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Prized office tenant steps up green demands

Jun 17, 2024 | Public | 0 comments

Ottawa landlords are contemplating a list of new expectations from a prized office tenant following recently announced updates to the federal government’s green operations strategy. Along with added low-carbon and climate-related criteria for procurement and the development, retrofit and management of federally owned facilities, the government will be looking for leased space that has or will soon achieve net-zero greenhouse gas (GHG) emissions.

Beginning in 2025, federal departments and Crown corporations that are entering into or renewing leases are instructed to: prioritize net-zero emissions; assess climate-related operational risks and ability to meet contingency standards; and ensure adequate electric vehicle (EV) charging capacity in locations where “significant federal fleet operations” will be accommodated. For new and renewed leases, landlords will be expected to report energy and water usage, solid waste output and GHG emissions through ENERGY STAR Portfolio Manager for any space 500 square metres (5,382 square feet) or greater, and those results will be publicly posted for buildings in “major urban centres”.

By 2030, the government has set a target to secure net-zero office space in at least 75 per cent of its new or renewed leases. Looking to other types of suppliers, bidders on “high-value” government contracts will be required to provide GHG life cycle assessment reports with their offered products and services beginning in 2025. Contractors and project managers will also have to fulfill requirements for the construction and renovation/retrofit of federally owned facilities, which include life cycle analysis based on a shadow carbon price of $300 per tonne and climate change risk assessment.

“This update to Canada’s greening government strategy will enhance climate adaptation, improve the emissions performance of Crown corporations and set important interim targets,” maintains Jonathan Wilkinson, Minister of Energy and Natural Resources.

“We are making our government operations cleaner and leading by example to drive change,” concurs Anita Anand, president of the federal Treasury Board.

Despite the more rigorous criteria for leased office space, the updated green operations policies may open up opportunities for commercial landlords since the government is also moving to cull its owned facilities that do not meet low-carbon and climate-resilient standards. Property portfolio reviews are to occur at five-year intervals and there is a now a 2030 deadline for completing climate risk assessments of “critical assets” with required adaptation measures to be implemented by 2035.

Challenges and opportunities for commercial landlords

The updated green operations strategy confirms that “portfolio rationalization” is under consideration. There are currently 10 Ottawa office buildings on the government’s disposal list, most of which still accommodate federal workers who will presumably need to be transferred elsewhere. Meanwhile, public service workers are expected to return to the office for a minimum of three days per week — up from two — as of September 2024.

“It’s hard to know where the federal government will end up in terms of its space needs over this five-year period between 2025 and 2030,” says Dean Karakasis, executive director of the Building Owners and Managers Association (BOMA) of Ottawa. “With the 10 buildings that it wants to sell, we don’t know yet how that will play out in the marketplace. The government will readjust its requirements as it sells off these and possibly other assets.”

That might also opportunely dovetail with a revamp or switch-out of some unpopular workplaces. Speaking during a webinar earlier this spring, Mark Sinnett, executive vice president with the real estate advisory firm, Avison Young, theorized that the sluggish pace of workers returning to the office in Ottawa and Toronto is partly attributable to public sector landlords.

“The provincial and federal governments are not making an effort to upgrade their offices to make it inviting to come back,” Sinnett submitted. “Going back to an office with three-quarter cubicles in a tired-out provincial or federal government office building is not conducive to the modern work environment. It’s a bit of a failure on their part to adjust and adapt to new realities.”

Given numerous previous policy statements and initiatives related to emissions reduction and climate change adaptation, the federal government’s updated office leasing criteria are not considered surprising. Concurrently, many commercial landlords are pursuing their own GHG reduction programs with targets to achieve net-zero emissions by 2050 or earlier.

To help facilitate that process, BOMA Ottawa is working with Hydro Ottawa to inform members about a range of provincial and federal incentive programs to subsidize energy efficiency and emissions reduction. That includes funds recently allocated to Hydro Ottawa through the federal deep retrofit accelerator initiative, which is earmarked to support comprehensive retrofits that deliver at least a 50 per cent cut in energy consumption and a 70 per cent drop in emissions output in existing buildings. Karakasis reports “overwhelming registration” for a planned BOMA Ottawa seminar on the topic.

“The more we can get every single building to be a candidate for government space, the better,” he says. “We want to put the pieces of the puzzle together and end up with a series of low-carbon, highly efficient, climate-resistant buildings that the government can have access to when it goes to market to look for space for its people.”

Industry and government guidance identified as resources for compliance

Carbon offsets will be allowed, at least initially, in calculating net-zero status. In scenarios where government lessors are unable to secure net-zero office space in the market, the updated policy states that commercial landlords will be expected to “implement an industry-recognized path to net-zero emissions within 15 years” as a contractual condition of the lease.

The updated policy also refers to Public Services and Procurement Canada’s (PSPC) guidance plan for a net-zero, climate-resilient leased portfolio, which was to have been developed by 2023 and include “a program to work with landlords”. However, if that plan has been completed, it has not yet been communicated to BOMA Ottawa.

“We stand ready to talk,” Karakasis affirms. “PSPC knows BOMA Ottawa well and that, at any time, if they want to do a formal or informal chat amongst landlords to get input, we’re prepared to facilitate that.”

Although the largest concentration of affected landlords are in the national capital region, the new leasing criteria will apply anywhere the federal government rents space. The BOMA BEST sustainability assessment and benchmarking program could prove helpful for owners/managers interested in attracting or retaining the federal government as a tenant, and perhaps even more so for federal government and Crown corporation facilities managers, since it aligns with many of the monitoring and reporting functions they’ll be expected to fulfill.

Notably, federal and Crown corporation entities will have to: track and disclose potable water consumption in major facilities; track and disclose waste diversion; minimize the use and disposal of environmentally harmful and hazardous chemicals and materials; and track and disclose the total amount of refrigerants in large HVAC and refrigeration systems, as well as GHG emissions from “significant” releases of refrigerant. Both federally owned and leased office space will have to show that climate-related risks that could affect operations have been assessed and addressed.

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