The BOMA Magazine - September/October 2010 by lprats

Experience the Power of the BOMA Network

September/October 2010

The Latest Trends in Building Operations: 2010 EER Data is In

Plus:

Industry Toasts International TOBY Winners Assessed Your Building Security Lately? GSA Test Drives Green Technology

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September/October 2010 Volume 6, No. 5

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BOMA•Kingsley REPORT: The Latest Trends in Building Operations Phil Mobley, Laura Horsley and Lindsay Tiffany Benchmarking data from BOMA’s 2010 Experience Exchange Report shows a decrease in operating expenses, among other trends.

For advertising rates and information, contact Paul Hagen at Stamats Business Media 866-965-4205. Connect with BOMA

International TOBY Award Winners Lindsay Tiffany These 14 buildings are celebrated as the best of the best in building operations and management.

See BOMA on YouTube: www.youtube.com/ bomainternational Follow BOMA on Twitter:

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Volume 6, No. 5 The BOMA Magazine September/October 2010, (ISSN 1532-4346), Copyright 2010. The BOMA Magazine is published bimonthly in January/February; March/April; May/June; July/August; September/October; and November/December by the Building Owners and Managers Association (BOMA) International, 1101 15th St., NW, Suite 800, Washington, D.C. 20005; Telephone 202-326-6300; Fax 202-326-6377; www.boma.org. Periodicals Postage paid at Washington, D.C. and additional mailing offices. POSTMASTER: Send address changes to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Undeliverable U.S. copies should be sent to: The BOMA Magazine, Attn: List Department, 1101 15th St., NW, Suite 800, Washington, D.C. 20005. Return undeliverable Canadian addresses to: PO Box 875, STN A, Windsor, ON N9A 6P2.

LEGISLATIVE UPDATE Senate plans to pass an energy bill; new Executive Order curbs greenhouse gas emissions.

36 GREEN SCENE

Alyssa Quarforth Green strategies for attracting and retaining federal tenants.

STATE & LOCAL UPDATE

CODES & STANDARDS UPDATE New revisions to the Americans with Disabilities Act spell changes for commercial buildings.

LEADING THE WAY Meet the New Chair: Ray Mackey— BOMA leader, spin class warrior.

RESEARCH CORNER Build a better budget through benchmarking.

EYE ON EDUCATION Highlights from key education sessions at the 2010 BOMA International Conference.

Budget concerns dominate state legislators’ agendas.

BOMA Vice President Lisa Prats @ LisaPratsBOMA On the Cover: Manulife Place in Vancouver, British Columbia, took home the 2010 TOBY Award in the 100,000-249,999 Sq Ft Category during the annual TOBY Awards Banquet at the 2010 BOMA International Conference.

MESSAGE FROM THE CHAIR November to Remember.

BOMA Chair Ray Mackey @ rhmackey BOMA President Henry Chamberlain @ HenryBOMA

J. Michael Coleman Effective building security demands integrated solutions and trained personnel.

DEPARTMENTS

Join BOMA on Facebook Join BOMA on LinkedInJoin the new EER Users Group

Assess Your Building’s Security

TRADE TOOLS Jason Stanley White Hot: The ROI on Cool Roofs.

46 BUYERS’ GUIDE Check out the latest products and services.

20 AROUND THE INDUSTRY Real Estate Roundtable survey highlights marketplace uncertainty; construction employment numbers remain shaky.

TRENDS TRACKER Lawrence Melton GSA test drives new energy-efficient technologies.

September/October 2010 BOMA

Message from the Chair

November to Remember This past June, BOMA members sent a strong message to Congress when they flooded the Capitol Hill phone lines to tell senators and representatives to oppose a proposal to double the tax on carried interest. Congress listened … for now. We were just a few votes away from the passage of legislation that would have further hindered economic development and severely hurt job creation. This November, that message has to be stronger than ever. The federal government and Congress are eyeing business and real estate taxes as they look for ways to offset growing deficits caused by runaway spending. What they don’t seem to understand is that a tax on commercial real estate, whether through increases in capital gains or carried interest, will not spur recovery. In fact, it’s a great way to stop it dead in its tracks. Fewer, not more, job hires are often the result of tax increases. We have an opportunity before us to change the conversation in Washington during the mid-term elections when all U.S. House of Representative seats will be up for vote, along with 37 Senate seats. This isn’t about politics; it’s about recovery. Republican, Democrat or Independent, it doesn’t matter. What matters is that lawmakers understand that a healthy commercial real estate industry is vital to a healthy economy, and that our industry doesn’t have the perceived deep pockets to foot the bill for growing deficits and exorbitant spending. Let’s make this a “November to Remember” by taking our concerns straight to the voting booth and supporting candidates that understand that Main Street jobs and businesses will be negatively impacted by tax increases on commercial real estate.

Sending a message to Congress in November will also elevate our collective voice on pending regulatory actions by the U.S. Environmental Protection Agency and the U.S. Department of Energy in such areas as energy efficiency, lead-based paint and stormwater runoff. Again, it all goes back to job growth, which is the only thing that will trigger real economic recovery. Costly regulations that align more with the political flavor of the month rather than with real science will increase operating expenses, setting up another situation where business owners find they have to delay hiring or put it off altogether. Most troubling is that we are now seeing signs of hope turn to signs of challenge. We’re just beginning to come out of this elongated recession, but new regulations or taxes could thwart economic recovery altogether. What we do have going for us, though, is the best grassroots network in the industry. Congress heard our voices in June on carried interest and they will hear from us again this fall in the lead up to the elections. I ask every BOMA member to take action to bring commercial real estate’s message straight to lawmakers. You can do this by meeting with your local legislators, writing and calling your senator or representative on Capitol Hill, joining your local government affairs committee and supporting BOMAPAC (www.boma. org) so that we can support lawmakers that understand that commercial real estate is at the heart of a healthy economy. Thank you for supporting this great industry!

BOMA September/October 2010

Editor: Laura Horsley Associate Editor: Lindsay Tiffany Contributing Editors: Karen W. Penafiel, CAE, Ronald Burton, James Cox, Lorie Damon, Ph.D., Emily Naden, Tracy Glink Designer: Amy Belice Published by: Building Owners and Managers Association (BOMA) International

BOMA International Officers Chair and Chief Elected Officer Ray H. Mackey, Jr., RPA, CPM, CCIM Stream Realty Partners, LP Dallas, Texas Chair-Elect Boyd R. Zoccola Hokanson Companies, Inc. Indianapolis, Ind. Vice Chair Joseph W. Markling CB Richard Ellis, Inc. Los Angeles, Calif. Secretary/Treasurer Kent Gibson, CPM Property Reserve Inc. Salt Lake City, Utah President and Chief Operating Officer Henry H. Chamberlain, CAE, APR BOMA International Washington, D.C. Call for Nominations: Vice Chair, Secretary/Treasurer and Executive Committee Members BOMA International’s Nominating Committee is seeking candidates for the positions of vice chair, secretary/treasurer and for five members of the Executive Committee to the Board of Governors. For further information, contact Ann Coslett at acoslett@boma.org. The cost for The BOMA Magazine is $75 a year for subscribers and $50 a year for BOMA International members.

Ray Mackey, Jr., RPA, CPM, CCIM Chair and Chief Elected Officer

Publisher: Lisa M. Prats, CAE

Publication of advertising should not be deemed as endorsement by BOMA International. The publisher reserves the right in its sole and absolute discretion to reject any advertisement at any time submitted by any party. Material contained herein does not necessarily reflect the opinion of BOMA International, its members or its staff.

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legislative UPDATE Obama Administration Seeks to Trim Energy Waste On July 20, 2010, President Obama issued Executive Order 13514 to curb greenhouse gas emissions produced by federal buildings and government travel and operations. The White House hopes to cut emissions by 13 percent by 2020 and thereby reduce carbon dioxide emissions by 101 million metric tons, equivalent to a reduction of 235 million barrels of oil. The federal government accounts for 600,000 vehicles, owns and manages nearly 500,000 buildings and paid a $24.5 billion utility bill in 2008. The move comes as the Obama Administration pushes the federal government to take a larger role in promoting a clean energy economy and the utilization of renewables, such as wind and solar power. Last fall, President Obama launched the GreenGov challenge in an attempt to generate ideas about how the government can improve sustainability. What resulted was the doubling of federal hybrid vehicles, elimination of Styrofoam cups from agency cafeterias and several other energy-saving initiatives. Essentially, the new Executive Order requires that the actions taken by the federal agencies meet these energy goals and give a positive return on investment for the American taxpayer. Annual progress will be measured and reported online by the Office of Management and Budget.

Senate Plans to Push Energy Bill THE SENATE HAS ANNOUNCED PLANS to try once more to move an energy bill before the November elections, though the scope of the bill has changed dramatically over the past few weeks as Senate Democrats have attempted to identify “noncontroversial” provisions that could be passed immediately. As such, carbon cap and trade is off the table. What’s left is a much scaled-down bill that includes an oil spill response to ensure BP pays for the damage it has caused and that, going forward, oil companies invest in preventive technologies; provisions to encourage the retrofit of the nation’s heavy vehicle fleet; incentives for home energy-efficiency retrofits; funding for the Land and Water Conservation Fund; and an increase in the liability cap of the Oil Spill Liability Trust Fund. Even this scaled-down “noncontroversial” bill does not presently have the 60 votes needed to invoke cloture and proceed to a vote, but Senate leadership continues to push hard to earn support. Of particular interest to BOMA is what’s NOT included in this legislation: the advanced building code language, which BOMA has been fighting for during the past four years, that would drastically increase energy efficiency in building codes with no regard to cost effectiveness. Things can change rather quickly on Capitol Hill and BOMA will remain vigilant to ensure that this bad policy option does not make its way back into the bill. Also not included are any rebates or other incentives targeted to commercial building energy retrofits.

BOMA September/October 2010

Despite Victory on Carried Interest, Concerns Remain The remaining days of the Congressional session continue to tick by, and members of Congress are anxious to return to their states or districts to prepare for the November elections, though many legislative priorities remain on their agenda. One such priority that BOMA continues to closely watch is the package of expired tax extenders, and, along with it, the proposed carried interest revenue offset. BOMA supports the one-year extension of the 15-year depreciation period for leasehold improvements and the brownfields deduction that are included in the package of tax extenders (a package of popular tax breaks that, for the past several years, Congress has voted each year to extend for another year). These tax provisions expired on Dec. 31, 2009. Despite its strong support for the extenders package, BOMA opposes Congressional attempts to pay for the extension through a proposed permanent increase on the tax on commercial real estate development by changing the tax treatment of carried interest from the capital gains rate of 15 percent to that of ordinary income. Continued on page 10

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legislative UPDATE EPA Forced to Take a Step Back on Stormwater

In addition to its Capitol Hill and grassroots lobbying efforts, BOMA International is fully engaged in a targeted coalition media campaign. These efforts have included the placement of op-eds in papers across the country that have cited data from BOMA International’s 2009 economic impact study to help emphasize the industry’s contribution to the economy. Funds appropriated from BOMA’s Industry Defense Fund, which were used to produce the study, have also been used to help fund strategically placed ads in prominent newspapers, such as Roll Call, calling on Congress not to drastically raise the tax rate on carried interest.

