A drone photo of downtown Denver in 2020. (Courtesy Guerilla Capturing)
Two real estate trade groups that recently teamed up are optimistic about the potential for meaningful changes to the city of Denver’s controversial new rules regarding building energy use.
Katie Kruger, head of the Denver Metropolitan Commercial Association of Realtors, told BusinessDen Monday that her group and the Building Owners and Managers Association believe city leaders are genuinely listening to feedback on the rules known as “Energize Denver,” which the industry believes are too onerous.
“I think these laws are going to change, and I think we’re going to do it together, which we haven’t seen in Denver in a long time,” Kruger said.
The regulations, which will force a transition away from natural gas in favor of electrification, were passed in 2021 as part of the city’s effort to eliminate emissions by 2040. Commercial and multifamily buildings account for 49 percent of Denver’s emissions, according to the city, which says Energize Denver could reduce those emissions 80 percent by 2040.
Real estate trade groups have adopted something resembling a good-cop, bad-cop approach in their quest for changes.
In April, the Colorado Apartment Association, the Apartment Association of Metro Denver, the Colorado Hotel and Lodging Association and commercial real estate group NAIOP filed a lawsuit over the matter, saying the rules are at odds with federal regulations.
Among the local firms where executives submitted declarations in support of the suit were Zocalo Community Development, Cornerstone Apartment Services, Woodspear Properties, Griffis/Blessing, Sage Hospitality and Stonebridge Cos.
Katie Kruger
The lawsuit also targets a similar set of state regulations, known as Regulation 28.
Kruger’s group, known as DMCAR, and BOMA, which is led by Stephen Shepard, have a lot in common with the plaintiffs in the litigation — she called them “our brethren.” But rather than joining the lawsuit, the two groups formed a coalition in early September focused on providing feedback and negotiating changes to Energize Denver.
“We felt there was room to try this another way,” Kruger said.
A key problem, from the standpoint of all the trade groups, is that complying with the rules would be unreasonably expensive, and that they lack nuance. Andrew Hamrick, general counsel and senior vice president for both apartment associations, told The Denver Post in April that greenhouse gas emissions from buildings are not the largest source of air pollution, and there are better ways to achieve reductions.
“They’re attacking a small emission problem with a very expensive fix,” Hamrick said in April. “That’s what the friction is all about.”
One datapoint: Pete Dikeou, whose family real estate firm bought the Hudson’s Bay Centre at 1600 Stout St. last month, told BusinessDen at the time he expected to spend $3 to $5 million on upgrades to comply with Energize Denver. That’s compared to just under $9 million to buy the 20-story tower itself.
Earlier this month, Denver’s Office of Climate Action, Sustainability, and Resiliency proposed a number of changes to Energize Denver. Emily Gedeon, a department spokeswoman, said this is the third round of changes since the rules were enacted.
In an Oct. 11 briefing outlining the changes, Sharon Jaye, Denver’s building performance policy manager, said the city wants “to work with Denver’s building owners to create plans for their buildings to reduce energy consumption, not to collect penalties.”
“We know building owners are experiencing challenges and barriers,” Jaye said.
Under Energize Denver, buildings are benchmarked based on their 2019 energy use, and supposed to meet gradual reduction targets in 2024, 2027 and 2030. The city says 26 percent of Denver buildings have already met their 2030 target, which means three out of four need to make improvements.
Under the current rules, some buildings will have to reduce energy use 70 percent to meet their targets, Jaye said.
“What we heard is it’s cheaper to tear down the building and start over, which we do not want to happen,” she said.
The city is now proposing to cap the maximum reduction needed at 42 percent.
Jaye said there’s flexibility to do that the ordinance requires a 30 percent reduction overall, but the current rules had aimed for a more aggressive 33 percent reduction.
A third of buildings over 25,000 square feet will benefit from that change, Jaye said.
Other proposed changes include adding specific criteria for adaptive reuse projects — notable given the city has separately expressed interest in seeing some office buildings converted into residences — and allowing owners to take advantage of renewable energy systems anywhere in Colorado, not just within Xcel Energy territory as currently written. The latter change will also eliminate a difference between the Energize Denver and Regulation 28, Jaye said.
Another change would allow HVAC systems to be electrified when the current system in place actually stops working, Jaye said. The current wording requires systems be swapped when the current one has reached an average “end of system life,” regardless of whether the system is still operating or not.
Denver is also looking to extend the timeline for compliance for buildings with a high vacancy rate, not just for those specifically in foreclosure or receivership.
“What we heard is that high vacancy rates, especially in downtown, and some financial distress situations for some office buildings, make investments into energy efficiency difficult at this moment,” Jaye said.
Kruger said her group and BOMA don’t believe the current proposed changes go far enough. There are brand new buildings that can’t come into compliance with Energize Denver as written, she said.
But Kruger also said that city leaders are “listening when we say, ‘I think the amendments should go this way.’”
“That’s unheard of in recent years, for the city to come to us and really be open,” she said.
She said that she shared data on downtown vacancy rates and city leaders “finally saw the connectivity” on how mandating expensive changes could impact efforts to revitalize downtown and prioritize affordable housing.
“We don’t want to take it down. We just want it to evolve … We can’t purely be aspirational. We have to be realistic,” Kruger said.
