Inside AvalonBay's New York decarbonization programme: how software-led optimization delivered $540K in savings without major capex

A case study of how three Manhattan buildings, owned by one of the largest multifamily REITs in the United States, cleared early Local Law 97 caps and doubled their projected utility savings, with no equipment replacement and no resident disruption.

 

The challenge facing AvalonBay's New York portfolio in the run-up to Local Law 97's first compliance period was the same challenge facing most large multifamily operators in the city. The buildings work. Residents live in them. The capital required to electrify them in full does not pencil at current economics. Doing nothing was not an option.

What the company chose to do instead has now been recognised with a 2026 Better Project Award from the U.S. Department of Energy. Across three buildings in Manhattan's Midtown West neighborhood, AvalonBay deployed Parity's software-led HVAC optimization service, cutting more than 1,000 tonnes of CO2, generating $540,000 in verified utility savings, mitigating around $290,000 in projected LL97 fines, and earning roughly $30,000 in demand response revenue. The verified savings doubled Parity's original contractual guarantee. The platform has since been expanded across AvalonBay's full New York portfolio, with Brooklyn, Boston, California, and DC rolling out next.

The case is not about pre-war buildings. The three pilot communities were built in 1998 and 2008. The interesting part is what this approach looks like for the much larger swathe of relatively modern legacy stock that still relies on central steam systems and now sits inside Local Law 97's compliance perimeter.

 

Why a major retrofit wasn't on the table

 

AvalonBay's options in New York were shaped by three constraints, according to Alexander Heckman, Senior Director of Engineering at AvalonBay.

The first was regulatory. "Because many of our buildings are rent stabilized or have a portion of rent control, going from central to unitized systems constitutes payment switching," Heckman said. In other words, electrifying via in-unit heat pumps would shift costs that owners currently absorb onto residents, which is restricted in rent-regulated units.

The second was affordability. Even in market-rate apartments, moving from central heating to unitized heat pumps raises resident utility costs in a way the company wanted to avoid.

The third was capital. Keeping central systems but electrifying them at the building level, moving from central gas to central electric requires substantial common-area infrastructure upgrades, which raise operating costs. "These investments often have a negative ROI even when considering fine mitigation in underwriting," Heckman said.

Within these constraints, AvalonBay's framework for decarbonizing a property follows a hierarchy: eliminate waste, recover energy, improve efficiency, generate on-site where feasible, and offset what remains. Software-led HVAC optimization sits at the top of that hierarchy. It addresses waste in central systems without disturbing the equipment, the residents, or the capital plan. For the portfolio of buildings that share these constraints, it was the obvious place to begin.

"These investments often have a negative ROI even when considering fine mitigation in underwriting. If owners were able to offset more costs associated with central heating, especially following electrification, it would open up more opportunities and move the market."

— Alexander Heckman, Senior Director of Engineering, AvalonBay

 

Three buildings, one strategy

 

AvalonBay selected three communities in Manhattan's Riverton neighborhood for the initial pilot: Avalon Clinton South, Avalon Clinton North, and Avalon Midtown West. All three sit within a few blocks of each other.

 

Building	Building Alias	Stories	Units	Year Built	SQFT
510 West 52nd Street	Avalon Clinton South	24	288	2008	247,294
515 West 52nd Street	Avalon Clinton North	25	345	2008	326,404
250 West 50th Street	Avalon Midtown West	40	550	1998	192,337

 

The selection logic was practical. These communities were projected to incur some of the largest LL97 fines in 2030, and they shared maintenance resources. "This was the ideal scenario from the perspective of optimizing integration, training, and results," Heckman said.

 

Provided by Avalon Bay exclusively for this article.

 

What Parity actually does inside each building is real-time HVAC control optimization, delivered remotely through the cloud. "Our algorithms automatically control and optimize central HVAC systems in real-time through remote control adjustments," said James Hannah, Chief Operating Officer at Parity. "These adjustments modify equipment performance parameters to maximize efficiency and improve HVAC operations, without affecting occupant comfort."

In these specific buildings, Parity is controlling boilers, circulating pumps, steam valves, ventilation equipment, and a limited amount of central cooling equipment. The platform models the real-time demand curve for heating, cooling, and ventilation, then operates the equipment closer to that curve, eliminating waste from over-supply. It also pre-programs and automates curtailment of ventilation and cooling systems to capture demand response revenue.