Despite its strong support for the extenders package, BOMA opposes Congressional attempts to pay for the extension through a proposed permanent increase on the tax on commercial real estate development. 10

BOMA September/October 2010

On May 10, 2010, the U.S. Environmental Protection Agency (EPA) released a notice that the agency planned to move forward on an information collection request (ICR) on stormwater management, including discharges from developed sites. EPA drafted questionnaires, which it intends to send randomly to owners and developers of developed sites. BOMA International, in conjunction with the Real Estate Roundtable, International Council of Shopping Centers and several other real estate associations, filed comments on June 9, arguing that this is an expansion of EPA’s authority and EPA should not be allowed to proceed. Under the Clean Water Act, EPA presently regulates point sources, including active construction sites. By sending the proposed ICR to owners of already developed properties, BOMA believes EPA is expanding its authority well beyond those given to it under the Clean Water Act. The Office of Management and Budget (OMB) agreed! OMB has denied EPA’s request to send either the short or long version of the questionnaires to owners and developers; however, OMB will allow EPA to revise the questionnaire, taking into consideration the guidance provided through the public comment period. Despite this victory, our coalition is well aware that EPA still plans to proceed with its regulatory goals and will most likely proceed with a revised version of the questionnaire. Our coalition has hired legal counsel, thanks to support from the Industry Defense Fund, and will continue to educate EPA, OMB, the Small Business Administration and Congress on the issues of concern over this rulemaking.

House Amends FIRPTA to Permit for Additional Commercial Real Estate Investment Prior to its August recess, the House of Representatives passed H.R. 5901, the “Real Estate Jobs and Investment Act,” by a near unanimous vote of 40211. Introduced by Congressman Joseph Crowley (D-N.Y.), the bill amends the Foreign Investment in Real Property Tax Act (FIRPTA) of 1980 by increasing the ownership stake a foreign investor may have in a publicly traded Real Estate Investment Trust (REIT) without being subjected to FIRPTA from five to 10 percent. The dividends of REITs (historically constituting two-thirds of total return) paid to non-U.S. shareholders would remain subject to U.S. withholding (but not FIRPTA) tax. And, in countries where it is consistent with United States tax treaties, when applying this ownership test, H.R. 5901 would lookthrough to the individual investors in foreign mutual funds that in turn invest in U.S. REITs. This targeted change to FIRPTA is consistent with existing U.S. policy on the purchase of debt by foreign investors and will enable new investments in publicly traded REITs. H.R. 5901 encourages the flow of additional capital into the United States commercial real estate market, allowing for REITs to reduce leverage, increase liquidity and better position themselves in the face of ongoing economic difficulties. The outlook for consideration by the Senate at this time is unclear. BOMA International will continue to support this and other efforts to ease the FIRPTA rules in order to encourage additional investment in commercial real estate.

Understanding Your Motor Options

A brief from NECA’s Electrical Design Library Issue 4, 2010

f you think “industrial” when you heard the word motors, you’re not alone. After all, motors—in fans, pumps, robots and assembly lines—are the heart of any modern manufacturing plant. But motors are critical to the equipment running commercial facilities as well. Efforts you make to ensure the motors used in your building are efficient, and that they are operating efficiently, can make a big bottom-line difference in operational expenses. In other words, there’s more to energy efficiency in your building then switching out the lighting.

60% of Power Use What’s more, the omnipresence of motors in our everyday lives is drawing new attention from efficiency advocates seeking to reduce both energy use and related greenhouse gas emissions. The U.S. Energy Department now estimates that motors use more than 60% of all electricity generated in this country.

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state & local update

Budget Concerns Dominate State Legislators’ Agenda STATE LEGISLATORS GATHERED in Louisville, Ky., in late July for the National Conference of State Legislatures (NCSL) annual meeting to discuss innovative solutions to the biggest problems facing states. The recession and its impact on state budgets was the dominant theme of the meeting. According to a new NCSL report, it continues to wreak havoc on state budgets during the 2010 legislative sessions; however, many state fiscal officers report revenues have picked up, or, at the very least, have slowed their rate of decline. Nearly every

state expects FY 2011 tax revenues to surpass FY 2010 collections; but fiscal uneasiness remains. They are concerned about revenue growth being insufficient to replace the loss of federal stimulus funds. This mirrors a trend seen at the municipal and county levels. States faced a collective budget gap of at least $83.9 billion during enactment of their FY 2011 budgets. As a result, state legislatures were prompted to increase taxes and fees for the ninth consecutive year as they worked to shore up state budgets. More gaps are expected

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BOMA September/October 2010

in the next two years. Two-thirds of the states already forecast another round of double-digit budget gaps in FY 2012. Thirty-three states forecast gaps in FY 2012. Nearly half of the states have budget forecasts extending to FY 2013, and, so far, 23 states project budget gaps for FY 2013. These gaps can be traced, in part, to the end of the federal stimulus funds, the expectation of lackluster revenue recovery and mounting spending pressures. The actions taken by the 45 reporting states resulted in a net tax increase of $3 billion. The tax increases represent 0.4 percent of total state tax collections. Nine states increased taxes by more than one percent, while only one state cut taxes by more than one percent. Thirtyfive states made no significant tax policy changes. During the meeting, NCSL’s Environment Committee postponed debate on a “Greening the Built Environment” policy to their Winter Meeting. The policy called on the federal government to enact legislation to promote states’ and localities’ adoption of the International Green

States faced a collective budget gap of at least $83.9 billion during enactment of their FY 2011 budgets. As a result, state legislatures were prompted to increase taxes and fees for the ninth consecutive year as they worked to shore up state budgets. Construction Code (IgCC) as a base code and the consideration of ASHRAE 189.1 as a compliance path within the IgCC. It also calls on Congress to encourage energy efficiency in commercial buildings. BOMA staff has already reached out to NCSL to educate its members through a formal presentation on this resolution’s impact on commercial real estate. The U.S. Conference of Mayors endorsed a similar resolution calling on local governments to adopt the IgCC at its annual meeting in June. This resolution calls on local governments “to take

a more holistic approach to incorporating energy efficiency in residential and commercial building, sustainable community planning and healthy and safe building practices into the codes to the IgCC and consider its Standard 189.1 compliance path as base code in their jurisdiction.”

BOMA California Advocates Key CRE Issues in Sacramento BOMA California joined its real estate colleagues in Sacramento for the California Commercial Real Estate Summit, an annual event where industry leaders from all sectors of the commercial, industrial and retail real estate industry converge on California’s Capitol to meet with policymakers. The summit provided BOMA members with an opportunity to meet other industry leaders from across the nation, high-level staff from Governor Schwarzenegger’s Administration and California state legislators. BOMA California’s legislative priorities included codes, recycling, sustainability and taxes. Advocates lobbied for

a bill that would modify the code adoption cycle and extend it to an 18-month process, adding three months to the interim update process. This will allow more time to consider new code impacts before adoption and provide additional time for education and training. Additionally, members educated legislators on mandatory commercial recycling. California’s proposed split roll property tax was also high on this year’s legislative priority list. This measure would change the state’s Proposition 13 by placing a greater emphasis on commercial property and the private sector in generating state revenues. Passed in 1978, Proposition 13 resulted in a cap on property tax rates in the state. In addition to lowering property taxes, the initiative also contained language requiring a twothirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to raise special taxes.

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September/October 2010 BOMA

Codes & standards update

Justice Department Issues Final Rule Revising ADA Regulations IN LATE JULY, the U.S. Department of Justice (DOJ) announced amended regulations implementing Title III of the Americans with Disabilities Act (ADA) for commercial buildings and public accommodations. This is the first comprehensive revision since the 1991 ADA Accessibility Guidelines (ADAAG) went into effect. In making this

BOMA September/October 2010

long anticipated change, DOJ adopted standards contained in the U.S. Access Board’s 2004 ADA/ABA Accessibility Guidelines. The new standards include new requirements for restrooms, service counters, employee work spaces, telephones and stairways. The revised rules also impact power-driven mobility devices, communication services and lodging reservation systems. BOMA was successful in securing major concessions in the revised regulations for the commercial real estate industry on two major issues that facilitate a less problematic and more costeffective transition to the new rules. The first is a broad “grandfather” clause exempting all building elements constructed or altered in compliance with the 1991 rules until those elements are subject to a planned alteration; this also applies to the “path of travel” to an altered area. The second is the

inclusion of a reasonable time within which to comply with the new rules. The revised regulations become effective in January 2011, but are not mandatory for new construction, alterations and barrier removal until January 2012. During 2011, projects may be designed and constructed in compliance with the current ADAAG or the revised 2010 regulations. A comprehensive review of the new ADA regulations is available at www. boma.org.

Access Board to Set Standards Impacting Medical Office Buildings The “Patient Protection and Affordable Care Act” recently signed into law by President Obama includes provisions to address access to medical diagnostic equipment for people with disabilities. The act authorizes the U.S. Access Board to develop new standards for examination tables and chairs, weight scales, radiological equipment and other diagnostic equipment. Access to this Continued on page 16

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Codes & standards update equipment by persons with disabilities is not currently addressed in the ADAAG. Unlike the recently announced amended ADAAG rules, these new regulations are not subject to approval by DOJ. The law mandates that the Access Board issue the new standards within two years in cooperation with the U.S. Food and Drug Administration. BOMA will track the development of these new regulations and work with members to ensure the Access Board considers critical issues in the operation of medical facilities. More information is available at www.access-board.gov.

ICC Hearings to Determine Future Energy Code Requirements Final Action hearings to determine the content of the 2012 International Energy Conservation Code (IECC) will be held in late October. The International Code Council (ICC) voting will hear debate and vote on a host of proposals to amend the current edition (2009) of the IECC. Numerous changes have been proposed that would greatly increase

BOMA September/October 2010

the stringency of the code, in particular several proposals that make up the so called “30-percent solution” put forth by the U.S. Department of Energy (DOE) and energy-efficiency advocacy groups. Proponents claim their changes would result in a 30-percent reduction in building energy use—an increase in stringency that would significantly impact BOMA members. BOMA has worked to modify the requirements that would be most detrimental to BOMA members, including onerous building insulation and glazing provisions. BOMA will aggressively represent the interests of the commercial real estate industry to ensure that any changes are cost effective, reasonable and technically feasible. A full list of IECC proposals for the 2009-2010 ICC code development cycle is available at www.iccsafe.org.

