This is the second of a three-part blog series in which I explain how and why commercial lenders and brokers should factor building efficiency into mortgage loans and property condition assessments. In IMT’s Financing Energy Efficiency Through Mortgage Loans, we examined the need for better integration of energy efficiency at the mortgage underwriting level for commercial buildings. This blog post examines the important role brokers play in real estate transactions and how IMT’s broker education course is helping overcome the market failure that results from a lack of consideration for energy efficiency during underwriting.
Financing Energy Efficiency Through Mortgage Loans, a recent report from IMT and the Lawrence Berkeley National Laboratory (LBNL), culminates in a set of recommendations for both lenders and building owners/buyers to better factor building efficiency into mortgage loans and property condition assessments. Research shows that buildings whose mortgages include underwriting for energy efficiency not only see increased net operating income, reduced energy consumption, and higher savings, but also lower risk of loan default. Central to IMT’s recommendations is the need for further stakeholder education and proactive conversations about energy efficiency and green, high-performance buildings.
In addition to owners and lenders, brokers play a key role in most real estate transactions, holding a unique position as the liaison between clients, building owners, and other brokers during real estate deals both small and large. Therefore, brokers need to be equally educated on the most current green building trends and best practices, with an understanding of why it matters to their day-to-day business.
Today, the business case for going green is hard to ignore. A recent study by the Department of Energy found that on average high-performance buildings’ net operating income (NOI) per square foot is nearly 30 percent higher than that of traditional buildings. And, high-performance buildings enjoy nearly 18 percent lower operating expenses.
To drive greater efficiency awareness, education, and action, IMT offers The Business Case for High-Performance Buildings, a continuing education course for brokers across the country that draws from real-world examples and shows how commercial real estate leaders successfully incorporate energy efficiency and broader sustainability elements into their operational and investment decisions. This course, supported by the U.S. Department of Energy (DOE) and provided in collaboration with realtors associations across the country, has educated over 400 brokers to date. We’re also proud to announce that a free, online version of it is now available on GreenLeaseLibrary.com and the Better Buildings Solution Center.
From new technology and regulations to demand from investors and tenants for more efficient spaces and buildings that achieve designations such as LEED or ENERGY STAR, IMT’s course explains how once-niche green concepts are evolving into high-performance standards across office, retail, and industrial segments, and what commercial practitioners can do to deploy best practices. Other topics include how to help clients handle energy and sustainability in the lease process, how environmental policies impact commercial transactions, and what commonly used resources are available to industry professionals.
What IMT is Hearing from Brokers
Reactions to the broker course thus far have ranged from surprise over green buildings having such a defined business case to uncertainty about how efficiency elements could be incorporated into transactions. IMT and DOE are mindful of both these reactions and tailor the course to alleviate these concerns and arm brokers with the knowledge to speak confidently to their clients about green buildings.
In one recent course, taught in Omaha, Nebraska, attendees were open about their uncertainty of green buildings having a place in their business transaction.
"There are not a lot of energy-efficient buildings in Nebraska, and our hope in engaging IMT for a broker education session was to give our local agents a better understanding of ‘green’ buildings and how they benefit owners and tenants. IMT's overview made our members more knowledgeable on the financing and gave them valuable resources of energy-efficient buildings," said Christie Bevington, Chief Operating Office of the Nebraska Realtors Association.
The collaboration demonstrated by this course mirrors the kinds of partnerships that will be necessary to bring energy efficiency into every commercial real estate financial transaction and make high-performance buildings the norm across the country.
How Brokers Can Take Action
There are several opportunities for interested brokers in every state to get educated and be a leader in the market. Below are some examples of how to get involved today.
Take the online continuing education course: As mentioned earlier, available now on Green Lease Library and the Better Buildings Solution Center is a recorded version of the course. Free to access, this resource is a great tool to jumpstart your continuing education on high-performance buildings.
Become an approved continuing education instructor in your state: Check your state’s continuing education requirements or reach out to IMT to learn if the course has already been approved in your state.
When looking for appraisers for high-performance buildings, seek out “green” appraisers: The Appraisal Institute maintains a list of green designated brokers accessible here.
- Learn more about Urban Land Institute’s 10-Step Tenant Engagement program: A step-by-step guide to high-performance buildings is offered by ULI, starting with the broker and ending with strategic communication and corporate sustainability reporting.
Stay Tuned for Part Three
In the third and final post in this blog series, we will discuss the unique opportunity lenders have to increase mortgage loan portfolios, reduce property default risk, and provide a needed service to building owners by incorporating energy efficiency into building assessments, (I.E. property condition assessments or physical needs assessments). We will also offer a look at how innovative financing programs like the Small Business Association’s energy efficiency loan program is opening up new avenues for efficiency investment for small businesses across the U.S.
To download Financing Energy Efficiency Through Mortgage Loans, click here. To read part one of this three-part blog series, click here.