Navigant Research Blog

The Real Estate Services Shopping Spree

— June 12, 2015

You would be forgiven for thinking that CBRE stands for Can’t Buy Rapidly Enough. The company (which actually stands for Coldwell Banker Richard Ellis as a result of an interesting history of spinoffs, mergers, and acquisitions) is the world’s largest commercial real estate service and has been on a recent acquisition binge. In March, CBRE announced a definitive agreement to acquire the Global Workplace Solutions business that Johnson Controls, Inc. announced it would divest last year. Two weeks later, CBRE announced the purchase of Environmental Systems, Inc. (ESI), an energy management and systems integration provider.

Global Workplace Solutions offers services that help companies operate facilities more efficiently, optimizing real estate performance and employee productivity, particularly in the industrial, life sciences, and technology sectors. These services include everything from site selection and design, planning, and construction management to standardizing maintenance procedures and performing inventory management.

ESI, on the other hand, designs, installs, manages, and supports integrated building automation systems and building energy management systems. In 2012, ESI was selected by IBM to manage the energy use of the 50 largest federal government buildings, linking the automation systems of the buildings together on a cloud-based platform to provide enterprise-level management.

The Complete Package

Both acquisitions highlight how providing a complete portfolio of services for corporate clients is becoming increasingly important for CBRE and the commercial real estate service industry as a whole. With growing demand for green-certified commercial office space, as well as increasing awareness of the benefits of energy efficiency in reducing operating expenses, commercial real estate service providers are moving to expand their capabilities with clients. Indeed, DTZ and CoreNet Global announced a partnership that incorporates CoreNet Global’s benchmarking service into DTZ’s commercial real estate services portfolio.

Real estate services companies have historically played a less central role in energy efficiency decision-making, energy management, and energy benchmarking than other infrastructure-focused players such as energy service companies (ESCOs) and HVAC contractors. But, that seems to be changing, as corporate clients are beginning to view energy information to be as important as the other information typically provided by real estate service companies. Though CBRE’s shopping spree may be over for now, we will likely see more acquisitions by real estate services companies to fill out their service portfolios.

 

Green House Gas Emissions and HVAC

— June 9, 2015

The scientific consensus around climate change is that greenhouse gases (GHGs) emitted by human activities are creating a very serious problem. As a result, most major global regions have adopted targets for reduction of GHG emissions, notably carbon dioxide (CO2). The largest source of CO2 emissions comes from the burning of fossil fuels for generating electricity, powering vehicles, and providing heat. Heating, ventilation, and air conditioning (HVAC) equipment plays a large role in CO2 emissions, as it accounts for roughly 40% of total building energy consumption.

Thus, increasing the efficiency of HVAC equipment is a clear way to address GHG emissions. But, it’s not the only way HVAC equipment can help. Indeed, in a recent report, the World Resources Institute points out that non-energy and non-CO2 emissions account for 22% of all U.S. GHG emissions and are expected to rise. The report goes on to recommend the reduction of hydroflourocarbons (HFCs), which are used as refrigerants in HVAC equipment. However, when it comes to HVAC, what HFCs should be replaced by is not entirely clear.

Engineering Requirements

Within an HVAC system, refrigerant needs to be evaporated, condensed, and be compressed in such a way that the system can provide cool air. As a result, the band of temperature and pressure in which refrigerant changes phase between liquid and gas is narrow. Within a building, even the best HVAC systems may leak at some point in their lifetime. So, refrigerant needs to be non-toxic and non-flammable to keep building occupants safe. These requirements were met by chlorofluorocarbons (CFCs) and hydrochlorofluorocarbons (HCFCs). However, the proliferation of these refrigerants introduced a new problem: ozone depletion. While HFCs have solved the problem of ozone depletion, they are a GHG that traps heat in the atmosphere, contributing to climate change. The next generation of refrigerant needs to solve all of these problems.

So far, finding one refrigerant that is functional, safe, and doesn’t have severe impacts on the environment has been difficult. Potential candidates that have a lower the global warming potential than HFCs include R-32, which is mildly flammable, and CO2, which doesn’t fully change phase. Both have been commercialized. R-32 has been available in Japan since 2012. CO2 is being used as a standalone refrigerant in Europe and has recently been deployed in the United States. While challenges still remain, the development of these refrigerants presents the promise of reduced GHG emissions.

