Availability of Commercial PACE Financing Will Support Economic Development and Carbon Reduction
With more than 2.9 million square feet of office space under development and nearly $700 million in recorded office building sales during the first half of 2019, Fairfax County’s hot office market now has an opportunity to reduce some heat from an environmental perspective. The County announced today the launch of its Commercial Property Assessed Clean Energy (C-PACE) program, which provides for the private financing of energy-saving and sustainability improvements through special tax assessments.
Fairfax County follows the City of Fredericksburg, Arlington and Loudon County in activating their programs.
“Commercial PACE programs are an effective way for state and local governments to make private capital accessible to property owners in support of building improvements that ultimately benefit tenants, the community, and environment,” explained C.J. De Santis, head of Government Relations for Counterpointe Sustainable Real Estate. “The program allows us to facilitate the adoption of sustainable real estate practices, and that’s particularly important in Fairfax County where you have a great deal of office space in transition.”
C-PACE financing can be used by commercial property owners to fund 100% of energy saving investments. The program works for both existing buildings and new construction where the funding has become a valuable tool for developers of green buildings.
In a statement released by the County, Jeff McKay, Chairman of the Fairfax County Board of Supervisors said, “the Fairfax County C-PACE program will support responsible, sustainable development of commercial property and will help ensure the long-term resiliency of our local and regional economy.”
The office opportunity:
- A recent report by the Rocky Mountain Institute, Unlocking Hidden Value in Class B/C Office Buildings, suggested that existing offices can typically save 15-35 percent of their energy costs through energy efficiency investments, which translates to anywhere from a 2.4 to 5.6 percent increase in net operating income.
- As reported in BisNow earlier this month, London-based Green Street Advisors studied European REITs to find evidence of the economic impact of green buildings. The firm concluded that ‘green buildings have better occupancy than brown ones,’ a fact supported by more-dated research presented by the U.S. Environmental Protection Agency’s ENERGY STAR program.
- C-PACE financing allows office building owners pass through the expense of energy saving improvements to tenants with triple net leases and/or to use green leasing structures to share in the economics of increased efficiency.
De Santis offers the example of a project CounterpointeSRE recently funded in Fort Worth, Texas.
A 70,000 square foot multi-tenant office building originally constructed in 1983 just used $448k in C-PACE financing to support the installation of an energy-efficient HVAC (heating, ventilation and air conditioning) VRF upgrade, interior LED lighting, and exterior LED lighting. The improvements will produce annual energy savings of 284,007 kWh, which equates to projected energy expense savings of $369,319 over the estimated useful life of the improvements (20 years). The property will also realize $16,903 in annual operating savings.
“This project is a good example of the program’s ability to make common sense upgrades that save energy and build value,” stated C.J.. “We’re looking forward to putting the program and our capital to work in Tysons, McLean, and throughout Fairfax County,” he continued.