Press

April 28, 2019 | Miriam Hall, Bisnow New York

The New York City commercial real estate industry is picking over the details of upcoming city laws that will fine building owners if they exceed new emissions caps.

While the industry grapples with the implications of those requirements, Mayor Bill de Blasio has signaled he is not done with legislating building materials over environmental impact, sparking a wave of questions for which the industry wants answers.

This month, the City Council passed the Climate Mobilization Act, which requires large and medium-sized buildings to cut emissions 40% by 2030 and 80% by 2050. The worst-performing buildings have five years to bring their emissions down.

The new laws set emission caps, and would impose hefty fines if landlords don’t comply. Last week, Mayor Bill de Blasio — who wants the city to become carbon neutral by 2050 — took on the glass and steel buildings that have defined the city’s skyline, implying those types of buildings would no longer be allowed.

“We are going to introduce legislation to ban the glass and steel skyscrapers that have contributed so much to global warming,” de Blasio said last week. “They have no place in our city or on our Earth anymore.”

Though the city and the mayor have since conceded that glass and steel would not be entirely outlawed, de Blasio has continued to refer to it as a ban. His office has not released a draft or further explanation of his plan, but the mayor hopes new energy codes will be in place by next year, the New York Times reports.

“It’s a ban, and I’ll tell you why,” he told WNYC in his weekly segment Friday, but then acknowledged there is nothing stopping builders using the materials. “It is true that if a building owner wants to invest a lot more to make sure that that glass is not inefficient — it’s a major investment to do that — they can still have, certainly, a notable amount of glass.”

Members of the real estate industry — many of whom are already bristling against the laws demanding emission caps on building — said they were perplexed by the comments.

“It was absolutely ridiculous, and really the only thing that would work under his statement would be mud huts,” Marx Realty CEO Craig Deitelzweig told Bisnow. “I don’t know how you can attract world-class tenants to New York City if you can’t have glass buildings. It’s very strange. It’s backwards thinking.”

Youngwoo Executive Vice President Bryan Woo, whose firm is co-developing Pier 57, said the lack of clarity is disconcerting.

“If you are not exact and precise about the way that this is going to work … there is a huge chance for a misstep,” he said of de Blasio’s comments. “There’s nothing wrong with doing something for the environment, but we would love to know the details.”

The Real Estate Board of New York, which has criticized the emissions cap laws and believes they will cost the real estate industry at least $4B in building upgrades, is similarly in the dark about further legislation.

“We haven’t seen any law drafted or any policy drafted,” Carl Hum, REBNY’s senior vice president and general counsel, told the Times this week. “We are curious, if the mayor is banning glass and steel, what the alternative will be?”

Mention of the words “glass” and “ban” from the mayor resulted in panicked calls from clients at engineering consulting firm Thornton Tomasetti, Sustainability Project Director Casey Cullen-Woods said. Her view is that the mayor is posturing — though she is pleased to see this level of attention given to climate policy discussion.

“While it is very theatrical to say, ‘We will not allow glass and steel buildings,’ that’s not what the law actually said,” she told Bisnow, adding that building with glass will still be allowed. “It just has to be a high performance [material].”

Over the past 15 years, Cullen-Woods said, there has been a wave of new laws and codes to drive efficiency that have simply not worked fast enough.

“Sometimes it takes a controversy for people to step away and look at solutions. Arguably changing infrastructure is one of the hardest things for us to do,” View Dynamic Glass CEO Rao Mulpuri said.

His company makes smart window technology that allows the owner of a building to adjust how much light and glare a window lets in, which has been used in places like Durst Organization’s One Bryant Park and LaGuardia Airport.

“Glass is not our enemy,” he said. “You can build as much glass as you want as long as you build it smartly.”

Putting aside the is-it-a-ban-or-not conversation, there is no denying the industry is now facing a fundamental shift in the way it must build and manage properties.

“Developers will have to meet our new standards,” Mark Chambers, the director of the Mayor’s Office of Sustainability, told the Times. “Business as usual won’t cut it.”

Under the laws, varying emission caps apply to building 25K SF or larger. Rent-regulated and affordable housing, as well as houses of worship, are not subject to the new limits. The city is setting up an Office of Building Energy Performance to monitor building owners, who will be fined $268 for every ton of emissions beyond a building’s limit, the AP reports.

The laws have rattled the commercial real estate industry, with many big landlords claiming it is a punitive plan that will do more harm than good.

“In this legislation it is all stick and no carrot,” Rudin Management Chief Operating Officer John Gilbert said.

Since introducing a machine-learning system that integrates all building operation called Nantum, Rudin has already cut carbon by 44%, reduced steam consumption by 48% and lowered electricity use by 41%, Gilbert said.

His concern, shared with many others, is that all buildings are treated the same under the law, which will penalize companies that have densely populated buildings.

“You want to incent owners to cut their carbon, rather than create unreasonable caps that no one’s going to be able to meet,” he said, adding that he has no clue about what the mayor meant about banning glass and steel.

The Durst Organization, one of the city’s most prominent real estate partners, believes the legislation will wind up punishing densely populated, efficient buildings, and the fact that so many buildings have been exempt undercuts the goal.

“It ends up promoting inefficiency over efficiency,” Durst spokesperson Jordan Barowitz said. ”It’s misguided in that it exempts too many buildings in the city from the more stringent requirements in the bill.”

Marx’s Deitelzweig said the demands of retrofitting older buildings to meet the emissions caps means most people will likely opt to tear down buildings rather than improve them.

“I’m not sure that is good for the environment and wouldn’t meet their goals,” he said. “Many things that are good [for the environment], they are not really wonderful for the tenant experience. You have to find a balance.”