There is not an easy answer to how Local Law 97 will affect the real estate industry in the post-pandemic era (if we are even there yet), but it is certain that it will be a topic that experts and advisors address for some time. Two recent articles and an associated research report by the Citizens Budget Commission suggest that LL97 and its well-intended targeting of carbon emissions might need an adjusted timeline in light of the pandemic. Meanwhile, the PACE program, creates opportunities - for some.
John Giardino of Michelman & Robinson in a Crains' Business piece on NY's middle-market real estate sector suggested that as companies are on the move in the post-pandemic era, their energy profile is going to matter. "Low-energy-use businesses will have an easier time finding space to lease, particularly if they note that another business in a given building is a high-energy user and the landlord needs a low-energy user to balance that out," Giardino stated.
Meanwhile, Michael Clain, a partner with the law firm of Windels Marx Lane & Mittendorf, in the same Crain's piece suggested LL97 will drive rents up for many who live in or work in NYC, and those "rent increases will likely reinforce the trend towards remote-work arrangements and office space reductions."
To mitigate the cost of required improvements required the C-PACE program stands as a source of financing, but groups such as Citizens Budget Commission (CBC) point to decreased office occupancy as a roadblock.
"Fewer people in buildings, along with slow leasing during the pandemic, may leave some landlords with less capital to make the necessary retrofits for Local Law 97. CBC argues that the city should reexamine how the pandemic may impact implementation for the 2024 deadline," writes Rebecca Baird Remba of the Commercial Observer.
One resource for property owners will be an as-of-yet announced carbon trading program, but in the interim, PACE finance for improvements that decrease building emissions remains the shiniest tool in the toolbox. Beyond compliance with LL97, PACE additionally stands up as a valuable piece of the capital stack for property developers and owners who need to address deferred maintenance of energy-intense infrastructure such as HVAC.
For more information on the C-PACE program, contact us.
Sources:
"Middle-market companies press the reset button on growth," Crain's New York Business. August 31, 2021. Michael J. Clain, John Giardino, and Ling Kong.
"NYC Emissions Law Discourages Dense Office Buildings, Lacks Clarity: Report." Commercial Observer. August 27, 2021. Rebecca Baird-Remba.