ICC Green Building Code Development Schedule Development of the International Green Construction Code (IgCC) will

continue through 2011, culminating with the publication of the 2012 edition. The initial draft of the code (Version 1.0) was released for comment in March and hearings were held in August to consider suggested changes from over 1,200 commenters. A revised draft (Version 2.0), scheduled to be released in November, will be subject to preliminary and final action hearings to be held in the spring and fall of 2011. BOMA will actively represent the interests of members throughout this process. BOMA members throughout the country have recently reported on efforts to push adoption of IgCC draft Version 1.0 in their state or local governments. Because the IgCC draft is likely to undergo significant modification before it is approved by the ICC voting members in late 2011, it is critical that jurisdictions consider the advisability of enacting regulations based on this document. For more information, contact Ron Burton at rburton@boma.org.

September/October 2010 BOMA

leading the way

Meet the New Chair Ray Mackey BOMA Leader, Spin Class Warrior It’s a tough market BOMA members are working through right now. Where do you see signs of recovery? The economy is growing in 38 states, but that also means that 12 states are still in trouble, and even states that are growing are facing budget crunches. Unemployment seems to have topped out and is headed down slightly, although still at historically high levels. Economists project the unemployment rate to be 9.4 percent by year-end and to improve in 2011. On the commercial real estate side, leasing velocity and investment sales activity are up slightly, but improvement in fundamentals is still a ways off. Real demand for office space will not return until we have significant job growth across the board. We are beginning to see a few CMBS deals completed and, in general, the lending markets appear to be thawing slightly. Life insurance companies, in particular, are becoming more aggressive on financing terms. Competition has heated up for wellleased, well-located core assets, and cap rates for this class of property have slightly compressed. We are also beginning to see some movement from the special servicers to bring problem assets to market, although most transactions appear to be on an asset-by-asset basis rather than in bulk as we saw in the last downturn. The economic signs for commercial real estate certainly don’t point to a boom market anytime soon, but the direction is, at worst, stable and, at best, slightly improving.

BOMA September/October 2010

The advocacy challenges ahead are daunting, to put it mildly. How do we harness the power of BOMA’s grassroots network? What is our biggest battle? The success of our advocacy efforts has always been a result of the passionate commitment of our members and their willingness to, en masse, write those letters, send those e-mails and make those phone calls directly to their senators and representatives. Our biggest challenges this year will be on two fronts. As the federal government battles the effects of expanding deficits, we expect Congress to push for increased taxes on commercial real estate activities, particularly taxes on capital gains and carried interest, at a time when the industry is struggling to come out of this deep recession. The other daunting challenges we will face are on the regulatory side as we work with federal agencies like the U.S. Environmental Protection Agency and the U.S. Department of Energy to ensure that new regulations on items such as energy efficiency, stormwater runoff and lead-based paint are based on proven science and compliance can be achieved with available, affordable technology and procedures.

During your BOMA Chair acceptance speech in Long Beach, you talked about the unique “BOMA experience” of each member. What is your BOMA experience and how has it led you to this position today?

For me, my BOMA experience started more than 25 years ago when my boss told me to get involved with a local group called the Dallas Building Owners and Managers Association. After obtaining a scholarship for an instructor-development training class, I was able to convince my employer to send me to the BOMA International Convention in Boston, where the training was being held. That’s when I got my first taste of the “BOMA Blue Kool-Aid” and got my first glimpse at the power of the collective synergy of our membership. Over the years, my BOMA experience continued to evolve through a variety of leadership roles at the local, state, regional and international levels. This included opportunities to serve as the president of Dallas BOMA, president of Texas BOMA and two terms on the Executive Committee of BOMA International. Today, my BOMA experience means many different things. It means the ability to attend a Regional Owners Council meeting in Las Vegas to share current trends and best practices in the management of mixed-use properties. It means traveling to Portland, Ore., New York City or Little Rock, Ark., and seeing the vibrant educational programs that our local associations are providing to their members. It means going to a National Advisory Council meeting in Washington, D.C. and returning back to my business partners in Dallas with a management and leasing assignment for 500,000 square feet of office space, primarily because of a contact I made through BOMA.

What are you most excited about during your year as Chair? I am most excited about BOMA’s continued leadership in the transformation of existing buildings to more energyefficient operations, and BOMA’s commitment to continuous improvement. Several years ago, BOMA began educating its members on how to reduce the energy consumption in their buildings and how to operate them in a more sustainable manner through programs like the BOMA Energy Efficiency Program (BEEP) and the Sustainable Operations Series (SOS) webinars. BOMA not only challenged the commercial real estate industry to reach new heights in energy efficiency with the BOMA 7-Point Challenge, it also provided the tools and education to help make market transformation a reality. BOMA continues to raise the bar, providing additional tools, resources and training to owners, managers, operators and occupants of existing facilities. Building on our past success, this is a year that I expect BOMA to take efficiency in building operations to a whole new level with updates to the BOMA Green Lease Guide, the BOMA Preventive Maintenance Guide and the BOMA 360 Performance Program, as well as introducing other new tools and resources to the industry.

In your acceptance speech, you mentioned that you dropped 60 pounds in the last 18 months. What’s the secret to your success?

the table). My wife is a math teacher and she told me that losing weight was just simple math—burn more calories than you take in. No fancy diets, I ate normal food (just less of it) and I started going to a spin class four- to five-times a week. Eighteen months later, I’m still

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Look for it: Check out an expanded version of our interview with BOMA Chair Ray Mackey for insight into the success of the Texas markets and why now is the best time to be a BOMA member. Visit www.boma.org and select “BOMA Magazine” from the “News” drop down box.

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September/October 2010 BOMA

Around the industry

RER Sentiment Survey Highlights Marketplace Uncertainty THE LATEST REAL ESTATE ROUNDTABLE (RER) SENTIMENT SURVEY underscores the continuing uncertainty in the real estate marketplace. RER’s Index dropped from 76 points in the second quarter to 74 in the third quarter, due to unstable market fundamentals and uncertainty over government policy. In terms of real estate values, respondents reported some improvement in expectations, yet emphasized the gap between valuations for Class A assets and all others. Those factors and the continuing instability of the capital markets continue to cause unease. “Uncertainty reigns. Whether it is job creation, unstable capital markets or a volatile mix of current policy and the upcoming mid-term elections, investors and businesses are skittish, causing the commercial real estate outlook to be flat. The good

M usic

to your eyes

news is that last quarter’s view that commercial real estate markets have stopped falling has been confirmed,” reports RER President Jeff DeBoer. BOMA International is an active participant within the Roundtable. A recent Kiplinger Letter projected weaker GDP growth for the year (3.1 percent vs. 3.5 percent reported in June) and unemployment remaining virtually unchanged at 9.4 percent. One glimmer of a recovery was reported in second quarter, when numbers showed that more office space was leased than was vacated nationwide—something that had not happened in the eight previous quarters. These reports indicate that a floor has been established; but for a robust recovery, the economy is still lacking the drivers that will lead to new hiring and economic growth.

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BOMA September/October 2010

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Construction Unemployment Falls to 17.3 Percent in July The nation’s nonresidential building construction sector shed 1,800 jobs in July, according to the August 6 employment report by the U.S. Department of Labor. Since July 2009, 38,700 nonresidential construction jobs, or 5.4 percent, have been lost. Nonresidential construction employment now stands at 680,100. In contrast, nonresidential specialty trade contractors gained 8,000 jobs in July. Still, the sector’s job force is smaller by 183,500, or 8.5 percent, from a year ago. The heavy and civil engineering sector saw a loss of 700 jobs in July after gaining 1,300 jobs in June. The residential building construction sector lost 9,900 jobs in July, and has lost 55,500 jobs since July 2009. Overall, the construction industry shed 11,000 jobs in July and has lost 376,000 jobs over the past 12 months. Since the beginning of the recession, the industry has lost 1,918,000 jobs, a drop of 25.6 percent. July’s construction unemployment rate declined to 17.3 percent, down from 18.2 percent last year. “The data indicates that construction job losses have slowed dramatically, particularly in those segments powered by the stimulus package passed in February 2009,” comments Associated Building and Contractors Chief Economist Anirban Basu. “Still, this news provides stakeholders little comfort since the eventual exhaustion of stimulus support will become increasingly apparent in construction employment data next year.” In order for construction employment numbers to improve, Basu emphasizes the need for expansion of jobs associated with privately financed activities, as well as state and local government support for capital spending and projects.

Grubb & Ellis Participates in DOE Energy-Efficiency Pilot Program Grubb & Ellis Company will be one of eight major U.S. corporations selected by the U.S. Department of Energy (DOE) to participate in the pilot program for the Global Superior Energy Performance Partnership. The Partnership is designed to drive continuous improvements in building efficiency through an international network of government agencies, national-level certification programs and other public-/private-sector organizations. U.S. Secretary of Energy Steven Chu recently announced the program at the Clean Energy Ministerial, a gathering of ministers from 24 governments, in Washington, D.C. Other program participants include 3M, Cleveland Clinic, The Dow Chemical Company, Marriott International, Nissan, Target Corporation, Wal-Mart Stores, Inc. and the Massachusetts Institute of Technology. As a participant, Grubb & Ellis will be responsible for implementing an energy management system in selected buildings it manages, establishing baseline and target performance levels and measuring and verifying energy use.

September/October 2010 BOMA

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Benchmarking

BOMA • Kingsley REPORT

BOMA Kingsley REPORT Practical Industry Intelligence for Commercial Real Estate Benchmarking Autumn 2010

Market Analysis 2010 Experience Exchange Report Indicates Tight Management Needed for Today’s Demanding Market By Phil Mobley As BOMA International reported on July 13, the 2010 Experience Exchange Report® (EER) revealed a $0.09 (1.1 percent) decrease in total operating expenses at U.S. private-sector buildings during 2009. Owners of buildings participating in the EER thus enjoyed a total contribution of more than $62 million to net operating income (NOI), or about $15,000 per private-sector building—a critical amount given today’s environment of tough competition for occupancy and limited capital availability. Of course, aggregate trends are one thing; understanding where and how they occur is a far more interesting (and, ultimately, far more rewarding) exercise. A building’s location—both its market and its situation within that market (downtown vs. suburban)—obviously has a profound impact on the cost to own and operate it. Factors from local tax and utility rates to labor costs to the general economic conditions of a particular submarket can render comparisons to a “national average” practically useless. Also important is the type of building, as certain specialties have very different needs in specific expense categories. And, the context provided by a time trend should never be overlooked. What follows is an analysis of office building expenses for the year 2009 based on the 2010 EER. While the EER contains information from over 4,200 office buildings across the United States and Canada, this analysis will focus on a specific subset of those buildings—those in the United States for which data was submitted in both 2009 and 2010, whose total rentable area did not change by more than 10 percent and whose occupancy did not change by more than 15 percent. This two-year “same building analysis” is akin to retailers’ “same store” analysis and allows for a fairer “apples-to-apples” comparison of expense information by netting out the potential impact of volatile occupancy, changes in building size and changes in the overall composition of the buildings that contribute to the EER year over year. The two-year, same-building analysis comprises 1,600 buildings and 350 million square feet. It also provides a truer time trend comparison, as it represents literal year-over-year changes in the operating expenses and incomes from the same buildings in each year.

