Mychele Lord has focused on sustainability throughout her 22 years in commercial real estate, a career that spans property and asset management, leasing and development. A licensed Texas real estate broker, Lord left an executive position with Transwestern a year ago to form her own company, Lord Green Real Estate Strategies (www.lordgreenstrategies.com), a consulting firm designed specifically to meet the sustainability needs of the real estate industry.

Lord’s expertise lay in the greening of existing assets, where she has done pioneering work with millions of sq. ft. of commercial property in the Environmental Protection Agency’s Energy Star program and the U.S. Green Building Council’s LEED for existing buildings rating system. Lord Green’s clients include TIAA-CREF, Invesco Real Estate, New York City and the U.S. Green Building Council. NREI recently spoke with Lord about the importance of benchmarking building energy performance and what future regulation of carbon emissions could mean for the commercial real estate industry.

Q: First of all, how does Lord Green Real Estate Strategies help the commercial real estate industry meet sustainability needs?

A: We manage buildings, we operate them, we develop them—that’s just what we do as real estate professionals—so when we make decisions, every decision that we make, it’s incorporating sustainable practices or sustainability into those decisions. So taking an applied approach, or a practical approach, for example, to an existing real estate portfolio is to benchmark all the buildings in Energy Star Portfolio Manager.

The tool allows the asset manager or the owner to consolidate or sort all the properties so you can see how not only individual properties are performing, but how portfolios are performing from an energy as well as carbon perspective.

Q: Can you define “carbon footprint” as it applies to commercial real estate?

A: The most obvious thing is the indirect emissions that result from a building’s energy consumption. The more energy a building uses, the larger its carbon footprint. Make your building more efficient and you reduce your carbon footprint. That’s the biggest piece and that’s where we as an industry should focus first.

But what about when we build a building? You’ve got the equipment on site that produces a lot of CO2 emissions. If you think about the concrete and steel that goes into the construction of the building, a tremendous amount of energy is used to create those products. Everything can have a carbon impact.

Q: Currently, there’s no regulation over how a carbon footprint is measured, correct?

A: Right. We don’t have a mandated or federal standard at this time. The Greenhouse Gas Protocol is an accounting tool for quantifying emissions. It’s probably the most widely used. It’s really set up for businesses and for government, and it takes into account employee commutes, travel, emissions from operations and emissions resulting from your real estate.

The EPA Energy Star Portfolio Manager is the one that focuses specifically on the actual real estate itself. Right now, it’s not mandated for the most part, however, BOMA International and Real Estate Roundtable are both working in Washington right now to communicate that the real estate industry is taking measures to improve the energy efficiency of our buildings so that we’re not regulated.

BOMA has developed the 7-Point Challenge , which is a plan that real estate owners and operators can adopt that will support us in Washington. Right now we’re not regulated and we don’t want to be regulated. We would like to be at the table to participate in a competitive marketplace. So if I as a business owner make capital improvements to my building in order to improve the energy efficiency of that building and therefore reduce its carbon footprint, then I want to reap the benefit of that in a carbon trading market. I don’t want the utility company to benefit from my capital investment. That’s what Real Estate Roundtable and BOMA are advocating.

Q: How far away is “cap and trade” legislation, which would cap the amount of greenhouse gases that U.S. businesses can emit and allow them to trade with, or buy from, others if they exceed their cap?

A: There’s movement in that direction. Over 200 local governments have joined Energy Star. Just recently, [Washington] D.C. legislated benchmarking of all commercial buildings—public and private—by 2010. [Owners] have to benchmark their buildings annually with Energy Star. California has legislated that all property owners disclose a building’s Energy Star score to prospective buyers, lessees and lenders by 2010. The same thing is going to happen with buildings. When you go to buy a building or lease a building, you want to know what the energy performance of that building is.

Q: When do you think the cap and trade legislation will pass? And if it does, what will that mean for the industry?

A: That’s the $50 million question. It will either directly or indirectly impact the industry. So at a minimum, I believe 100% we need to benchmark the buildings that we have so we know their energy performance. When we buy buildings, we know our risks. Well this is a risk that I don’t believe is being adequately incorporated into that equation.

So the first thing to do is know what your risk is—how do you do that? Make sure you know what your statement of energy performance is for that building. Then you’ll know your stars and those in the middle of the road, and you’ll know your dogs.

Q: So the future regulation of carbon footprint could potentially impact building valuations?

A: I think with savvy buyers, if I’m going to buy a building today, I would sure ask what the energy efficiency of that building was before I bought it.