Jennifer Kearney (00:01):
It's got to be addressed in the lease document. So once the building receives the penalty, which is delivered in the form of a building violation, they can't assess it on the tenant. So the building owners are left holding responsibility for activity that the tenants are engaging in.
When New York City's Local Law 97 goes into effect, building owners and tenants may be in for an unwelcomed financial surprise, especially if their brokers or consultants haven't discussed occupant energy use. In this episode of utiliVisor's In Conversation, Richard Angerame, president of utiliVisor and special guest, Jennifer Kearney, partner and energy procurement consultant at New York City's Gotham 360, discuss issues that many New York City brokers, owners, and tenants are overlooking with the upcoming New York City's Local Law 97, especially when it comes to leasing space.
Richard Angerame (01:05):
What I think is interesting too, is that we've been involved with some building owners that have been now putting down the clauses with some very large law firms in the City trying to pass on those costs onto the tenants themselves, even though they can't, they're going to try. Again, I'm sure the brokers are being educated about this, but I don't know. There's got to be a whole educational program on how to lease space down in New York, which is different than it was before.
Jennifer Kearney (01:32):
Richard Angerame (01:33):
How do you see that?
Jennifer Kearney (01:35):
I think that the brokers have a long way to go to become educated on the way this law actually works. And I think that the brokers need to keep in mind that the building owner has to be protected in the event that you are leasing traditional commercial office space to a hedge fund, to a data center, to a law firm that's running 24 by 7 in a building that typically is not a 24 by 7 building or classified as a 24 by 7 building, driving that energy consumption up driving the carbon emissions of the building up. I think that the brokering community has a ways to go to really understand all of the overall implications, and maybe those leases certainly with the data centers and hedge funds need to have some provisions in there to protect the owner. So the building owners are left holding responsibility for activity that the tenants are engaging in.
Richard Angerame (02:47):
And I think that, that's a good point. Some building owners think that they can get every tenant to participate in this effort, and most tenants are saying, look, I've got a business to run, I'm paying you a square foot cost, okay, you handle it. We believe that it's easier to take the 5%, as we call it, the 5% of the building tenants to represent 40% of the square footage of the building, and let's make an impact on them. There are vendors out there and other submetering companies and advisors that say we got to get everybody in the building. That doesn't work because everybody just looks at it and says, okay, that's a great idea, but I'm never going to have time to implement it. And unless you have somebody that's following up with them, like our Engineering Operation Center, it never gets done. It always falls off the way.
Richard Angerame (03:37):
So we've been successful with a couple of building owners working with their tenants, but the tenants have to be engaged, and they have to be incentivized too, okay. Now, whether incentivize means money, okay, or in other aspects, doesn't make any difference, but they have to be engaged. They may have their own sustainability goals they're trying to corporately maintain. Okay. And that's where we're finding out that some overseas clients are much more open to that because that's their culture. And I think that's what we can play into. So the whole idea of trying to make everybody do the same thing, it's not going to work. And if we're going to accomplish anything close to these goals, we got to start nipping away at the people we can work with and the building owners that are going to invest time and money with their tenants.
Jennifer Kearney (04:26):
Because I have a feeling that you have a lot more conversations with the broker community than I do. Do they get it, or do they want to get it?
Richard Angerame (04:34):
The first question is a good one. Do they want to get it? The answer is yes, if it sells space. If it doesn't sell space, it doesn't come up. So, they've gone back into a hole that they've created, years ago, and they're not going to advise, they're not going to educate. If the tenants bring the right consultants in to properly ask the questions of load and also the penalties of the electrical load, the answer is, yes, they're going to get better answers. But I have to tell you, the tenants are not properly represented, and if they can sell something and get away with it at a $100, $80, while even $85 to a $100 a square foot, they're going to do it and let them think about it later.
Jennifer Kearney (05:26):
Do you think that the building owners need to sit down with their brokers and their consultants and explain how this all works? Because what has a potential for happening is a lot of building owners getting these leases that they think are so great. The broker gets paid and walks away. And then the owner gets left with a carbon penalty for the next 10 years.
Richard Angerame (05:50):
That's exactly right. You're a hundred percent right. And again, it's that the lease clauses are not written definitively. So there's a lot of gray areas and, that means it's going to end up in court, or they're going to agree on what they want to agree on. But it's amazing to me that you would think there would be much more educated brokerage today than before. I don't believe so. And the thing is, is that the tenants are not asking the questions, which amazes me with the consultants that are out there and the capabilities that they have, they're not educating their own clients. And the watts per square foot of people that are asking, you would think in the world that's going to be penalized very shortly. We're still getting requirements of six watts per usable square foot, and we say to ourselves, what are you going to do with all that power?
Jennifer Kearney (06:42):
They just want more because they think it's just an unlimited spigot. So more is better. And that's why these leases are really, really important. So that you only ask for what you actually need, because if you ask for more and it drives the building over the line, the user of the energy has to be held responsible and accountable.
Richard Angerame (07:04):
Absolutely correct. And that's where the owners are saying. They're actually looking at the fact that when the building peaks, who is really contributing to that peak, and that person, that company, that tenant should pay the majority of the penalties. And there's different, very unique, and creative languages being written today that I don't know how many people really understand and truly understand the effects. But we're definitely shifting into a new world.
You've been listening to utiliVisor's in Conversation, where we discuss topics such as submetering, energy efficiency, and energy plant optimization. Your host is Richard Angerame, president of utiliVisor, with special guest Jennifer Kearney, partner and energy procurement consultant at Gotham 360. This program is a production of utiliVisor, a leader in submetering and energy plant optimization. To contact us with comments or questions, email firstname.lastname@example.org. Our music is moments like this from Telestream's ScreenFlow library. Thanks for listening. Please note that this program should not be considered professional advice. The information, opinions, and recommendations presented here are for general information only. The opinions and views expressed in this episode are solely those of the individual speakers and do not necessarily reflect the position of any agency, organization, or company. This program was recorded in 2021, copyright utiliVisor.