Going green is something that's on a lot of real estate investors' radars, and for good reason. Not only can eco-friendly buildings draw in a larger share of tenants, but they can also result in major cost savings on utilities.
Now, when we think of New York City, we don't necessarily imagine the most earth-friendly city out there, especially given the amount of lighting that goes into Times Square alone. But actually, New York City is slowly but surely becoming quite the eco-friendly hub. And that could certainly work to its benefit.
The Empire State Building goes green
Empire State Realty Trust (NYSE: ESRT), which owns the famed Empire State Building and 13 other office buildings throughout New York City, recently became the nation's largest real estate user of fully renewable energy when it signed multiyear contracts with Green Mountain Energy and Direct Energy to provide wind power for the skyscraper. These contracts are expected to provide 300 million kilowatt-hours of electricity across 10 million square feet of New York real estate -- enough power to light every home in New York state for an entire month.
Empire State Realty Trust is expected to save the city 450 million pounds of carbon dioxide. That's the equivalent of removing all New York City taxis from the road for a full year.
A more sustainable skyline
In 2019, New York passed the Climate Mobilization Act, which requires most new buildings and those undergoing major renovations to add either a green roof or solar panel system. Certain public properties and affordable housing complexes were exempted from these requirements, but some property managers are opting to retrofit their buildings anyway to lower emissions and help residents save money on utilities.
A research brief from the MacArthur Foundation found that retrofitting all multifamily properties across the U.S. could save up to $8 billion every year and lower electricity consumption by 15%. That alone may be serving as motivation for New York City landlords to invest in going green.
New standards for buildings
While some building owners are actively taking steps to become more eco-friendly, New York City is also forcing landlords to comply with certain standards. Since October 2020, buildings with 25,000 square feet or more have been forced to comply with energy assessment requirements and post their grades publicly. So far, many have done poorly. And come 2024, building owners will be fined if they fail to meet certain energy-efficiency requirements.
New York City has imposed this policy because it has a goal of reducing its overall emissions by at least 80% by 2050. And given the direction the city is going in, that goal may be more than attainable.
While retrofitting buildings comes at a cost, in the long run, the energy savings involved could be huge. Short-sighted investors may not see things that way, but buildings that invest in energy efficiency are likely to come out ahead financially in the long run, all the while benefiting the planet. And if New York City secures a reputation of being an earth-friendly destination, that alone could draw in countless new businesses that pump tax revenue into the city.
All told, there's much to be gained by New York City going green. And so far, the city seems to be headed in a very positive direction.