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Driving Energy Efficiencies to Increase Commercial Real Estate Values

The National City Tower is a 38-story, hi-rise office building located in downtown Louisville containing approximately 723,300 rentable square feet (RSF). The building includes commercial office and retail space, is occupied by multiple tenants, and is predominantly used for professional and retail services. It was constructed in 1972.

The property owner, an affiliate of KBS Realty Advisors (KBS), desired a strategy of prioritized options for improvements in energy efficiency. The strategy needed to address feasibility, installed costs, year’s payback, and rate of return. The desired outcome of the strategy would be increased efficiencies and competitiveness of the building’s energy costs when compared to similar buildings, thus reducing energy consumption and increasing the building’s overall value.

The building’s current systems included a perimeter induction and terminal reheat system for heating, ventilating, and air conditioning (HVAC), utilizing chilled water for cooling, and electric resistance and hot water heating. Chilled water, generated by centrifugal water chillers, is circulated to air handling units that provide conditioned air to the induction units and suspended ductwork and air grilles. Heat is rejected from the chillers through cooling towers located on the roof. Heating for the induction units and terminal reheat system is provided by natural gas-fired boilers. The building HVAC systems utilize pneumatic controls. Domestic hot water is provided by electric tank-type water heaters located on three levels throughout the building. Electrical service is supplied by the local utility and stepped down to 480Y/277 and 208Y/120- volts for distribution to all levels. Fluorescent lighting is provided on all levels by type T-12 and T-8 lamps.

The building engineering staff at National City Tower had previously endeavored to improve the energy efficiency of the building. These strategies included reflective coatings on the exterior glass, replacing water chillers, converting lighting to high-efficiency fluorescent lamps, upgrading the cooling towers, and converting elevator controls to digital type and variable speed drives. In 2011, KBS requested Terracon’s assistance in developing new strategies for improvements in energy efficiency. Terracon’s Facilities Division initiated the study by conducting an American Society of Heating, Refrigeration, and Air Conditioning (ASHRAE) Level I Energy Audit that assessed the current energy efficiency of the building envelope as well as the mechanical, electrical, and lighting systems.

A primary goal of the Level I audit is to identify and provide a savings and cost analysis of low-cost and no cost energy conserving measures. The audit also provides a listing of potential capital improvements that merit further consideration and provides opinions on potential installed costs and energy savings. The ASHRAE Level I energy audit analyzes the utility usage and costs, and then determines an annual Energy Utilization Index (EUI) and Energy Cost Index (ECI) for the building. The EUI depicts the total annual energy consumption per square foot of building, and is expressed in British Thermal Units (BTUs).

In conducting the ASHRAE Level I Energy Audit, Terracon visited the building to obtain visual information and diagnostic information on the building energy consuming systems; obtained energy billings (one to three years is typical) for evaluation and estimating potential energy savings of opportunities identified; developed recommendations for energy cost reduction measures (ECRMs); and developed preliminary cost estimates, approximate payback, and rates of return for the ECRMs. Energy records analyzed indicated that the annual BTU usage is within the typical range of buildings of similar age, size, and physical location.

Terracon developed 10 opportunities for ECRMs, estimated the installed costs of the ECRMs, and estimated their payback and rate of return. The ECRMs included installing premium efficiency motors on pumps and air handling units, re-commissioning the HVAC system, installing heat recovery equipment, installing highefficiency burners at the boilers, installing variable speed drives at the chillers, completing a lighting retrofit, and retrofitting the perimeter induction units. The estimated savings were considered incremental and exclusive as individual ECRMs are completed.

Additionally, Terracon observed other building systems that could represent additional opportunities for energy reduction including digital controls and variable speed drives on the remaining elevators,converting the HVAC systems to variable air volume systems, installing a high-performance coating on the exterior glass, and installing a high-efficiency cooling tower. Due to the installation costs and complexity of estimating energy savings with these options, further analysis was recommended including conducting an ASHRAE Level II or III energy audit.

In summary, an ASHRAE Level I Energy Audit provides an owner with a prioritized list of low-cost and no-cost energy cost reduction measures that may be acted upon during general maintenance activities and provide an immediate impact on energy costs. Other measures identified during the audit may be implemented within existing capital improvement budgets and represent more significant reductions in energy costs. An ASHRAE Level I Energy Audit can further be utilized to assist with long-term planning for upgrades to energy consuming systems.

In addition to the ASHRAE Level I Energy Audit, commercial real estate investors who engage firms such as Terracon to conduct physical needs “due diligence” prior to acquiring commercial buildings now have a new tool that they can utilize called the Building Energy Performance Assessment (BEPA). ASTM recently issued a standard for conducting a BEPA (ASTM 2797-11), based upon the input of a national committee of energy, engineering and commercial real estate professionals. The BEPA is a building energy performace indicator developed for additional diligence in support of commercial real estate transactions, and is increasingly being requested as an add-on to a property condition assessment (PCA). In a similar fashion to the ASHRAE Level I Energy Audit, the BEPA provides the EUI and ECI metrics for analysis.