Office Space of the Future: Energy Efficiency and Beyond in DetroitPublished: Apr 26, 2017 Finance & Real Estate | Blog Post
Between 2005 and 2015, Detroit saw one in three properties foreclosed due to mortgage defaults or unpaid taxes. Although the city’s efforts to address residential blight and vacancies have received national attention, commercial property decay is an equally complex and difficult problem that its residents and businesses face. As the Mayor’s office, lenders, and other stakeholders continue the uphill battle to restore commercial infrastructure, one building project stands as an optimistic sign of what the future could hold.
One of Detroit’s revitalized neighborhoods situated just outside of the downtown core is where Walker-Miller Energy Services (WMES) is quietly retrofitting an abandoned building—once home to the Detroit Police Department Precinct 9—into the company’s new high-performance, zero-net energy (ZNE) headquarters. ZNE buildings are highly energy efficient, with well-insulated building shells, high-performance lighting and equipment installed, and optimized operations put into practice. The second ZNE component is that the total amount of energy consumed by the building over a year is equal to the amount of on-site renewable energy it generates, often through solar PV panels.
In order to design and install a ZNE building, WMES needed to be creative with its financing model. To achieve its lofty energy-saving goals, the company acquired retrofit financing from Ascentium Capital, as well as a Property Assessed Clean Energy (PACE) loan. Michigan passed PACE-enabling legislation in 2010 and a statewide PACE program called Lean & Green Michigan is available for Detroit’s commercial, industrial, multifamily, and nonprofit properties. To finance the remainder of the building construction and initial operation, the WMES team combined capital investments and assets as well as a community development financial institution (CDFI). Traditional banks and lenders are still hesitant to fund energy efficiency retrofits due in part to the high upfront costs. To overcome this obstacle, many building owners turn to loans such as PACE, or more forward-looking institutions like Ascentium.
From Horse Stalls to High-Performance Office Space
When construction begins this summer at the once-abandoned property, it will span all areas of sustainable building and energy management. Energy efficiency and renewable generation upgrades will include an all-electric Variable Refrigerant Flow (VFR) heating and cooling system, carport-installed solar panels, back-up batteries for energy storage, low water use, fully controlled LED lighting, and many other energy waste-reduction and low-impact strategies.
Complementary to its quest to reduce energy costs and environmental impacts, WMES has taken the abandoned building (pictured right, courtesy of Curbed Detroit), kept the basic structural integrity and design, and revitalized the space as an office. When the building was built in the 1920’s, the large horse door would have led animals to 18 horse stalls. That horse door will be upgraded to facilitate drive-in access to the 6,700-square-foot first floor with a large conference room space, two offices, two bathrooms with showers, a locker room, a storage area, and seating for the 35- person team. The upstairs was once a 3,100-sq.-ft. hayloft but will now become four executive offices, eight cubicles, a bathroom, and a kitchen.
Rendering Image: WMES
Scaling Up Energy Efficiency Financing Is Needed
According to the Building Performance Database, the U.S. Department of Energy’s database on building energy management, the WMES building will use about a quarter of the energy of that used by buildings of similar size. In formal terms, this means similar buildings’ Energy Use Intensity (EUI or the amount of energy consumed per square foot) is 94 kBTU per sq. ft. while WMES projects their EUI to be around 26 kBTU per sq. ft. The building’s annual energy consumption will be covered by solar PV panels. While costly upfront, energy efficiency upgrades have long-term economic and health benefits as efficient buildings are less expensive to run and operate and tenants are more comfortable. This highlights the need for greater uptake in existing financing mechanisms like PACE or on-bill, and better communication between commercial banks and owners on green financing, which we also learned from IMT’s national survey of commercial lenders.
Annually, commercial and industrial buildings in the United States spend about $400 billion on energy. Coupled with the fact that the building sector uses roughly 40 percent of total energy across the country, it’s clear why more cities and building owners need to actively manage their energy performance and strive for greater efficiency, and even ZNE.
While Detroit’s resurgence poses a unique opportunity for building owners and lenders looking for rundown or abandoned properties to retrofit, cities across the United States can look to the WMES building as an energy efficiency standard and goal. NZE may not be a realistic first step for all building owners, but it certainly provides an admirable end goal for many owners who are just beginning their energy efficiency upgrades. For a comprehensive list of low- moderate- and high-cost energy efficiency implementation measures, check out IMT’s Sustainable Operations for the Modern Office and Fit-Out and Leasing Guidelines.