All of Parity's computing sits in the cloud. The hardware integration is what makes the platform work at the building level. Parity connects to existing boiler controllers, valve controllers, variable frequency drives, building management systems, and other onsite controls via open protocols such as Modbus and BACnet. Where the existing equipment lacked the necessary read and write capability, Parity installed supplementary control panels, sensors, and automation hardware.

 

How the savings were verified

 

Measurement and verification is where building performance claims most often get challenged. For a portfolio operator like AvalonBay, internally validated savings figures matter both for capital allocation decisions and for compliance reporting under LL97. The case study's credibility for other practitioners turns on this section more than any other.

Both companies built their verification on the same standard: the International Performance Measurement and Verification Protocol, or IPMVP, which is the internationally accepted framework for verifying energy efficiency results.

On Parity's side, two different IPMVP options were applied. Electricity savings were verified under Option B, which uses pre- and post-optimization machine-level data. A baseline was constructed from electricity consumption levels measured at the equipment before Parity's optimizations went live, then compared against consumption levels recorded after deployment. For natural gas, steam, and oil, savings were verified under Option C, which uses historical utility billing data as the baseline and compares it against consumption reported in utility bills after optimization. Quarterly performance reports compare actual savings against Parity's contractual savings guarantee.

On the AvalonBay side, verification runs in parallel. The company's internal utilities team applies IPMVP Option C across whole-building and common-area accounts to ensure that the savings recorded at the equipment level actually show up in the bills the company pays. "We are able to see in real-time what our savings are versus our previous method of operation for each specific piece of equipment," Heckman said. "Simultaneously, our internal utilities team does an analysis on the whole building and common area accounts to ensure those savings are reflected in our actual bills."

The dual approach matters because building-level savings can be obscured by other factors such as fluctuating utility rates, occupancy changes, weather variation, and billing-cycle artefacts. By verifying at both the equipment level and the bill level, AvalonBay can attribute savings cleanly to the platform.

 

Provided by Avalon Bay exclusively for this article.

 

"IPMVP is the internationally accepted industry standard for how to calculate baselines and measure savings, which made it the natural approach for us to adopt," Hannah said. "Our clients and their consultants can more easily validate our analysis since it's based on that well-established standard."

 

What the team didn't expect

 

The cleanest version of any case study is rarely the most honest one. AvalonBay's deployment took several months to settle into rhythm, and the operational changes required were larger than expected.

"We learned a lot, and it took several months to iron out and tune our collaboration," Heckman said. "On the operations side, we had to change everything with how we approach the back-of-house, from the way we triage or escalate building problems, to our methods of communication with our vendors."

Two patterns proved particularly valuable. Where individual air-side systems underperformed Parity's model, the gap usually pointed to an underlying mechanical issue that had not previously been visible: a sensor out of calibration, a valve not modulating, a fan running at the wrong setpoint. Each of these became a fixable problem. Where the platform overperformed initial projections, the data revealed operating practices that could be standardised across other buildings in AvalonBay's national portfolio. The pilot ended up exporting operational lessons well beyond its three Manhattan addresses.

The deeper point is one that vendors are not always candid about. "The software and algorithms scale very well," Hannah said. "The training, technical support, and importance of strong communication are things you need to ensure that you have strong internal processes and systems in place in order to scale effectively. To solve this HVAC energy performance problem in an impactful way, you need to lean into that and not assume that software alone is going to work. If that were true, this wouldn't still be such a big opportunity."

 

From three buildings to a portfolio standard

 

The original three-building pilot has expanded to AvalonBay's full New York portfolio. Brooklyn, Boston, and DC are next. What was once a high-rise compliance tool is now being deployed across garden-style and mid-rise properties as well.

"NYC, Boston, and DC were the clear first targets due to local law regulations and Building Performance Standards," Heckman said. "But now it's clear: software-based HVAC optimization is just good business. To that end, we'll be rolling our software-based approaches, both with ecobee Smart Thermostats and Parity, throughout our garden and mid-rise portfolio as well. It's not just a high-rise or BPS tool anymore, it's an asset value enhancement."

