Breaking Down the Walls to Energy Efficiency: Vornado Realty Trust and New York City Tenants

Vornado convenes tenants and building management teams in regular sustainability meetings

Landlord Challenge:

Vornado Realty Trust wanted to engage tenants in achieving and maintaining top energy and environmental performance across the portfolio.

Tenant Challenge:

Tenants lacked insight into their own energy consumption and did not have a meaningful way to track usage.

Lease Structure:

Modified Gross (Tenants are billed by landlord for actual energy use)

Vornado’s Corporate Sustainability group, led by Sukanya (“Suki”) Paciorek, pays attention to the data, and realized several years ago that energy use in common areas was going down while the energy use in tenant spaces – accounting for up to 70% of energy consumption – was staying flat. So Vornado brought the power of data to its tenants. Vornado’s Energy Information Portal (EIP) collects energy data from 3,000 sub-meters in New York City buildings and translates this real-time energy consumption data into actionable information. Any of the 80,000+ occupants in Vornado’s 17-million-square-foot Manhattan portfolio can access the EIP to view their own company’s energy use in real time. As a result, tenants can connect their actions to actual energy savings, gaining a way to understand the impact of their behavior and motivation to improve.

"Engaging with tenants is a critical part of any successful sustainability program."

– Suki Paciorek, Senior Vice President, Corporate Sustainability, Vornado Realty Trust

Vornado Realty Trust, one of the largest commercial real estate investment trusts in the United States, is a leader in sustainability and energy efficiency. The company’s many successful environmental and energy programs garnered it the ENERGY STAR Partner of the Year award in 2013 and 2014. One of the keys to Vornado’s success is the company’s understanding of the value and power of energy data.

By working with tenants to explain the value of the data they can view through the EIP, Vornado is helping its tenants understand their energy consumption and make improvements to reduce usage. In 2009, L (formerly Limited) Brands, a tenant occupying more than 350,000 square feet and 15 floors of Vornado’s building at 1740 Broadway in New York City, acted on information provided by the EIP to reduce daily electric consumption by 15%, resulting in a savings of almost $150,000. According to L Brands, the opportunity EIP provides to reduce energy use is part of smart facilities management and sustainable improvement, allowing the company to use its resources to better serve customers.* Vornado earned ENERGY STAR certification for 1740 Broadway in 2008 with a score of 80; in 2011, 2 years after Vornado launched the EIP, the building’s score increased to 86 (and increased again to 88 in 2012).

Paciorek, along with Vornado’s Energy and Sustainability Director for the New York region, Daniel Egan, and the rest of her team see their role as more than just providing data; rather, they act as “ambassadors” to the resources, programs, and recognition that data can help unlock. For example, they connect tenants to utility incentives for efficient practices, convene tenants and Vornado representatives in regular sustainability meetings, and provide sustainability information as well as data. This approach breaks down the figurative walls between landlord and tenant to benefit both and the environment.

LESSONS LEARNED

  • Closely track energy data, particularly sub-metered data, to identify trends and make strategic time and resource investments.
  • Landlords: Motivate tenants to take action by making energy and cost data available and understandable.
  • Landlords: Seeing your role as an "ambassador" to tenants for energy and environmental opportunities may increase tenant willingness to engage in green initiatives.

*Adapted from Unprecedented Visibility, The Steven L. Newman Real Estate Institute Research Publication, Fall 2010.