Buildings Already Have the Technology. What They Lack Is Trustworthy Data.

By Mike Zatz, Ex-Chief, Energy Star Buildings Branch

 

Commercial real estate is under a kind of pressure it has not felt in years. Electricity prices are climbing quickly, with double-digit percentage year-over-year increases in some regions. Capital has grown more expensive, leaving owners with less to spend and a sharper need to extract value from the assets they already hold. Office sector occupancy, still absorbing the losses of the pandemic, has settled at a lower level than before. In this climate, energy has stopped being a reporting line and become something much closer to a margin lever. Reducing energy waste is no longer a matter of corporate values. It is a question of net operating income and competitive advantage.

Real estate has the technology to reduce a large share of wasted energy. It has the financial reason to do it. It increasingly has the regulatory requirement to do it. So why is so much waste still there?

 

From a good story to a hard number

 

Not long ago, a sustainability project in real estate could move forward on a reasonable return and a good narrative. For many asset owners, the bar wasn’t particularly high. That has changed. Today, these projects have to pencil out on the financials of the building itself, demonstrating not just a decent return but a measurable impact on NOI. Cost efficiency has become mandatory in a way it never was before.

Regulation has moved in the same direction. Across the United States and Canada, roughly 60 jurisdictions now require owners to measure and report their energy use, and often their water use, with the results frequently made public. For years, those rules carried minimal consequences. An owner could report poor performance and often face nothing worse than the disclosure itself, on the assumption that no one was looking. But now things have changed with the arrival of building performance standards (BPS). Around 15 U.S. jurisdictions, along with a couple in Canada, now place a hard cap on the energy a building may use or the emissions it may produce, with penalties for those that exceed it. The first year of enforcement is underway for perhaps the best-known of these laws, New York City's Local Law 97, where larger buildings that fall short can face fines of a million dollars a year or more. Compliance, in other words, has gone from being a process with minimal risk to carrying a direct financial impact.

As owners evaluate the performance of their assets in the first years of enforcement of these BPS laws, it is worth understanding an intentional design feature of some, which could lull owners into a false sense of security. Recognizing the challenges owners would face, and the new nature of a requirement of this type, New York's targets for its first compliance period were purposely set at a level that the great majority of buildings would be able to achieve. Though the city is still evaluating the data, it is estimated that around nine in ten did. The next set of targets, roughly five years out, is far more demanding, in the region of 40 percent tighter or more. That means even buildings comfortably compliant today have substantial work ahead. This is not the approach taken by all jurisdictions, but regardless, owners who begin planning now will more successfully manage the transition to increasingly tightening targets in future years. Those who treat the current pass as permission to ignore the issue for four or five years are setting themselves up for a very difficult (and costly) catch-up.

It is also worth being clear about intent. Despite the way it may feel to many owners, these jurisdictions are not interested in collecting large amounts of revenue through penalties. Their goal is compliance, for climate reasons, and they would much rather see buildings improve and meet their targets than collect fines. It is a genuine balancing act. The geography matters too. The United States remains the largest market for this kind of work, but Canada is growing, as recent conversations at the Canada Green Building Council’s Building Lasting Change conference made plain. There has lately been a political plateau in the U.S., and a milder one in Canada, that has slowed some of the momentum and may push a few deadlines back. The direction of travel, however, has not reversed. These cycles tend to turn, and the pressure will resume.

 

The thirty percent hiding in plain sight

 

Industry estimates show that up to 30 percent of building energy is wasted – and since energy is the single largest controllable operating expense in most commercial buildings, that waste goes straight to the bottom line. The striking thing about that figure is how much of it has nothing to do with capital projects. A large share can be recovered through simple behavioral and maintenance changes, before anyone considers upgrading equipment. And yet the waste persists, decade after decade.

There are myriad reasons why this is the case. Years of effort inside the most successful benchmarking program in the country, ENERGY STAR®, still left it covering only about a quarter of commercial floor space. The honest assessment is that a major obstacle is not capability but attention. The large enterprise owners, many of them sophisticated operators with substantial staff and advanced systems, are well equipped to chase efficiency improvements and largely do. But most buildings do not sit inside those companies. They belong to owners of just a few assets, often of a smaller size, often Class B and C, and it is this group that tends not to come along. These owners often understand the benefits perfectly well. They simply face an overwhelming number of competing demands on their time and resources, and they are hard to reach with the information that would help, because they cannot spare the hours for conferences and webinars that larger players take for granted.

This is where local government has a quiet but powerful role. A small owner may never respond to an industry campaign, but that same owner still deals with the city or county for permits and for taxes. That point of contact is one of the few reliable ways to reach the operators who most need to act, and to their credit, many local governments have recognized this and are offering substantial support resources to owners.

 

From benchmarking to active management

 

Benchmarking itself has evolved, and the path it has taken points to where the market is heading. It began with owners comparing a building against its own historical performance, using annual totals or monthly bills. It advanced to comparing a building against its peers based on total annual consumption, an approach ENERGY STAR did much to establish with the 1-100 ENERGY STAR score. The leading edge now is active, continuous management of energy performance.

