Case Study Background
AvalonBay Communities is a publicly-traded real estate investment trust (REIT) that owns approximately 90,000 rental apartments around the United States, including about 10,000 in Boston and nearby suburbs. These include four buildings around the Prudential Center (AVA Back Bay, Avalon Exeter, and Avalon at Prudential Center I & II) as well as Avalon North Station and Avalon Brighton. The company’s environmental, social, and governance commitments include reducing 63 percent of its scopes 1 and 2 greenhouse gas emissions by 2030, and 61 percent of scope 3 emissions, based on a 2017 baseline. The company also seeks to reduce whole-building water use intensity by 10 percent by 2029, and by 2027 in water-stressed areas, while diverting 20 percent of waste from landfills across its portfolio.
Strategy
As for all owners of residential rental properties in Boston, fulfilling BERDO will be a significant challenge for AvalonBay, with a limited set of tools available. One of the biggest issues is that the large majority of the energy consumption inside its buildings comes from residents’ heating, cooling, and electricity usage, over which AvalonBay has little control.
AvalonBay has profitably invested millions of dollars in building efficiency, installing more efficient lighting and equipment, and taking advantage of other major capital upgrades to reduce energy use in company-owned common areas of its properties. In the Boston market, however, AvalonBay has a mix of both highly energy efficient buildings constructed between 2014 and 2023, and several hundred units, such as those at the Prudential Center, dating back to 1968. For this second group of older buildings, it makes financial sense to perform whole-building energy upgrades only when those towers are undergoing major capital renovations anyway. “Upgrading with the latest and greatest most energy-efficient system is something that we’re going to be looking at” as older buildings come up for renovation, says AvalonBay Senior Vice President of Development David Gillespie. “It’s one of the lenses we’ll be using” to decide what to invest where and when.
Incentivizing renters to make the kinds of energy-use reductions needed to meet BERDO is a major challenge. Alex Heckman, Director of Engineering for AvalonBay, says that in the highly competitive market for rental apartments in Boston, the company has found few renters willing to pay a premium to live in a more energy efficient apartment. Renters are in an apartment for about 24 months on average, and the marginal potential savings on utility bills don’t provide a meaningful incentive to pay more to rent a unit. Many tenants also push back on high and low temperature limits on apartment thermostats, or restrictions on when they can open a window.
“One option allowed for BERDO compliance is for multi-property owners to have all of their buildings measured as a single, combined building portfolio.”
As other multi-property owners have reported, AvalonBay also has significant challenges around getting accurate, timely information from electric and gas meters to measure the total emissions impact of its buildings. In several cases, company officials have found data discrepancies between the utility reporting and total building usage. For that reason, AvalonBay is currently exploring how to implement “shadow metering” by monitoring, for example, the total electric flow coming through the main switchgear serving a building before it gets fed through individual units’ meters to ensure the building’s total energy footprint is measured accurately.
In other states, AvalonBay is seeing some positive early indicators of the value of installing on-site solar-electric generation. “We’re starting to try to market that in a way that shows that you’re actually saving money from having solar,’’ Heckman said. “We can offer that, and we’re hoping to see some benefit from it, but it’s in the early stages.’’
AvalonBay is also thinking hard about the embodied carbon impacts of replacing older, less energy-efficient buildings with new construction that consumes far less energy. However, Gillespie notes, “If you tear that building down and rebuild it, the operational carbon that you use to actually heat and cool and power the building might just be a drop in the bucket compared to how much embodied carbon you just wasted, given the existing structure you tore down.”
The Results
One option allowed for BERDO compliance is for multi-property owners to have all of their buildings (of 20,000 square feet and larger within Boston’s city limits) measured as a single, combined building portfolio. By combining the emissions footprint of its newer and more energy-efficient buildings with the emissions of its 1968-vintage Prudential Center buildings, AvalonBay expects to meet BERDO standards for the rest of this decade. As standards grow more stringent between 2030 and 2050, the challenge of BERDO compliance will grow.
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