Continued on page 24

September/October 2010 BOMA 23

BOMA • Kingsley REPORT

Benchmarking

Building Type Analysis About 75 percent of the buildings in the sample are general, multi-tenanted office buildings. This stands to reason, as they are by far the most common buildings in the marketplace. The 2010 data set is robust enough to examine three other types of buildings: corporate facilities (typically owned and/or occupied by a single tenant), medical office buildings and buildings used primarily by government agencies. The chart “Major Category Expenses by Building Type” displays the average cost per square foot (psf) for each of the building types listed above across the seven largest expense categories (note that government buildings are excluded from the examination of fixed expenses, which are largely driven by real estate taxes, from which most government buildings are exempt). Because general multi-tenanted buildings comprise most of the sample, their expense profile very closely resembles that of the “typical” U.S. private-sector building. Still, it is notable that, for the past two years, these buildings have spent about 11-percent less on roads and grounds. Similarly, government buildings have spent about 25-percent less than private-sector buildings in this category. Why might this be? One theory is that medical and corporate buildings likely have different parking requirements. Or, perhaps they tend to be located on more campus-like settings, which require more maintenance. For government buildings, the likely explanation is that they are overwhelmingly located in downtown locations, which tend not to require the same level of roads and grounds maintenance. Though this is a relatively small category, the impact of a penny or two across thousands of square feet can be very significant. More significant, however, is the impact of utilities expenses. With the typical building spending 10 to 12 times as much on utilities as on roads and grounds, variances here bear very

24 BOMA September/October 2010

Major Category Expenses by Building Type

Major Category Expenses by Location in Market

close monitoring. Importantly, this is the one expense category that saw reductions across all property types during 2009. General multi-tenanted buildings trimmed $0.08 psf from their utility bills, while corporate facilities doubled that savings ($0.16 psf) and government buildings almost tripled ($0.22 psf ) it. Even medical buildings, which often have very rigid requirements for temperature control and redundant building operating systems, managed to reduce utility costs by $0.10 psf. Whether from

falling rates, better weather or more efficient usage, building managers across the board were generally able to squeeze cost out of their operations in the utilities category in 2009. (For more on the energy aspect of utility costs, see the sidebar “Focus on Energy Efficiency is Here to Stay.”) Trending in the opposite direction in 2009 were fixed expenses. While medical and corporate buildings have 20- to 40-percent lower fixed expenses than general multi-tenanted buildings (likely

Benchmarking

Government buildings and, to a lesser extent, corporate facilities led the charge in driving down expenses in the other categories. Government buildings cut administrative expenses by 36 percent ($0.49 psf ) and cleaning by 15 percent ($0.33 psf ), while corporate facilities dropped them by 13 percent ($0.13

psf) and 11 percent ($0.19 psf), respectively. Government buildings also saved another 16 percent ($0.37 psf) on repairs and maintenance and 12 percent ($0.07) on security in 2009. A strong market position in contract negotiations may have contributed to these savings. Continued on page 26

Five Reasons to Benchmark Industry Practitioners Discuss the Benefits of Benchmarking By Laura Horsley 1. Fine-Tuning Building Operations.

3. Acquisitions and Development.

Comparing building income and expenses to comparable buildings and market peers through tools like the Experience Exchange Report (EER) helps property professionals track key asset performance indicators—energy, repairs/maintenance, cleaning costs—to identify ways to trim expenses and bolster net operating income. Karrie McCampbell, senior vice president of the Central Region with Transwestern in Dallas, uses the EER to catch and analyze anomalies that crop up in expense line items. “You can compare a building to the EER market data to see if anything seems out of whack,” says McCampbell. “If something does come up, you can then delve in to see if there is a legitimate reason or if there is a problem you need to investigate.”

Benchmarking is also an important tool for property acquisition and development. Explains Walraven, “We use the EER in the underwriting of assets. So, if we are looking at acquiring a property or portfolio of properties, we use it as a benchmark to confirm whether a given asset is above or below the benchmark and whether we have opportunities to improve our deal or ways to ensure performance post-closing.” Mark S. Johnson, CPM, senior vice president and national property management executive with DASCO, logs into his EER to help forecast operating expenses for medical office buildings. “The EER serves two main purposes for me when evaluating new opportunities for DASCO,” says Johnson. “The first is to forecast future operating expenses for new developments. The second is to benchmark the performance of potential acquisitions as I look for expense reduction opportunities to help grow NOI and, ultimately, increase the property value. For me, the EER is a crystal ball.”

2. Budgets and Trending. Benchmarking data allows users to examine trends and forecast the impact on revenue and expenses. Prior year EER reports are available and allow users to track performance year-over-year within a given market or nationally. Come budget season, EER users can import data tables in both PDF and Excel formats to create reports and presentations. “With the new trending in the EER, you can see what the increases are and whether expenses are trending up or down,” says McCampbell. “We use it when presenting our budget to the building owner. We can show him/her that our expense budget is in line with, or lower than the EER market average (taking inflation into consideration).” Brenna Walraven, managing director of national property management with USAA Real Estate Company, has been benchmarking with the EER for more than 20 years and uses it as a management tool to help indicate where improvements need to be made. “We use the EER as an indicator of how we might budget and where. For instance, if $2 per square foot for energy costs is the going rate in a particular market and our building is at $2.50, then we know right away that there is a problem. We might decide to budget more for energy-efficiency retrofits or other activities to address being well above market.”

4. Rebid Service Contracts. Knowing whether a building is in line with the cleaning, security and other expenses relative to a market can help property professionals rebid and negotiate lower costs for products and services. Remarks Walraven, “What a manager can do is look at his/her cleaning costs and say, ‘Here’s what we’re paying, but wait a minute, the market is three percent or five percent better.’ That can be used as a tool to put pressure on suppliers to do better and improve.”

5. Educate Stakeholders. Property managers are not the only ones who rely on benchmarking. Owners, tenants, occupants, brokers and tenant rep brokers can all benefit from the data. Owners rely on the information when analyzing and eventually signing off on budgets, and tenant and clients want to know that they are not paying above the market. Explains McCampbell, “It’s very helpful for brokers because they talk a lot about operating expenses, and when they are comparing one building with another, the client will usually ask about current operating expenses. They like to compare it to the market to see if they are too high or too low.”

September/October 2010 BOMA 25

BOMA • Kingsley REPORT

due to tax exemptions and incentives for many such buildings), they saw greater increases. Fixed expenses climbed over nine percent ($0.28 psf ) at corporate facilities and nearly four percent ($0.09 psf) at medical buildings, compared to less than two percent ($0.07 psf) at general multi-tenanted buildings.

BOMA • Kingsley REPORT

Benchmarking

Downtown vs. Suburban Including fixed expenses, privatesector buildings in suburban locations typically spent about $2.84 psf less than their downtown counterparts in 2009, a difference of 22 percent. (As will be explained below, this gap is six-percent wider than in 2008). While roads and grounds expenses were over 200-percent more in 2009 (still a $0.02 psf decrease over 2008), security expenses were lower by 44 percent and fixed expenses by 33 percent. Cleaning (28 percent) and repairs and maintenance (24 percent) expenses were also lower at suburban buildings. Interestingly, utility expenses were very similar for downtown and suburban buildings, primarily because they decreased more than twice as much at suburban locations than at downtown. Further contributing to the widening gap in operating and ownership costs between downtown and suburban locations was a $0.15 psf increase in fixed expenses at downtown buildings, compared to a negligible increase at suburban sites. One quirky finding in this analysis is the opposing trend in administrative expenses. At suburban buildings, these expenses increased $0.08 psf in 2009, while they declined $0.06 psf at downtown locations. Administrative expenses are still higher in the absolute at downtown buildings ($1.44 psf vs. $1.37 psf), but this has brought them closer in line.

Market-Level Analysis Perhaps the most relevant factor impacting expenses is the market in which a building resides. The trends charts on this page display 2009 expenses and the change since 2008 for private-sector buildings in a few selected markets. The first chart depicts total operating expenses, while the second shows total fixed expenses. To illustrate that different locations within the same market can have an impact, two markets have been split: Chicago (downtown vs. suburban) and

26 BOMA September/October 2010

Trends in Operating Expenses • Selected Markets

Trends in Fixed Expenses • Selected Markets

Washington, D.C. (downtown vs. the Virginia suburbs). Some secondary markets are also included for the sake of comparison. It may not be surprising that New York had the highest total operating expenses among these markets in 2009, as New York perennially is one of the most expensive markets in which to own and operate an office building. However, New York buildings did experience a seven-percent decrease vs. 2008. Atlanta, Dallas and Minneapolis, already with relatively low operating expenses,

saw double-digit decreases. Operating expenses in Kansas City went against the national trend, going up by nearly 21 percent. This was largely driven by tremendous increases in utility (15 percent) and administrative (25 percent) expenses. Also bucking the trend were suburban portions of Chicago and Washington, D.C. While their downtown brethren saw no appreciable change in operating expenses, suburban Chicago and Washington, D.C. experienced increases of 11 percent and 12 percent, respectively.

Benchmarking

Making Sense of It All Given the wealth of data available in the 2010 EER, this analysis barely scratches the surface. A multitude of other factors play into the overall cost of owning and operating an office building. The findings presented here are intended not only to inform, but also to provoke further questions and analysis. With real estate transaction activity still very slow and expected not to increase in volume in the coming year, the pressure to drive down expenses as a means for preserving asset value will only increase. Detailed, market-specific operating performance data helps to support and enhance operational efficiency and create competitive advantages. Access the 2010 Experience Exchange Report (EER) by visiting www.bomaeer.com. The BOMA•Kingsley REPORT is written and published by BOMA International, www.boma.org, and Kingsley Associates, www.kingsleyassociates.com.