 

More EVs Might Mean Changes to Parking Garages

— May 27, 2015

The adoption of electric vehicles (EVs) seems to be unstoppable. In Electric Vehicle Market Forecasts, Navigant Research estimates that plug-in EVs will make up 2.4% of total worldwide light duty vehicle sales by 2023. EVs will thus have a profound impact on the electrical grid, but how will they affect buildings?

Currently, the most visible impact has been the proliferation of electric vehicle charging stations. Driven largely by LEED requirements and state-level incentives, many commercial buildings have dedicated parking spaces for EVs. Indeed, in some markets, EVs have enough of a presence that commercial buildings are installing charging stations in response to demand from the market. But, increased adoption of EVs may necessitate new paradigms for the design of parking garages.

The Solution to Pollution Is Dilution

Parking garages need ventilation. In addition to the carbon dioxide that contributes to climate change, internal combustion engines also emit a lot of other pollutants that are terrible to breathe. Parking garages need to exhaust these pollutants and replace them with fresh air in order to be compatible with human life. Building codes dictate the amount of air that needs to be exhausted based on the worst-case scenario: if every car in the garage was running at the same time.

This approach made sense when sensors and controls were expensive and difficult to use. However, with the sophistication of modern systems, demand-controlled ventilation (DCV) is becoming an attractive alternative to reduce energy consumption. DCV uses sensors to monitor air conditions and match the delivery of ventilated air with the actual need of the space. DCV saves substantial energy because the airflow that a fan provides has a cubic relationship with the power needed. As a result, halving the airflow of a fan reduces the power consumption to one-eighth of the full airflow. Some systems can reduce peak kilowatt-hour demand by up to 95%.

Unlike internal combustion engine vehicles, EVs do not create emissions that need to be exhausted (that happens at the power plant). So, in a future with all EVs, garage ventilation requirements can be drastically reduced. But, in the meantime, the presence of EVs in parking garages translates to greater savings through DCV operation.

 

Greek Construction Booming … In the United States

— May 19, 2015

Today’s outlook for construction in Greece is bleak. A standoff between the country’s Syriza government and its European creditors could spark a default of government debt and potentially lead to an exit from the European Union, and the Greek economy is in shambles after 6 years of recession. Furthermore, the head of one of Greece’s largest construction companies was arrested on charges of tax evasion.

Greek construction activity has fallen more than 95% from its pre-crisis peak and, in all likelihood, has little chance of rebounding any time soon. Across the Atlantic, though, Congress is considering a bill that could have a profound effect on a different type of Greek construction—the Greek-letter fraternity and sorority houses across the country.

Currently, a donation to a college or university Greek organization for housing provides a tax deduction of 30% of the donation amount (and, perhaps, a feeling of giving back). However, the Collegiate Housing and Infrastructure Act would allow donations to Greek groups to be fully tax deductible. The Fraternal Government Relations Coalition, a group representing 100 fraternities and sororities, is urging Congress to pass the bill. The group says that $1 billion in construction and renovation projects could begin if the bill is passed. Some of the buildings date to the 1930s, and some have seen few if any upgrades in the past several decades. The impact of $1 billion toward renovations on aging housing could have huge ramifications on energy consumption.

From Frat House to Green House

Improvements to the building envelope, more efficient HVAC equipment, better lighting, and, importantly, smarter controls could not only reduce operating costs but also improve the comfort of building occupants. Navigant Research’s Energy Efficiency Retrofits for Commercial and Public Buildings provides insight into the major technical and market trends related to these types of projects. Indeed at some universities, fraternities and sororities are already leading on energy improvements. The Kappa Alpha Order chapter house at the University of Maryland installed ceramic film on their windows as part of a sustainability initiative. Also, the Beta Theta Pi fraternity of University of Florida installed solar panels on the roof of its campus fraternity house. Broader Greek construction may have an impact positive enough to counteract all of that other stuff fraternities do.

 

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