A drone photo of downtown Denver in 2020. (Courtesy Guerilla Capturing)
Two real estate trade groups that recently teamed up are optimistic about the potential for meaningful changes to the city of Denver’s controversial new rules regarding building energy use.
Katie Kruger, head of the Denver Metropolitan Commercial Association of Realtors, told BusinessDen Monday that her group and the Building Owners and Managers Association believe city leaders are genuinely listening to feedback on the rules known as “Energize Denver,” which the industry believes are too onerous.
“I think these laws are going to change, and I think we’re going to do it together, which we haven’t seen in Denver in a long time,” Kruger said.
The regulations, which will force a transition away from natural gas in favor of electrification, were passed in 2021 as part of the city’s effort to eliminate emissions by 2040. Commercial and multifamily buildings account for 49 percent of Denver’s emissions, according to the city, which says Energize Denver could reduce those emissions 80 percent by 2040.
Real estate trade groups have adopted something resembling a good-cop, bad-cop approach in their quest for changes.
In April, the Colorado Apartment Association, the Apartment Association of Metro Denver, the Colorado Hotel and Lodging Association and commercial real estate group NAIOP filed a lawsuit over the matter, saying the rules are at odds with federal regulations.
Among the local firms where executives submitted declarations in support of the suit were Zocalo Community Development, Cornerstone Apartment Services, Woodspear Properties, Griffis/Blessing, Sage Hospitality and Stonebridge Cos.
Katie Kruger
The lawsuit also targets a similar set of state regulations, known as Regulation 28.
Kruger’s group, known as DMCAR, and BOMA, which is led by Stephen Shepard, have a lot in common with the plaintiffs in the litigation — she called them “our brethren.” But rather than joining the lawsuit, the two groups formed a coalition in early September focused on providing feedback and negotiating changes to Energize Denver.
“We felt there was room to try this another way,” Kruger said.
A key problem, from the standpoint of all the trade groups, is that complying with the rules would be unreasonably expensive, and that they lack nuance. Andrew Hamrick, general counsel and senior vice president for both apartment associations, told The Denver Post in April that greenhouse gas emissions from buildings are not the largest source of air pollution, and there are better ways to achieve reductions.
“They’re attacking a small emission problem with a very expensive fix,” Hamrick said in April. “That’s what the friction is all about.”
One datapoint: Pete Dikeou, whose family real estate firm bought the Hudson’s Bay Centre at 1600 Stout St. last month, told BusinessDen at the time he expected to spend $3 to $5 million on upgrades to comply with Energize Denver. That’s compared to just under $9 million to buy the 20-story tower itself.
Earlier this month, Denver’s Office of Climate Action, Sustainability, and Resiliency proposed a number of changes to Energize Denver. Emily Gedeon, a department spokeswoman, said this is the third round of changes since the rules were enacted.
In an Oct. 11 briefing outlining the changes, Sharon Jaye, Denver’s building performance policy manager, said the city wants “to work with Denver’s building owners to create plans for their buildings to reduce energy consumption, not to collect penalties.”
“We know building owners are experiencing challenges and barriers,” Jaye said.
Under Energize Denver, buildings are benchmarked based on their 2019 energy use, and supposed to meet gradual reduction targets in 2024, 2027 and 2030. The city says 26 percent of Denver buildings have already met their 2030 target, which means three out of four need to make improvements.
Under the current rules, some buildings will have to reduce energy use 70 percent to meet their targets, Jaye said.
“What we heard is it’s cheaper to tear down the building and start over, which we do not want to happen,” she said.
The city is now proposing to cap the maximum reduction needed at 42 percent.
Jaye said there’s flexibility to do that the ordinance requires a 30 percent reduction overall, but the current rules had aimed for a more aggressive 33 percent reduction.
A third of buildings over 25,000 square feet will benefit from that change, Jaye said.
Other proposed changes include adding specific criteria for adaptive reuse projects — notable given the city has separately expressed interest in seeing some office buildings converted into residences — and allowing owners to take advantage of renewable energy systems anywhere in Colorado, not just within Xcel Energy territory as currently written. The latter change will also eliminate a difference between the Energize Denver and Regulation 28, Jaye said.
Another change would allow HVAC systems to be electrified when the current system in place actually stops working, Jaye said. The current wording requires systems be swapped when the current one has reached an average “end of system life,” regardless of whether the system is still operating or not.
Denver is also looking to extend the timeline for compliance for buildings with a high vacancy rate, not just for those specifically in foreclosure or receivership.
“What we heard is that high vacancy rates, especially in downtown, and some financial distress situations for some office buildings, make investments into energy efficiency difficult at this moment,” Jaye said.
Kruger said her group and BOMA don’t believe the current proposed changes go far enough. There are brand new buildings that can’t come into compliance with Energize Denver as written, she said.
But Kruger also said that city leaders are “listening when we say, ‘I think the amendments should go this way.’”
“That’s unheard of in recent years, for the city to come to us and really be open,” she said.
She said that she shared data on downtown vacancy rates and city leaders “finally saw the connectivity” on how mandating expensive changes could impact efforts to revitalize downtown and prioritize affordable housing.
“We don’t want to take it down. We just want it to evolve … We can’t purely be aspirational. We have to be realistic,” Kruger said.
