There are always excellent presentations at the BOMA NAC conferences. In the Fall Conference that I recently attended, the most thought-provoking topic was given by Christopher Lee, President & CEO of CEL & Associates, Inc., who discussed a number of issues related to the economy. The CEL & Associates, Inc. reports are all very interesting and thought-provoking.
Most relevant to me was his use of six terms that will likely define the next decade for the real estate sector: scarcity, specialization, demographics, debt, sustainability and uncertainty. For now, I want to highlight “scarcity of energy” presented by Mr. Lee.
Most of us recognize that oil and other fossil fuels are increasingly difficult and expensive to extract. Renewable energy sources and greater energy efficiency may fill the gap eventually, but in the near term we can expect energy to play an significant role in the way buildings are managed and valued. Some trends that Christopher Lee sees ahead are:
– Values of LEED certified and ENERGY STAR labeled buildings will rise faster than others, while buildings with poor energy metrics will face increased vacancy rates and decreased value.
– Property managers will spend much more time focusing on energy-related issues and building energy efficiency issues than they have in the past.
– Lenders will likely shy away from lending on inefficient (real or perceived) buildings.
– Government emphasis on energy will result in continued, and perhaps increased, incentives for building owners who implement efficiency measures and seek renewable energy installations in buildings.
– By 2020, the real estate industry should not be surprised to find that all buildings sold and (re)financed will need to be retrofitted for energy compliance or have escrow monies set aside for retrofits to avoid penalties.
I hope to follow up with thoughts on some of the other five concepts in the report.