BOMA • Kingsley REPORT

In both locations, roads and grounds expenses were up over 2008, possibly due to early winter snowstorms in late 2009. Repairs and maintenance was a key driver in suburban Chicago, increasing $0.39 psf. In the Virginia suburbs of Washington, D.C., repairs and maintenance, utilities and security all increased substantially. With respect to fixed expenses, New York and downtown Washington, D.C. again led the way with the highest absolute expenses. However, unlike the situation with operating expenses—which were either flat or declining in both markets—fixed expenses increased 11 percent in New York and six percent in downtown Washington, D.C. Los Angeles saw an even greater increase (13 percent), with Atlanta (eight percent) and the Virginia suburbs (five percent) also experiencing substantial increases. A 12-percent decrease in fixed expenses in suburban Chicago helped to offset the operating expense increase, while a four-percent decrease did the same for Kansas City. Houston (and Dallas, to some extent) was one of the few fortunate markets to see decreases in both operating and fixed expenses.

Focus on Energy Efficiency is Here to Stay By Lindsay Tiffany While pressure on operating expenses may ease once the economy recovers, signs indicate that a steadfast focus on energy efficiency will outlast the current market downturn and has become a key element of ongoing operational practice. The 2010 EER reveals that overall energy expenses in office buildings continue to decline. While energy costs continue to increase across most markets, the steady decline in utility costs as a portion of total operating expenses suggests that property and asset managers are controlling those costs by controlling consumption. Energy consumption in commercial buildings continues to drop, and though it may be attributed to increased attention on compressing operating expenses due to the economic downturn, many believe the focus on energy efficiency is permanent and will be increasingly important for success in the global marketplace. According to BOMA’s 2010 Experience Exchange Report (EER), utilities expenses, consisting largely of electricity costs, decreased significantly in 2009. Analysis of a two-year control sample of private-sector buildings, which contributed data to the EER in both 2009 and 2010 and did not have a change in occupancy greater than 15 percent or a change in total rentable area greater than 10 percent, shows that utilities expenses dropped 9.6 percent during 2009 in suburban buildings, from $2.49 per square foot (psf) to $2.25 psf, and dropped 4.4 percent in downtown buildings, from $2.48 psf to $2.37 psf. Brenna Walraven, managing director of national property management, USAA Real Estate Company, sees the decrease in energy expenses as part of a long-term movement in the industry towards energy efficiency. “With respect to energy, and to a lesser extent water and trash/recycling, the increased focus on compressing utilities expenses is definitely a continuing trend and is part of a permanent shift in our industry to achieve more sustainable and high-performance operations.” In 2009, USAA’s portfolio saw decreases in energy expenses similar to those reported in the 2010 EER. “Our portfolio saved 7.63 percent in energy relative to overall consumption over the last year,” notes Walraven. “I think it is compelling to say that, after a decade-long commitment to energy efficiency, in 2009 we saved the most in consumption than we had in any other year.” Such a move reflects ongoing operating realities. Building owners and managers have very little control over utility rates; rather, their only opportunity to control utility costs is to control consumption. And, investors are taking notice. USAA Real Estate Company recently participated in a study conducted by several large European institutional real estate investors to develop an environmental real estate sustainability score, indicating that energy efficiency plays an important role for global investors when evaluating the performance assets and managers. “Investors look at your sustainability policies and performances but want data; it means that there is an increased focus because you want to show that you are continually making improvements,” says Walraven. “Energy efficiency is much more than the plaque on the wall or money saved—it’s also very helpful in setting us apart in an institutional investment marketplace.” For resources on energy efficiency and sustainability, visit www.boma.org/ resources/TheGREEN.

September/October 2010 BOMA 27

Par Excellence Commercial Real Estate Honors Outstanding Buildings of the Year By Lindsay Tiffany The commercial real estate industry gathered in Long Beach, Calif., to toast the best of the best in building operations and management at The Outstanding Building of the Year (TOBY®) Awards, sponsored by Securitas Security Services USA, during the 2010 BOMA International Conference and The Every Building Show®. Fourteen commercial buildings were honored with the prestigious award for excellence in building management and operations in specific categories of size or building type.

To win the international award, the buildings first won both local and regional competitions. Judging was based on community impact, tenant and employee relations, energy management, accessibility for disabled people, emergency evacuation procedures, building personnel training programs and other indicators. A team of industry experts also conducted a comprehensive building inspection. This year’s TOBY awards competition was the largest by far, with 94 buildings competing in 14 categories.

The TOBY Awards are sponsored by Securitas Security Services USA, the most locally focused security company in the United States, with over 450 local branch managers and more than 100,000 security officers. Securitas USA’s services include guarding services, patrols and inspections, access control, concierge and receptionist services, security console operators, alarm response and specialized client-requested services. For more information, visit www.securitas.com.

Earth

Collier Center Phoenix, Ariz. Managed by: CB Richard Ellis, Inc. Owned by: GE US Pension Trust The Earth category recognizes excellence in environmentally sound office building management. Collier Center is located in downtown Phoenix and is a mixed-use project comprised of Class A office, specialty restaurants, retail and a three-level, below-grade parking garage. Owned by GE US Pension Trust and professionally managed and leased by CB Richard Ellis, Inc., this landmark structure is a premier urban office destination. Energy management is everyone’s responsibility at Collier Center, and small changes have made a big difference in saving money for clients and tenants, improving energy efficiency and continuing the fight against global warming.

Corporate Facility

Robert S.K. Welch Courthouse St. Catharines, Ontario Managed by: Ontario Realty Corporation Owned by: Ontario Ministry of Energy and Infrastructure The Robert S.K. Welch Courthouse is a 131,000-rentable-square-foot, four-story facility situated on 2.29 acres of land. The building provides 100 permanent staff positions and hosts 200 visiting judges and lawyers at any given time. Managed by Ontario Realty Corporation (ORC), Robert S.K. Welch Courthouse stimulates the economy by creating spin-off jobs in building operations and maintenance to ensure a high level of service excellence. ORC has made emergency preparedness a top priority, with plans in place to maintain critical services and communication with employees during any emergencies to ensure operation regardless of disruption.

BOMA September/October 2010

Government Building

Howard M. Metzenbaum U.S. Courthouse Cleveland, Ohio Managed and owned by: U.S. General Services Administration The Howard M. Metzenbaum U.S. Courthouse is a six-story, granitefaced building located adjacent to Public Square in Cleveland’s Central Business District. It serves a critical role in the community as the site of Cleveland’s U.S. Bankruptcy Court, a U.S. District Court and other federal executive agencies. The courthouse is one of the first historic restoration projects to follow the Secretary of the Interior’s standards for the treatment of historic properties and maintains the highest national standards of sustainable, green design practices. All products that were incorporated into the building, including finishes and furniture, were screened for characteristics of off-gassing and noxious odors that could affect indoor air quality.

Industrial Office Park

Legacy Center Business Park Houston, Texas Managed and owned by: Liberty Property Trust Liberty Property Trust manages this Class A, industrial-flex office park at Legacy Center Business Park located in Houston, Texas. Comprised of five buildings on 41.7 acres, Legacy Center Business Park is currently at 98-percent occupancy. The parking ratio is four/1,000 square feet, and the office-to-warehouse ratio is 32-percent office to 68-percent warehouse. All five buildings have oversized, shared truck courts. Upgrades by many tenants include the addition of ramps to one or more of their dock-high bay doors. The management team is an advocate of contributing to the community and closes its offices for one day each year for community service.

Historical Building

Pembroke Courthouse Pembroke, Ontario

Managed by: Ontario Realty Corporation Owned by: Ontario Ministry of Energy and Infrastructure Expanded in 2007, the current Pembroke Courthouse facility was designed to incorporate existing on-site historical courthouse structures that date back to 1866. The renovations, completed within the last two years, surround the original structures and more than double the original square footage. Pembroke Courthouse’s management team ensures conformance with all applicable environmental legislation, guidelines, codes, policies, procedures and practices. The team is committed to energy efficiency, which is demonstrated by encouraging energy efficiency through tenant and staff awareness programs. Pembroke Courthouse received BOMA Canada’s BOMA Best award in 2009 along with other environmental and energy management awards.

Medical Office Building

OHSU Center for Health and Healing Portland, Ore. Managed by: CB Richard Ellis, Inc. Owned by: RIMCO, LLC This 16-story green building has both a prominent place in Portland’s skyline and a significant position in the city’s portfolio of green buildings. It houses physician practices, education and research activities, retail operations (including a full-service pharmacy) and a health and wellness center with a gym. The OHSU Center for Health and Healing building is 60-percent more energy efficient than Oregon building code requirements and, at the time of its initial certification, it was the largest LEED Platinum building in the United States. Continued on page 30

September/October 2010 BOMA

Suburban Office Park Mid-Rise

Greenway Plaza Houston, Texas

Managed by: Crescent Real Estate Equities LP Owned by: Crescent Crown Greenway Plaza SPV LLC/Crescent Crown Nine Greenway SPV LLC

Renovated Building

Park Central 789 Dallas, Texas

Managed by: Parmenter Realty Partners Owned by: Parmenter Park Central, LP With its evening light show and prominent location in the heart of North Dallas, Park Central 789’s three well-run buildings are home to an A-list of corporate tenants. Park Central’s amenities are hard to beat, with the luxuries offered by the connected Westin Hotel, three on-site restaurants, a concierge desk, an on-campus fitness center and proximity to the rapid transit system. Park Central has completed several renovation projects in recent years. Elevators have been modernized, the exterior envelope has been waterproofed and painted, a new fire panel has been added, chillers have been replaced in Park Central 8, the security system has been upgraded and lobbies have been renovated.

Often described as “a city within the city,” the Greenway Plaza complex is tailored to modern business life, with amenities that include two conference centers, a retail food court, a U.S. Post Office, a transportation center, a hotel, a five-star restaurant, a full-service health club, a health clinic and three banks. All 10 Class A office buildings are BOMA 360 Performance Buildings and ENERGY STAR®-labeled. Greenway hosts the largest green roof in Houston, which features grassy areas and colorful seasonal plantings. Greenway Plaza has made an enduring impact on the Houston community through its commitment to outreach programs, including financial support, the donation of resources and volunteered man-hours.

Under 100,000 Square Feet

Port Huron Federal Building & U.S. Courthouse Port Huron, Mich.

Managed and owned by: U.S. General Services Administration

Suburban Office Park Low-Rise

Ballantyne Corporate Park Charlotte, N.C. Managed by: The Bissell Companies, Inc. Owned by: H.C. Bissell

Tenants at Ballantyne Corporate Park include more than 40 Fortune 500 companies and approximately 14,000 employees. The buildings are 100-percent smoke free to promote health, and bicycle racks are convenient to every building. Building management sponsors several health events throughout the year, partnering with the YMCA to offer free exercise events on its campus. The management company is also a responsible corporate steward, hosting a myriad of events that benefit a wide variety of local charities. In 2008, a community website was launched by The Bissell Companies to provide tenants and the community with interactive maps and information on current events, carpools, schools, residential properties, childcare facilities, medical practices, job listings and more.

