Energy use intensity is tomorrow’s must-have metric for site selection

From location and accessibility to environmental and wellness indicators, there are plenty of considerations for companies selecting a new site.

One in particular is top of mind for today’s sustainability-minded, cost-conscious companies; the energy efficiency of the buildings they occupy.

Minimizing energy use is not only an essential step on the path to decarbonization. It can also make good financial sense as companies look to make cost savings.

One metric that’s really coming into focus is energy use intensity (EUI), expressed as energy per square foot per year, which refers to the amount of energy used in a building in a year divided by its total gross floor area.

It’s the top indicator of its energy efficiency performance in the same way mileage per gallon reflects the efficiency of a car engine. Arguably it’s the single best piece of information to assess the sustainability of a potential site, as low EUIs generally reflect good performance.

In contrast, higher EUIs or buildings where the EUI is unknown can indicate older and less efficient systems, poor maintenance or building management – and the potential for disruption to operations, which in turn raises red flags for a tenant’s business continuity.

During site selection, there is only so much information available, so companies leasing space must be strategic about what they ask for – and from whom. Despite its importance, many potential tenants still aren’t requesting EUI figures at all, much less at the early stages of their property search.

If it’s understood that a building may be operating inefficiently, it becomes a topic for discussion in lease negotiations to potentially facilitate improvements in ways that benefit both sides.

Historically, a lot of green lease negotiations have looked at energy efficiency through a cost lens. While that still matters, the conversation – and the clauses - are shifting to focus on working together to achieve common decarbonization goals.

Indeed, it’s an area where more collaboration between owners and their tenants is needed. With occupier activity typically accounting for the majority of emissions, much of the success of an owner’s decarbonization strategy largely relies on the building’s users.

On the other hand, an occupier looking to sign a five or 10-year lease has little influence over improving the building’s energy performance as they are reliant on the existing infrastructure and the landlord’s equipment. They simply don’t have a lot of time to make up for sites which currently perform poorly, and so must consider the impact of carbon-intensive buildings on their own ability to deliver on their shorter and longer-term decarbonization goals.

At a time when pressure is rising to show progress towards net zero targets, many companies are looking for buildings which already have high standards of energy efficiency – and they’re anticipating competition in the coming years.

Demand for buildings that rank highly for sustainability and boast certifications such as Energy Star or LEED, where 30 percent of all points are allocated to building energy efficiency, is outstripping supply in both the US and Europe as owners struggle to keep pace with the necessary retrofitting rates.

JLL research estimates that at least 90% of office buildings across the world’s most developed cities are already over 10 years old and 80% of today’s office buildings will still be in use in 2050. Yet the pace of retrofitting, currently at 1% of stock per year, must rise to at least 3%.

The global push to decarbonize real estate is only going to intensify – and companies will have to make increasingly complex decisions regarding the real estate they own and occupy.

As a direct reflection of a building’s efficiency, EUI has new relevancy in site selection processes – and more companies will prioritize it as they become increasingly focused on meeting their ESG commitments.

What’s more, tenants are increasingly using it to assess the performance of their portfolio in new ways, be it for renewals, during portfolio consolidation or new workplace strategy discussions.

No sustainability site scorecard nowadays is complete without it.

For more information on energy efficiency in buildings contact one of our sustainability experts today

Alaina Ladner, Senior Vice President, Sustainability Practice Lead, West Region, JLL