Steven Pacifico is the Executive Director, Zero Carbon Building Accelerator Program, at Toronto 2030 District. For this feature, he interviewed Caroline Karvonen from BOMA Toronto, Kit Milnes, Vice President, Sustainability & Resilience from KingSett Capital, and Ali Hoss, Chief Sustainability Officer from Triovest.
The commercial real estate sector should be excited about Toronto moving forward with its Building Emissions Performance Standards (BEPS) policy.
Before I joined the Toronto 2030 District, I was responsible for a portfolio of buildings across North America. When I saw how much we were spending on energy, I developed a series of programs that began with performance benchmarking, then used that data to guide a coordinated approach to energy efficiency and decarbonization.
The results went straight to our bottom line. In the first year, the portfolio reduced its energy costs by about $1 million. Within four years, we were saving millions of dollars per year.
But that was just the beginning. With growing market expectations for brighter, more comfortable and affordable buildings, our sustainability strategy helped us secure new lease deals, and our tenant satisfaction scores steadily improved.
I believe there can be similar savings and wins across Toronto’s commercial real estate (CRE) sector. This policy can bring us better, higher-performing buildings at a lower cost to operate, in addition to working better for tenants, saving energy, and cutting greenhouse gas emissions along the way.
But support from building owners will be critical to the policy’s success. I spoke to other leaders in the CRE sector about what they’ll need from a good BEPS policy, and how it will impact them – here’s what they had to say.
Building owners will need resources and financing options
Many Class B and C building management companies are balancing a precious lack of time, finances, and capacity. The primary focus has been on lease and vacancy rates, not decarbonization pathways. With existing programs, like BOMA Canada’s Enspire, and emerging new tools and resources, building owners will have ample support to begin deep energy retrofits. Simple and effective financing tools will enable the market to move quickly to meet new standards. For BEPS to succeed, the cities will need to help building owners grow their existing resources and access financing.
“Effective policy design should include a thorough cost-benefit analysis to ensure that the implementation is economically viable and does not impose undue financial strain on building owners or the public sector. More widespread access to financing will be critical to ensuring compliance, particularly for smaller property owners.”
– Ali Hoss, Triovest
“New programs are providing assistance to the mid-tier building sector. This will help the sector access the expertise, education, and resources required to make informed decisions about deep energy retrofit projects.”
– Caroline Karvonen, BOMA Toronto
“A majority of building stock is owned by private individuals or small companies. They rely on their assets to cover living expenses, and so availability of capital will be key.”
– Kit Milnes, KingSett Capital
Standards will create regulatory and supply chain certainty
One of the biggest takeaways from my conversations with sector leaders was the benefit of regulatory certainty that a well-designed BEPS policy will bring. By bringing together building owners, supply chain providers, and trades, we can all work together on a cohesive and organized plan. While many large building owners are thinking about asset renewal regularly, many smaller owners do not fully understand the downside risks of doing nothing. The best time to capture the lowest cost is at the time of system renewal. It’s something that we at District 2030 have modelled for our own Toronto district: if all building owners replaced their HVAC system with an electric heat pump system at time of renewal, we can reach our building related climate goals, while creating greater asset value over time. With strong policies in place, the workforce and technologies needed to deliver retrofits can step up to meet demand.
“Certainty and stability make energy-efficient and decarbonized properties more attractive to investors, especially those focused on long-term sustainability, while clear guidelines help property owners strategically plan retrofits and energy-efficient upgrades.”
– Ali Hoss, Triovest
“Right now, this area is completely voluntary. BEPS brings us all towards the same goal: major asset renewal using decarbonization as the lens, with deep energy retrofits as the tool.”
– Kit Milnes, KingSett Capital
“BEPS will encourage all building owners/operators to fine tune their asset and capital planning now. It is crucial to determine their replacement strategy before the equipment reaches end of life, especially if this prematurely occurs.”
– Caroline Karvonen, BOMA Toronto
Building owners and tenants will benefit from economic and climate resilience
In 2024 alone, Toronto faced more than $1 billion in damage from just one flash flood event. If done correctly, BEPS policy will increase the resilience of our entire sector, both economic- and climate-related. Sustainability strategies can also help to secure new business, new lease deals, and improve tenant satisfaction scores. This work is no different than any other value adding building strategy, they are just really well managed properties that perform.
“The benefits of decarbonization extend to not only building owners but also lenders, appraisers, and insurance companies. It is essential that these stakeholders incorporate the value added by energy efficiency and sustainability measures into their processes, estimations, and calculations.”
– Ali Hoss, Triovest
“When done correctly and holistically, these projects can reduce risk exposure to both physical and transition climate risks. Retrofits create value by significantly cutting carbon emissions for the assets, reducing utility operating expenses and overall energy and water use.”
– Kit Milnes, KingSett Capital
“There continues to be a flight to quality and decarbonization is an amenity. Leading tenants with their own EGS targets are seeking zero carbon spaces that meet their environmental goals. One of the hottest office buildings in Toronto right now is Scotia Plaza (owned by Milnes’ KingSett Capital), which is the first Zero Carbon Performance certified office tower in Canada.”
– Caroline Karvonen, BOMA Toronto
Sustainability and energy efficiency strategies help to increase asset value and attract new tenants, all while delivering significant cost savings. A well-designed BEPS policy will offer supportive programs, financial assistance, and regulatory certainty, pushing energy efficiency to become the norm rather than a voluntary standard. This is an exciting opportunity for the CRE sector to be a leader, to advance our own goals and priorities, and to lower the emissions of the building sector. A well-informed BEPS policy will serve as a strong pathway to better, decarbonized buildings across Toronto.
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