “To avoid such penalties, asset owners could consider mitigating retrofits which, though costly in the range of $1 billion per year, have the potential to address climate change efficiently and sustainably.”

Technology could be key to helping CRE address climate change

Fifth Wall also noted that technology could be critical in finding solutions that can help the CRE industry reduce its carbon footprint. Solar technology, data and reporting and computer imaging were among the tech solutions Lewis included in the whitepaper. Artificial intelligence (AI) was also mentioned, as it’s believed that it will prevalent for both energy consumption and climate resilience.

“As more energy consumption data is amassed, AI will provide vital, algorithm derived insights on how to best optimize resources—with increasing accuracy,” Lewis wrote. “Additionally, AI will be leveraged to protect infrastructure and real estate assets as climate events pickup pace by computing risks and shedding light on damage mitigation opportunities.”

BrainBox AI is just one example of a company that’s helping CRE become more eco-friendly. The startup uses AI to optimize CRE buildings’ HVAC systems. The solution is just a foot wide by a foot tall and takes six to eight weeks, autonomously, to learn how a building “behaves” and customizes itself accordingly. Once the learning period is complete, BrainBox AI’s autonomous instruction mode starts. This is where the AI is managing, every five minutes in real time, all of the components of a building’s HVAC system.

“(BrainBox AI operates) just like a self-driving car or any other AI technology that needs to make a large number of decisions autonomously and in real time,” BrainBox AI Chief Business Development Officer Sam Ramadori told Connected Real Estate Magazine in December. “Like in a self-driving car, no human is telling it what to do. We are bringing that same capability to the HVAC system of a building.”

By learning how a building operates, BrainBox AI can make hundreds of adjustments to an HVAC system every few minutes, such as modulate fan speed and control cooling or heating stages. A CRE owner would need to hire dozens of engineers to monitor the HVAC system and decide every few minutes if the system needed to be adjusted to accomplish what BrainBox AI does autonomously . The solution has also helped CRE owners reduce energy bills by up to 25 to 30 percent and decrease their carbon footprint by up to 20 to 40 percent.

“The savings we’re generating are large,” Ramadori said. “The investment required to get there is very minimal, as is the installation pain. Throughout the whole installation process, we’re using about 10 hours of the building operator’s team’s time, so installation is a low cost and very light from an operational perspective. After that two to three month learning period, we go into autonomous mode, so by month three or four, you’re already seeing savings. That’s the reason why we went from a handful of buildings in May to now having more than 10 million square feet.”

Click here for Fifth Wall’s full whitepaper.

Joe Dyton can be reached at

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