Federal property landlords are adapting to Executive Order 14057, signed by President Biden on December 8, 2021. This order mandates that new construction and modernization projects over 25,000 square feet achieve net-zero emissions by 2030. This Executive Order will have a dramatic impact on Federal Real Estate Leaseholders.

There will also be an immediate impact as detailed in Directive M-22-06 from the Office of Management and Budget (OMB).

….. Each agency must ensure that all new (including new-replacing, succeeding, and superseding) leases entered into after September 30, 2023, for at least 25,000 rentable square feet in a building where the Federal Government leases at least 75 percent of the total building square footage are green leases. Such green leases must require the lessor to report to the agency annual data on facility greenhouse gas emissions, energy consumption, water consumption, and waste generation. New leases greater than 25,000 rentable square feet entered into after September 30, 2030, must be in net-zero emissions buildings.

So, the immediate effect is ensuring that leases over 25,000 rentable square feet are green and then after September 30, 2030 the leases are in net zero emissions buildings.

And what is net-zero versus net-zero emissions? Net-zero buildings generate as much energy as they consume annually through renewable sources. In contrast, net-zero emissions buildings (NZEBs) must also eliminate on-site greenhouse gas emissions from energy use, requiring them to be all-electric.

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To comply with EO 14057, building owners must undertake several key actions. They will need to conduct energy audits of their property to identify current energy use and areas for improvement. Implementing energy efficiency measures such as replacing lighting with LEDs, optimizing lighting and HVAC controls, and upgrading the building envelope is essential. Transitioning to full electrification when replacing equipment, installing on-site or off-site renewable energy sources like solar panels or wind turbines, and purchasing renewable energy credits (RECs) to cover any shortfall in on-site energy generation are also crucial steps. Continuous monitoring and maintenance are necessary to ensure sustained efficiency and compliance with net-zero emission goals.

Constructing NZEBs offers numerous advantages. These buildings eliminate operational greenhouse gas emissions and reduce reliance on non-renewable energy sources, contributing to environmental sustainability. They are designed to minimize energy consumption through efficient technologies, resulting in significant cost savings. Improved indoor air quality, achieved through a tighter building envelope, and controlled ventilation, leads to a healthier indoor environment. NZEBs enhance public perception and regulatory compliance, offering increased resilience and favorable financing options due to higher resale values and lower investment risks. There is an inherently lower risk when a building is designed for environmental resilience (the insurance companies agree!).

The directive for leases over 25,000 square feet to transition to NZEBs by 2030 is expected to significantly impact developers. The need for advanced materials and technologies will likely increase costs, but it also opens new market opportunities as demand for sustainable properties grows. Developers will need to adjust their marketing strategies to emphasize the economic and environmental benefits of net-zero buildings. While the initial costs of meeting these requirements might seem high, the experience with LEED standards shows that costs can decrease over time, with the long-term benefits outweighing the initial investments.

In summary, Executive Order 14057 is set to profoundly impact federal real estate, promoting eco-friendly practices and sustainability. Although the transition presents challenges, particularly in terms of upfront costs, the long-term benefits of energy savings, improved environmental quality, and regulatory compliance are substantial.