The scaling logic has changed how AvalonBay budgets capital projects. Software controls have moved from a discrete deployment decision to a default line item in everything the company does. "Replacing an RTU? Make sure you have a control budget. Doing an amenity renovation? Make sure you have a controls budget. Replacing a boiler plant? Make sure you not only have a control budget, but Parity's feedback on which head ends, VFDs, valves, and actuators to use."

That last point matters more than it sounds. It means software control is now informing capex specification decisions in real time, so that future equipment investments compound rather than strand the current deployment.

There are limits, of course. Hannah was direct about where software optimization stops. "You are limited by the physical limitations of the equipment. It's critical that you operate the equipment within the manufacturer's operating parameters." Software cannot insulate a wall, cannot replace a steam riser with a heat pump, and cannot deliver the deeper cuts that LL97's tightening post-2030 caps will eventually demand. Heckman's caveat reinforces the point: this approach works best when the underlying systems are fully functional. Retro-commissioning has to come first.

 

Lessons for other operators

 

Asked what he would say to sustainability and energy leads at other multifamily REITs reading this case study, Heckman offered three points.

The first was about people, not technology. "I would emphasize the value of in-house engineers," he said. "While energy audits and consultants are great, they don't know your operations, the building's history, or your residents. You need quality people internally to bridge the gap between consultants and asset management for effective execution."

The second was about sequencing. "I would have better aligned our retro-commissioning efforts before implementing software-based solutions. It's critical that your entire system is functional and calibrated before getting started. Get started on your Local Law 87 compliance early, go deep, correct your deficiencies, and you'll be primed for more."

The third was about strategy. "Before deploying anything, know where you are going. For this, I would recommend having a long-term energy and capital roadmap. Software-based solutions and waste elimination are merely the beginning of your journey, and it's always best to see the road ahead. If you're only making decisions based upon the ROI of the proposal you just received, you're going to fail. Invest the time in the 20-year plan, especially if you're a long-term holder like AvalonBay."

For other large multifamily operators staring down LL97 or the building performance standards now being rolled out across other major U.S. cities, AvalonBay's Manhattan pilot offers a working template for what the early stage of a long decarbonization programme can look like. The verified savings are real. The fine mitigation is real. The carbon reduction is real. None of it required equipment replacement, resident disruption, or major capital outlay. And the operating lessons it produced are now reshaping how the company budgets every capital project in its portfolio.

That is the difference between a pilot and a programme.

 

Authored by:

Alex Heckman, PE, Sr. Drirector, Engineering East, AvalonBay Communities: Alexander Heckman, PE is the Sr. Director of Engineering for AvalonBay Communities, where he leads building systems strategy and performance across Avalon's east coast portfolio consisting of more than 150 communities, 1100 buildings, and 45,000 apartment homes in MA, NY, NJ, DC, MD, VA, NC, and FL. With a background and license in mechanical engineering, Alex brings over 15 years of experience advancing portfolio optimization, maintenance operations, capital planning, energy efficiency, and sustainability in multifamily housing. Earlier in his career, Alex worked as an award-winning energy consultant, designer, and design-build engineer, specializing in utility performance projects. Since moving to AvalonBay, Alex has served as Senior Mechanical Manager, Senior Building Systems Engineer, and Director of Engineering, helping shape corporate HVAC and energy standards, driving capital efficiency, maximizing maintenance productivity, and launching technological initiatives. Passionate about decarbonization, engineer mentoring, and practical innovation, Alex focuses on bridging technical solutions with the realities of building operations, regulatory compliance, risk, and investment underwriting. Outside of work, he’s an active youth coach, musician, and dedicated husband and father.

 

James Hannah, COO, Parity: James Hannah is the Chief Operating Officer at Parity - an HVAC Optimization as a Service company, focused on multifamily residential buildings and hotels. His career has been concentrated on accelerating the adoption of clean energy solutions within the real estate sector, especially for multifamily investors and property managers. He’s worked closely with many of the largest real estate companies in the country and has advised governments, utilities, and other stakeholders on energy-related policy matters. Prior to joining Parity in 2021, James spent 10 years at Bright Power where he held several positions, including Chief Customer Officer. Prior to Bright Power, James held positions in the renewable energy and financial services sectors. James holds a bachelor’s degree from the University of Pennsylvania.