BOMA September/October 2010

Built in 1877 for $200,000, the Port Huron Federal Building & U.S. Courthouse building is listed on the National Register of Historic Places. It serves as home for the U.S. District Court, the U.S. Marshal Service, the Department of Homeland Security’s U.S. Customs and Border Protection, the Department of Defense Contract Management Agency and the U.S. Attorney’s Office. GSA’s Urban Development/ Good Neighbor Program was practiced through the upgrade and replacement of building systems and restoration. The majority of the building’s services are provided by small, disadvantaged and minorityowned businesses. Management promotes the Combined Federal Campaign, Toys for Tots, the Salvation Army and Habitat for Humanity. In addition, it hosts an annual Earth Day spring clean-up.

500,000-1 Million Square Feet

Accenture Tower Minneapolis, Minn.

Managed by: CB Richard Ellis, Inc. Owned by: CalSTRS

100,000-249,999 Square Feet

Manulife Place

Vancouver, British Columbia Managed and owned by: Manulife Financial This multi-award-winning building was one of the first buildings in Canada to be “Go Green” certified. The building’s fire detection system is among the most sophisticated of its kind. A security and concierge desk, directory board and magnificent abstract artwork complete the building’s main lobby. A fitness center and tenant amenity rooms are located on the second floor. Building management is generous in providing lobby space for displays and charitable efforts. Building materials and existing tenant improvements scheduled for demolition are removed and donated to ReStores Habitat for Humanity, which generates funds to support Habitat’s building programs while reducing the amount of used materials headed to landfills.

Accenture Tower is the first multi-tenant building in Minneapolis to earn the LEED EB O&M designation. The management company, which transformed the building using its shared knowledge of sustainable practices and applying CBRE’s Standards of Sustainability, has reduced CO2 emissions by 18.7 percent since 2001. Accenture Tower’s management offers tenants mixed materials recycling and such watersaving fixtures as sprinklers with rain sensors. The building encourages alternative transportation and features amenities that include concierge service, 24-hour security and proximity to bus stops, hotels, theaters, sporting events and countless restaurants. A new fitness center and conference center opened in 2009. Having a positive impact on the local community is important to staff members, and they support numerous social causes throughout the year.

Over One Million Square Feet

Aon Center Chicago, Ill.

Managed by: Jones Lang LaSalle Americas (Illinois) LP Owned by: Piedmont Office Realty Trust

250,000-499,999 Square Feet

300 West 6th Austin, Texas

Managed by: Thomas Properties Group, Inc. Owned by: TPG-300 West 6th Street LLC Completed in 2001, this building includes state-of-the-art technology, mechanical, electrical and telecom systems. Thomas Properties Group reflects and serves its tenants’ philanthropic goals with financial contributions and sponsorships each year. By supporting these worthy organizations, they assist the community and provide their tenants with meaningful contributions through memorable building-sponsored activities and events. In 2002, 300 West 6th was the first commercial high-rise office building to earn the Austin Energy Green Building Award, with a Three Star Rating for achievement in sustainable design and construction. In 2009, the building was given a prestigious 97 rating by ENERGY STAR®.

This premier building is the headquarters for many Fortune 500 companies and serves as the international corporate home for the building management team, Jones Lang LaSalle. An ambitious energy-saving plan began in 2004 and yielded positive results: Aon Center became the tallest structure in the United States to earn the ENERGY STAR® designation for superior energy performance. The management company has started a Tenants Go Green Committee. In addition, management supports the annual Step Up for Kids fundraiser for Children’s Memorial Hospital, where approximately 2,400 “steppers” climb 80 floors and 1,643 steps.

September/October 2010 BOMA

Give Your Building a Security Assessment Effective Building Security Demands Integrated Solutions and Trained Personnel By J. Michael Coleman As the commercial real estate sector begins to stabilize and recover, prudent property managers are taking an increasingly holistic review of their building security initiatives to ensure optimal efficiency, effectiveness and value of their programs. As vice president of commercial real estate for AlliedBarton Security Services, I encourage property managers to objectively review their security programs and analyze where integrated solutions may help reduce costs. There are several steps that can help simplify the planning process and result in a successful strategy. They include: partnering with industry experts, customizing the plan, leveraging technology and personnel and taking a comprehensive approach.

Include Experts in Your Planning It is critical to involve your security services provider in any security assessment. As your security expert, your provider should have in-depth knowledge of both your site and security risks and can offer a unique perspective, while also providing insight into best practices. Additionally, your security provider should play an integrated role in helping develop solutions based on an assessment. Whether those solutions involve technology, personnel, site changes or policy development, the security team can determine how all of those elements should work together for the best and most comprehensive solution. A security review that includes a vulnerability and threat assessment should be conducted for both the interior and exterior of the property to identify current and potential security concerns. The assessment should provide an evaluation based on the crime rate in the community, the potential of violent behavior among employees and visitors and the attractiveness of the facility for potential criminal activity.

BOMA September/October 2010

Are building managers and tenants conducting criminal background checks and reference checks on contractors? Is there an established procedure for tracking office keys and access cards for staff members? Are all vendors and visitors being adequately screened, and is their identity being verified? Upon completion of a threat assessment, property managers will determine the processes, procedures and equipment needed to protect employees, visitors and building assets. The challenge is to achieve effective security while preserving a welcoming facility.

Tailor the Solution When deciding upon security technology, or other services and policies to augment a physical security program, it is important to tailor the solution for each situation. Every commercial real estate building has different needs and goals. Just as security personnel should be assigned to meet each location’s specific needs, additional product and service options should be given that same individualized consideration. Many security personnel providers have strategic partnerships with a wide range of auxiliary service providers to create customized solutions for every building.

Leverage Technology and Train Personnel As a result of a security assessment, your security team may suggest an additional customer service element, a security awareness program, a change in visitor policies, an ID card system or additional security technology. There are many software solutions to choose from if a technology solution is warranted, but these solutions can only work successfully if the security officers and their managers are involved in the specification and integration and are appropriately trained. A one-time investment in technology integration through closed-circuit TV and remote monitoring, for example, can consolidate principal property initiatives, which ultimately reduces operating costs. Security personnel, however, need to be able to handle the challenges of security integration technology. Ensuring that security officers receive the appropriate training to navigate security technology is crucial to the success of any program. When investing in technology infrastructure, remember that investing equally in training for the security officers who will be operating is just, if not more, important. According to recent customer surveys and industry trend reports, employee training, testing and practical handson drills are most critical to a building management program’s success. Written guides and manuals have little meaning unless they are accompanied by intensive training. Proper training helps ensure that technology is part of the larger security strategy and is a worthwhile investment. Additionally, proper training and use helps enhance the experience

for the building’s tenants and visitors, while also ensuring they receive a level of service. One technology solution we have been successfully employing in a number of properties involves virtual security operations centers. These virtual solutions go beyond checkpoints and devices, and offer a suite of modules designed to manage officer presence, activity tracking and incident reporting. These systems also allow security professionals to efficiently track response and capture data from front-line staff.

Take a 360-Degree Approach It is important to take a balanced and comprehensive approach when reviewing the benefits of additional security products and services in conjunction with a physical security program. A wellexecuted and effective security program must be comprehensive and all elements should be integrated for a seamless effort. The physical security team can be considered the anchor, as their interaction in and implementation of all other elements of a security program is essential. A complete security solution must be an inclusive and holistic building solution. An investment in current and comprehensive security solutions, supported by well-trained security officers, is the most effective and cost-efficient form of commercial liability insurance and protection against crime.

About the Author: J. Michael Coleman is vice president of Marketing Commercial Real Estate for AlliedBarton Security Services www.allied barton.com in Philadelphia. He also serves as chair of the Building Owners and Managers Association (BOMA) International’s National Associate Member Committee and is a member of the Preparedness SIG. He has more than 29 years of experience in the security service industry and can be reached at mike.coleman@alliedbarton. com. Established in 1957, AlliedBarton Security Services is the industry’s premier provider of highly trained security personnel to many industries, including commercial real estate, higher education, healthcare, residential communities, chemical/petrochemical, government, manufacturing and distribution, financial institutions and shopping centers.

Ramp Up Readiness for National Preparedness Month By Darryl Madden—FEMA Ready.gov Coordinator In cooperation with the BOMA International Preparedness Committee September marks the seventh annual National Preparedness Month, and the Federal Emergency Management Agency, the American Red Cross and many local communities are encouraging businesses to take the time to assess their respective levels of readiness. What can BOMA members and local associations do during the month to participate? Start by visiting www. ready.gov, which contains information and resources on a wide variety of preparedness topics. Here are a few more ideas:

Property and Facility Managers • Arrange a discussion among team members about changes to existing plans and programs for response to potential incidents. Distribute the updated plan to all stakeholders. • Set up a meeting with neighbors to share emergency response plans and identify ways you can work together to challenge protocols and responses. • Set up a table-top session and include property team members, first responders, neighbors, tenant groups and other stakeholders to challenge and update existing plans. • Contact your local American Red Cross branch to conduct first aid awareness, CPR training and consider signing up for the Ready Rating program sponsored by the Red Cross. • Confirm that all staff members have personal emergency response plans in place (see the “Plan & Prepare” tab on www. fema.gov or www.redcross.org for information).

BOMA Local Associations • For BOMA local associations that do not have an emergency preparedness committee, reach out to other local associations that do to learn about the benefits of establishing a program for your local.

• The “Ready Business” section of www. ready.gov contains vital information for businesses on how to prepare for their unique needs during an emergency. Encourage your membership to access and complete the assessments. • Reach out to the U.S. Department of Homeland Security (DHS) contact in your area and set up a meeting to discuss current threats, trends and identify how the BOMA local association can help expand each group’s networks. • Make contact with local public health agencies and educate members on the role of public health departments and ways the members can assist to provide meaningful information prior to events and during emergencies (i.e. H1N1 event, flu season, measles outbreaks, etc.) • Reach out to local Office of Emergency Management personnel to understand if there are any programs scheduled during the year that might provide an opportunity for partnership. • Distribute emergency contact information for key preparedness organizations to your members, including FEMA, the Red Cross, the Office of Emergency Management, public health agencies, DHS Protective Security Advisor and more. • Conduct a roundtable discussion with members to assess risks within the community, as well as outside the community (50 miles), that could impact ongoing operations of your business community.

