The Retail Challenge

Energy Star is running a pilot with about 70 organizations through the end of this year for the Energy Star for Tenants program, previously known as Tenant Star.

Energy Star is running a pilot with about 70 organizations through the end of this year for the Energy Star for Tenants program, previously known as Tenant Star. The pilot will shape a new recognition by 2018 for energy-efficient tenant spaces based on build-out. Those verifying they have taken five key actions—estimate energy use, meter energy use, light efficiently, use efficient equipment and share data—will receive the designation.

Energy Star’s current certification program has struggled for relevance in the multi-tenant retail sector because of challenges to collecting whole-building performance data across varying retail formats, often tied to prevailing metering and lease structures, according to Will Teichman, senior director of strategic operations at Kimco Realty Corp. “It creates an apples-and-oranges situation, which does not lend itself well to establishing benchmarks,” he added.

Teichman, whose company owns about 510 open-air centers adding up to 84 million square feet of space and more than 4,000 tenants, noted that Energy Star does not have a score for shopping centers. It does have a score for single retail stores of greater than 5,000 square feet with at least one exterior public entrance, but that doesn’t work for most mall-based retailers or smaller shops. At the moment, approximately 80 percent of Kimco tenants occupy spaces smaller than 5,000 square feet.

Energy Star also requires “whole-building” data, which is difficult for many owners of net-leased retail, industrial and other buildings where landlords only have access to partial data, he said.

The International Council of Shopping Centers launched a Property Efficiency Scorecard in 2014 that offered shopping centers an individualized way to benchmark energy, water and waste operations for a subscription fee. However, the program was discontinued more than a year ago. An ICSC spokesperson described the program as “worthwhile” but declined to say why it had ended.

Teichman, who is part of an ICSC committee focused on benchmarking practices, said some member companies did not agree with a fee, as other benchmarking tools, including Energy Star, are free.

The mall conundrum

Although the scorecard program ended, ICSC has been working on other ways to allow members to compare performance and seek improvement. Last summer, a 31-page report on shopping center energy intensity was released to members based on data collected during a three-month period in 2015. The report looked at 1,135 properties and divided the data sets into malls and open-air shopping centers.

Even within the mall sector, more sub-categories were needed to account for the differences in metering infrastructure, Teichman said, noting that the landlord doesn’t always have access to energy-use data from tenants.

“It’s a challenge we face in retail, but it’s not necessarily an insurmountable challenge. We have to work harder to gather the performance data and benchmark that data in such a way as to effect positive changes within our portfolio,” he said.

However, the ICSC report “does give us a reference point for averages for how our peers perform,” he concluded.

Green leases, also known as energy-aligned leases, may help improve multi-tenant retail energy benchmarking. “One of the things we’ve included in our revised form lease is greater cooperation with Kimco and tenants, and data sharing,” Teichman said, noting that in the past property owners would have about 20 percent of data needed for benchmarking.

For a broader discussion of benchmarking standards, see Setting the Standard in the October 2017 issue of CPE.