Buildings have always been actively managed, of course, for occupant comfort, for security, and a variety of other operational needs. What is new is the decision to apply that same focus specifically on energy and water use, in order to reduce operational costs and protect asset value. That is what draws the more sophisticated owners away from monthly snapshots, which remain genuinely valuable and are a sufficient tool for a great many buildings, and toward closer-to-real-time interval data and the platforms built to act on it— Measurabl's own Optimize among them — though the broader movement matters more than any single product.

 

Not data-rich, but data-overloaded

 

There is a popular phrase that the industry is data-rich but insight-poor. The first half of that is misleading, as many in this business might not feel rich in data, but perhaps more overloaded. Data gathered for its own sake is of little use.

The more important and less comfortable point is that more data is not universally better. A large, well-resourced owner with capable engineers and a sophisticated building automation system should indeed pursue real-time, interval data, because the people and systems to act on it are already in place. For a smaller owner with few resources, however, that same flood of information may be minimally useful at best and counterproductive at worst. Such an owner may have access to large amounts of data, but no realistic way to look at it, let alone interpret it. For these buildings, monthly or even annual data, set against a simple peer comparison, remains the most effective tool available. The skill lies in matching the data to the owner's actual situation, not in blindly maximizing the quantity of data.

Beneath the debate about the value of more granular data sits a far more basic problem: access. The majority of utilities in the United States do not provide even monthly data in a usable form. The country has thousands of utilities, each operating more or less independently, many regulated, but rarely on the topic of data access for building owners. Currently, only around 80 of them deliver automated data at all, and then only to the ENERGY STAR Portfolio Manager benchmarking platform - 80 out of thousands.

They cover many of the larger cities, but outside those areas, the picture is often bleak.

An owner of a multi-tenant office, apartment, warehouse, or retail building frequently cannot see the building's own energy consumption at all, because the tenants pay the utility directly for their usage. Utilities have the ability to aggregate that information and pass it on, and a small number do, but most do not. It is fundamentally a problem of incentives: building the capability can be fairly inexpensive for a utility, and the value to owners would be considerable, yet there is little obvious benefit to the utility itself, so most are not inclined to pursue improvements in whole-building data access.

And even where access exists, quality is the next battle. Data drawn straight from the utility, usually the best available source, is often still of poor quality. Utilities do not move or change quickly, so these problems have been slow to fix, and they will not be solved overnight.

 

Why it takes an ecosystem

 

For all these reasons, the answer is not a single platform but an ecosystem. Sustainability in commercial real estate is best understood as a journey. An owner moves from annual data to monthly data and, in time, perhaps to real-time data, and no one provider carries them the whole way. Data has to become insight, and insight has to become action, through energy audits, retrofits, and increased use of renewables. A network of partners, each handling the stretch it does best and arranged around the owner's progression, makes that journey simpler and more seamless than any one company could.

There is a second ecosystem that receives less attention. A great deal of building data flows not to owners but to investors, lenders, insurers, index providers, and others. These audiences typically do not need the fine detail of every building. They need a reliable, higher-level read on performance. This is where efficiency quietly turns into value, because the same operational data that protects NOI is increasingly the data that capital markets expect to see.

The hardest piece to add to either ecosystem is the utilities themselves. Drawing them — or the organizations that represent them — into this effort would benefit the entire real estate industry, but it is genuinely difficult. There are roughly 3,000 electric utilities in the United States, each operating more or less independently and each a fundamentally different kind of organisation from the owners, investors, and providers around it. Aligning that many separate actors, each with its own systems and incentives, is a different order of challenge.

 

The next five years

 

There is reason for measured optimism. Access to data will remain the thorniest issue, tangled as it is with privacy concerns and unclear benefits to utilities associated with making the data available. And the recent political step-back in the United States has cost some ground as well, though this is best read as cyclical rather than permanent.

Quality, by contrast, should improve markedly. New tools are making it easier to pull clean data off messy utility bills and to reach interval data without expensive hardware. But tools like these only matter if they fit the way a building is actually run — necessary, not sufficient.

Where data is unavailable, estimates can fill the gap, and they have their place. But actual data will always beat an estimate, and the priority has to remain getting more access to actual data.

The plot is unglamorous, which is precisely why it is so often missed. Efficiency has become a financial and, increasingly, a regulatory imperative, and the technology to deliver it largely exists. The factor that decides who captures the value is the plain matter of getting trustworthy data, at the appropriate level of granularity, into the hands of people who have the time and the tools to act on it. That is the single thing owners raise most often, and it is where the next several years of progress will be won. The owners who treat it as a journey, and who start now rather than waiting for the next deadline to arrive, will be the ones still standing when it does.

 

Author Bio: 

 

Mike Zatz is SVP of Global Data Ecosystem & Partnerships at Measurabl, where he leads efforts to build a consistent, trusted global data ecosystem for real estate sustainability and the partnerships required to support it. His work focuses on connecting owners, managers, lenders, investors, policymakers, NGOs, and solution providers around improving access to decision-grade data that can streamline real estate transactions for all parties, as well as developing the partnerships to aid owners as they progress on their sustainability journey.

Prior to joining Measurabl in 2025, Mike spent 21 years with the U.S. Environmental Protection Agency, where he managed the ENERGY STAR® Commercial Buildings Program. In that role, he helped establish ENERGY STAR Portfolio Manager as the industry-standard benchmarking platform across the U.S. and Canada, where it is now used by more than 350,000 properties to track energy, water, waste, and emissions across a wide range of asset types.