BOMA International’s Preparedness Committee Provides Commercial Real Estate Sector with Seat at the Table Thanks to the tireless work of Edward Fallon, VP Operations-NY Region at Brookfield Properties and an active member of BOMA International and BOMA/NY, who served as its president and chairman of the Board of Directors, and Joseph Donovan, senior vice president of Beacon Capital Partners, the commercial real estate sector now has a front row seat at the national preparedness table with BOMA International’s Preparedness Committee. The committee does ongoing work in emergency preparedness in partnership with public-sector agencies, including the Department of Homeland Security. For more information, visit www.boma.org/ Resources/SafetyAndEmergencyPlanning.

September/October 2010 BOMA

trends tracker

GSA—Proving Ground for Energy-Efficient Technologies By Lawrence Melton The solar panels of a photovoltaic roof system help power the Denver Federal Center.

THE U.S. GENERAL SERVICES ADMINISTRATION (GSA) has one of the largest and most diverse portfolios in the country, with more than 361 million square feet of space in more than 9,600 federally owned and leased facilities. Last year, the agency received $5.5 billion under the American Recovery and Reinvestment Act to “green” its federally owned portfolio, stimulate the economy and put people back to work. This summer the agency launched an initiative called “solar summer,” a swift and aggressive push to ramp up solar installation projects countrywide. To date, GSA has put people to work building 31 solar energy projects that will generate a total of 12 megawatts of renewable solar power capacity—enough to power 1,600 homes and equivalent to removing 2,500 cars from the road. The Recovery Act funding has also given GSA an unprecedented opportunity to be a “proving ground” to test and implement new, innovative green technologies, while making our buildings models of sustainability. Not surprisingly, this is also in line with the goals expressed in Executive Order 13514, Federal Leadership in Energy, Environmental and Economic Performance, that gives GSA a mandate to reduce energy consumption and increase federal building performance. Beginning in 2020, all new federal buildings in the planning phase will be designed to achieve zero-net energy by the year 2030. We are excited about the potential technologies and initiatives that we are undertaking to meet these goals. GSA has been a leader in sustainability and energy conservation, and we are using the following technologies to push us to our zero-environmental footprint goal:

Off-Site Renewable Generation. This is an opportunity for GSA to pursue environmental and economic goals through a single, long-term renewable power procurement strategy. GSA’s creditworthiness and ability to contract for up to 10 years make it a viable purchaser/developer for grid-based renewable power projects.

Photovoltaic Systems. GSA has made significant progress in moving the PV market through its investments in approximately 9,154 kilowatts of installed capacity with another 1,082.5 kilowatts of capacity under way. Using Recovery Act funding, GSA is expanding the existing one megawatt PV plant to a total of seven megawatts at the Denver Federal Center in Denver, Colo.

On-Site Wind Power. GSA is seeking prime locations where wind power is cost effective to support an effort to test the technology. The Land Port of Entry in Jackman, Maine, is one such site under construction.

Geothermal Technologies. Technological advancement is making these systems viable in large buildings, such as the IRS facility in Andover, Mass., where drilling and installation of geothermal wells are under way.

Fuel Cells. GSA is currently exploring installing a fuel cell at its Washington, D.C. Federal Triangle office complex. Fuel cells cleanly produce energy by combining hydrogen and water to produce electricity and heat. The heat produced can be recovered and used for processes, such as absorption chillers or heating domestic water.

LED Lighting. LED lighting is widely considered the next big breakthrough in building lighting systems and could significantly reduce energy used for lighting and provide more occupant control. GSA is coordinating pilot office spaces for this exciting development in the FDA Research Campus Facility in White Oak, Md., as Phase Three of an energy savings performance contract.

Combined Heat and Power. The on-site generation of electricity and recapture of heat energy dramatically reduces the source energy required because of its inherently better efficiency. CHP is almost 80-percent efficient, while conventional generation/ transportation of electricity is approximately 33-percent efficient. GSA has 45 megawatts of installed CHP capacity at six locations across the country.

Radiant Heating and Cooling. Radiant heating and cooling technology, such as “chilled beams,” eliminates the fan to provide space heating and cooling. It is hailed for greater occupant comfort and control, while reducing energy use. GSA is using this technology in the new Bakersfield, Calif., federal courthouse.

Smart Buildings. GSA is incorporating various smart building technologies into 30 Recovery Act projects and 50 legacy buildings to gain reductions in operating costs, while increasing occupant satisfaction. Leading with our expertise, we will be looking to the market to provide more innovative technologies to test in our facilities. These new technologies will also guide the changing roles, skills and competencies of our property managers, preparing them for this new high-performance environment. GSA has the leverage to significantly and positively impact the future of green building technologies, but we want to hear from commercial real estate about how we’re doing and what we can do better. Send your comments to industryrelations@gsa.gov. About the Author: Lawrence Melton is the assistant commissioner for Facilities Management and Services Programs, U.S. General Services Administration, www.gsa.gov.

BOMA September/October 2010

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Green Scene

Attract and Retain Federal Tenants By Alyssa Quarforth

ARE YOU LOOKING FOR A WAY to differentiate your property to federal tenants in these tough economic times? Whether you have federal tenants now or plan to attract them in the future, enhance your leasing strategy to include compliance with the requirements of Executive Order (EO) 13514. The EO raises the bar for federal leadership and performance in energy-efficient and sustainable buildings, and, at the same time, raises expectations of the building owners and operators who lease space to federal agencies.

Capitalizing on the Executive Order The federal government is the largest tenant in the United States. In addition to owning more than three billion square feet of floor space, it also leases an additional 374 million square feet.

Agencies spend more than $10 billion annually on energy, and about a third of the money paid to utility companies could be reduced by implementing more energy-efficient practices and technologies. In an effort to capitalize on this opportunity to better direct federal funds and, more broadly, to reduce the environmental impact of federal facilities, the EO requires at least 15 percent of an agency’s existing building stock to meet a set of guidelines, Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings, by 2015. At the 2010 BOMA International Conference and The Every Building Show®, representatives from the General Services Administration (GSA) and the U.S. Environmental Protection Agency (EPA) provided attendees with details on how

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BOMA members can help tenants track progress and report accomplishments toward meeting the Guiding Principles. Commercial buildings that already operate in concert with the Guiding Principles will undoubtedly be more attractive to federal agencies looking to lease space or renew their leases. Helping an existing or prospective agency tenant understand how your space or building complies with many of the Guiding Principles will make their jobs easier.

Using Portfolio Manager to Comply with the Guiding Principles EPA’s ENERGY STAR® program, in concert with the U.S. Department of Energy’s Federal Energy Management Program (FEMP) and the General Services Administration, has incorporated the Federal High Performance Sustainable Buildings Checklist (known as the “Guiding Principles Checklist”) into ENERGY STAR Portfolio Manager, the EPA’s energy and water benchmarking tool. Federal agencies can use the Guiding Principles Checklist to assess

whether their buildings meet the goals set by the EO, and for reporting on the sustainability data element of the Federal Real Property Profile (FRPP). Meanwhile, building owners and operators can provide a value-added service by assisting their federal tenants in using the Checklist. Your tenants might use the Guiding Principles Checklist to facilitate building walkthrough assessments, track and easily view progress on each Principle, upload compliance documents to the repository for recordkeeping and create a portfolio-wide federal building sustainability report. Like the thousands of other organizations partnering with ENERGY STAR and benchmarking their buildings in Portfolio Manager, they can also use it to monitor up-to-date energy and water metrics. The Checklist automatically populates with the necessary energy and water metrics from Portfolio Manager. These metrics are dynamic, updating automatically as new data is added. To access the Guiding Principles

Overview of Guiding Principles for Existing Buildings • Benchmark building energy use with ENERGY STAR Portfolio Manager. • Occupy ENERGY STAR-labeled buildings. • Reduce energy and water use. • Perform recommissioning. • Reduce greenhouse gas emissions from energy used to operate buildings. • Purchase ENERGY STAR- and WaterSenselabeled products. • Enhance indoor environmental quality. • Use environmentally friendly materials. • Reduce non-recycled waste.

Checklist, buildings must first be benchmarked within Portfolio Manager, and designated as “federal” when doing so (or afterwards). The Checklist shows summary information at the top of the page, including a pie chart representing the building’s progress toward the Guiding Principles. Below, there are tabs for

the sections of the Principles, showing the required actions for each and providing the options to demonstrate compliance. Users can also enter comments or notes, and view links to references and resources that FEMP has suggested to support the Guiding Principles. “Within a multi-tenant building, the agency’s focus is on its own space, but, in many cases, demonstrating compliance with the Guiding Principles will require broader implementation of policies and procedures across the building as a whole,” says Lance Davis, sustainability expert with GSA’s Office of Design and Construction. “So, implementation of sustainable practices in an office building can give a landlord a marketing advantage and entice prospective and current federal government tenants.” For more information, see www.ener gystar.gov/federal and www.wbdg.org/ references/fhpsb.php. About the Author: Alyssa Quarforth is the ENERGY STAR Program Manager for Commercial Properties with the U.S. Environmental Protection Agency.

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Research corner

Build a Better Budget through Benchmarking By Lindsay Tiffany and Tracy Glink A GOOD BUDGET IS LIKE A ROAD MAP. It serves as a strategic property management tool for achieving the owner’s financial goals, informing daily building operations and providing direction for management decisions. But where do good budget numbers come from? Hundreds of property managers around the country finalizing their 2011 budgets this fall will be faced with this question, both when they build their budgets and present them to their owners. Several sources yield good projections: a building’s historical data, adjusted for inflation; a property manager or engineer’s own experience; contracting bids; and, perhaps most importantly, from benchmarking data like BOMA’s Experience Exchange Report® (EER®), which has been reporting on income and expense data in commercial buildings for 90 years. The EER tracks actual property performance across all the major income and expense categories for office properties in the United States and Canada. With market-level data for more than 110 cities, the report can help managers identify opportunities to rebid service contracts, trim expenses, project the benefits of capital improvements and develop cost projections for the coming year. Here are several ways benchmarking can help property managers build better budgets.

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Identify Industry Trends BOMA’s data analysis from the EER allows property professionals to pinpoint key trends over the last year and predict how costs and revenue will be affected. For example, analysis from the 2010 EER shows that, despite rising energy costs in many areas, utilities expenses decreased for most building types in most markets. However, fixed expenses, of which a large portion is real estate taxes, continued to climb. Understanding the trends helps. See the BOMA•Kingsley REPORT on pages 23-27 for more trends from the 2010 EER.

Find Anomalies Comparing a budget to industry benchmarking data offers property managers the opportunity to expose anomalies and investigate their causes. If, for example, utility expenses in a building are higher than local and national averages, the building management team can refine its strategy and budget accordingly. Do the thermostats need to be recalibrated? Should additional equipment be submetered? Does the building need a more effective tenant energy-efficiency awareness program? Continued on page 40

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Research corner Looking at holistic building data can point out trends that may be missed by simply operating off of historical building data.

a property manager has established where contracts are over or under market averages, he or she can renegotiate lower costs for the same services, reduce the scope of services or quality of the product or look for ways to purchase in volume or share services and products.

easy way to get more accurate projections is to adjust the benchmarking data using the consumer price indices, available at www.c2er.org. Property managers should properly note the adjustment when reporting the results.

Adjust the Numbers

When presenting the budget to key stakeholders, property managers need to be able to respond convincingly to the question: Where did that number come from? Having reliable, third-party benchmarking data to support budget predictions is an ace in the hole for property professionals.

Finetune Operating Expenses The EER tracks actual property performance across all the major expense categories for office properties in the United States and Canada, including cleaning, utilities, repairs and maintenance, administrative, security, roads and grounds and fixed expenses. These categories break down even further into subcategories like snow removal, plumbing, building insurance, cleaning payroll, elevators, trash removal and more. Going through each of these line items during the budgeting process will allow property managers to set competitive budget targets for each line item and devise a management strategy to achieve those goals.

One important thing to consider when using benchmarking data to build a budget is lag time. For example, property managers using the 2010 EER to create their budgets this year will actually be using income and expenses numbers two years old, as the 2010 EER contains data from the 2009 calendar year. An

Build a Better Budget with the 2010 EER Accessing the 2010 EER is easier than ever. Simply set up a subscription by visiting www.bomaeer.com. Once you have set up an account, you can choose the markets and building types you would like to purchase or you can choose to purchase the entire report.

Rebid Service Contracts

You can also customize and buy your subscription based on you and your staff’s needs all in one easy transaction. Call the BOMA Research Department at (202) 326-6346 for information about group and company-wide subscriptions.

One more way to cut operating expenses is to use benchmarking data to rebid building service contracts. Once

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September/October 2010 BOMA

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Best-in-Class Education Showcased at BOMA Conference By Emily Naden THE COMMERCIAL REAL ESTATE INDUSTRY’S PREMIER EDUCATION was on display at the 2010 BOMA International Conference, June 27-29, in Long Beach, Calif., as property professionals crowded into more than 40 education sessions designed to help property managers survive and thrive in today’s challenging

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BOMA September/October 2010

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marketplace. Industry experts shared their knowledge, best practices and case studies on various topics, from tenant retention to managing an escalations audit to measuring the performance of green buildings. The sessions were organized into five strategic tracks: Achieving High Asset Value in a Down Market; Assessing Operational Efficiencies and Savings; Tackling Today’s Leadership Challenges; Equipping Building Engineers for Greater Operational Efficiency; and Going for Gold: Leadership and Lessons from California. Los Angeles local Kent Elliott’s session, “Leading in Lean Times,” was a jam-packed, 30-minute power session filled with inspirational ideas for how property professionals can motivate themselves and their teams in today’s work environment, where staff are overloaded and stress runs high. Elliott stressed the importance of understanding the potential of the individuals in a team rather than focusing on their functional role within the company. He also reminded session attendees that effective leaders must make time for themselves to reflect, ask questions and take a broader look at the team’s goals and performance. CCIM-featured speaker Carmela Ma of CJM Associates in Beverly Hills, Calif., led “Troubled Assets Workshop,” a rigorous three-hour program dedicated to identifying and dealing with properties that are facing major financial distress. Ma’s program covered the calculations used for estimating and forecasting NOI on an asset, as well as traditional and new lender models. She also discussed the details of a troubled asset’s life-cycle, giving attendees a handful of important takeaways. Engineers were able to attend the conference for free with their property manager this year and many took advantage of the expertise of Ray Congdon, director of engineering, CB Richard Ellis. Congdon taught three 75-minute education sessions focused on engineering strategies for optimizing building performance. The popular “HVAC Basics and Beyond I & II” series gave attendees a detailed introductory course on how to operate and maintain one of a building’s most valuable assets. Another session, “Rev Up Your Motor Maintenance Practices,” allowed attendees to sample the Northwest Energy Efficiency Council’s acclaimed Building Operator Certification (BOC) program. Attendees learned about new tools to improve motor performance and how to work with common motor issues.

BOMA/Orange County partnered with local colleges and universities to present a Student Day educational program, “Class A Careers,” which was a smash success. The program featured an array of industry experts, including Cybele Thompson, director of global client solutions, Cushman & Wakefield, and Patrick Clark, business development manager, McKinstry, and offered a real-world

Ray Congdon, director of engineering, CB Richard Ellis, taught the popular “HVAC Basics and Beyond,” one of the courses in BOMA’s Building Engineers track.

view of life in commercial real estate. The program also featured a panel discussion, featuring speakers Brian Harnetiaux, leasing director and general manager, Transwestern; Anaiah Spencer, assistant property manager, Brookfield Properties; and Melissa Jones, LEED AP O + M, project manager, Sustainability Programs, CB Richard Ellis, Technical Services. The session was moderated by Marc Fischer, CPM®, RPA®, CCIM, senior vice president and director of management services, Transwestern. The panelists discussed how they got to where they are in the industry today and what skills and education it takes to succeed in property management. “Making Good Deals in Bad Times: Tips for Creating Successful Negotiations in Today’s Marketplace” featured attendee-favorite Tom Gille, who taught attendees successful negotiation techniques. He said that, while no two situations are identical, when armed with the right information, every deal can be successful. Gille also presented “Leasing for Leaders: Economic Impacts of

‘Non-Financial’ Lease Clauses,” highlighting common costly lease clauses that could catch landlords off guard. The conference also introduced new speaker roundtables, a boutique Q&A session offering attendees valuable one-on-one time with featured speakers. The roundtables sparked discussions on specific topics that attendees brought from the education session to learn more about.

Missed a Session? The Entire Conference? If you were unable to attend the 2010 BOMA International Conference or missed a session you wanted to attend, you can purchase the conference recordings in the BOMA Knowledge Portal. The portal also has recordings from BOMA’s 2010 Medical Office Buildings and Healthcare Facilities Conference and other Webinars. To access the recordings and other BOMA educational content, visit www.boma.org and select “On-Demand Education” in the Education tab’s drop down menu.

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September/October 2010 BOMA

trade tools [ROOFS]

A Penny Saved is a Penny Earned…or is It? By Jason Stanley

IT COSTS OUR GOVERNMENT two cents to make a one-cent copper penny. Therefore, the old phrase “A penny saved is a penny earned” is completely inaccurate. If you have a penny, you’re costing everyone else two. There are similarities to this in the sustainability movement. Many of the items we invest in have long According paybacks that, to a Lawrence without government subsiBerkeley dies (be it in National grants, tax Laboratory study, credits or reflective (white) rebates on the manuroofing will offset facturing or 24 gigatons of CO2 consumer over the lifetime side), would of the roofs, never fly due to an insufequating to ficient return $600 billion on investment in energy (ROI). Being sustainable also refers to savings. financial sustainability. Owners and managers of commercial space manage millions of square feet of buildings that collectively consume enormous amounts of energy. U.S. Energy Secretary Steven Chu has said, “Whitening the world’s roofs and roads would have the same effect as removing all the world’s cars for 11 years.” Furthermore, Chu says in the July 2010 issue of GreenBiz, “Cool roofs are one of the quickest and lowest cost ways we can reduce our global carbon emissions and begin the hard work of slowing climate change.” The U.S. Department of Energy’s National Nuclear Security Administration (NNSA) has a head start in the government’s cool roof movement. The NNSA has installed more than two million square feet of energy-efficient cool and white roofs at its facilities under its Roof Asset Management Program (RAMP), which was launched in 2005. The NNSA says it saves roughly $500,000 a year in energy costs as a result of RAMP and expects to save more than $10 million over the next 15 years. On average, the installation of cool roofs and increased insulation has helped the agency cut its building

BOMA September/October 2010

heating and cooling costs by 70 percent annually. There is a truly sustainable proposition that doesn’t require the use of grants, rebates, tax credits or complicated algorithms to afford. On a summer day, what color of shirt is more comfortable to wear: black or white? Obviously, white. The same theory applies to a building’s roof. This simple concept of a white roof can help significantly reduce energy consumption and energy costs. Selecting a longlasting, white reflective roof for your next re-roof project requires little investment, and has a great return on investment. In fact, these roofs cost about the same as traditional roofing products. In an independent case study conducted at the Nationwide Insurance building in Scottsdale, Ariz., Richard J. Bird, professor of statistics at DeVry University in Phoenix, concluded that “… the temperatures of the reflective (white) roof and black roof were statistically and significantly different …”, demonstrating a 7.79-percent decrease in energy consumption. According to a Lawrence Berkeley National Laboratory study, reflective (white) roofing will offset 24 gigatons of CO2 over the lifetime of the roofs, equating to $600 billion in energy savings … that’s a lot of pennies! How can a white roof have an impact of this magnitude? Because it reduces cooling loads and peak energy demands. Why should I use a cool roof on my next project? Because it will extend the roof life, reduce energy consumption and in many cities and states it’s now part of the

White Roof Resources Calculate cost savings for your building: IB Roof Systems: www.ibroof.com/green ENERGY STAR®: www.energystar.gov

Other resources: Cool Roof Rating Council: www.coolroofs.org Online Code Environment & Advocacy Network: www.bcap-ocean.org

energy code. More information on code requirements for white or cool roofs can be found through the Cool Roof Rating Council or the Online Code Environment & Advocacy Network (see sidebar). While it’s true that you’ll have a greater ROI for buildings located in a warmer climate, cooler climate cities also see the benefits. The city of Chicago is now requiring white reflective roofs on all air-conditioned commercial buildings. It’s not often you can find a sustainable proposition that supports your sustainability initiatives and saves you millions of “pennies” at the same time. The next time you look to replace your roof, choose a truly sustainable white reflective roof. About the Author: Jason Stanley is vice president of Business Development for IB Roof Systems and provides direct support and leadership to a nationwide network of sales and technical representatives. As a principal of IB Roof Systems, he has taken the company to carbon neutrality and has led initiatives to create a nationwide PVC reclamation program. He can be reached at jason@ibroof. com.

The National Museum of the Pacific War in Fredericksburg, Texas, reduces cooling loads via a white roof.

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REALIZE THE POTENTIAL OF $160 BILLION* IN ENERGY SAVINGS. WWW.USGBC.ORG / LEED

* Potential energy efficiency savings of building sector by 2030. McKinsey & Company (2007). Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost?