The Advancement of Building Performance Standards

By Claire Nicholson and Colin Curzi

In the nearly 10 years since Washington D.C. passed the first BPS policy in 2018, jurisdictions across the country have followed suit, drawing on lessons from early adopters and knowledge-sharing through the National Building Performance Standards Coalition. The policies are fortifying prescriptive energy and emissions targets against changing federal policy and dynamic real estate markets. However, in this ever-evolving regulatory landscape, while well-intentioned, BPS can also pose challenges for real estate investors and owners.

Years of development have revealed the positive components and drawbacks of BPS:

• Successful BPS policies share similar core requirements such as data disclosure, objective metrics, sufficient penalties to justify investment, and government clarity.
• Significant challenges emerge for both jurisdictions and building owners as they plan, invest, and comply with BPS policies.  

Elements of a Good BPS

Today, over a dozen BPS policies have been committed to law, many of which pair financial stipulations with data transparency mandates, including:

• Distinct data access requirements directed at utilities
• Objective targets to assess building performance
• Commitments to public disclosure of building-level energy data and metrics

Data transparency and objective metrics can help owners, both prior to acquisition and during ownership, to understand the performance of their buildings relative to peers and BPS targets.

Positive Trends in BPS Maturity

Along with the core pillar of BPS data disclosure, sufficient penalties to justify investment and clear governance structures can provide a roadmap to building-level decarbonization.

TREND 1: SUFFICIENT PENALTIES TO JUSTIFY INVESTMENT

BPS compliance is a highly involved, multi-year, multi-stakeholder undertaking. For these policies to warrant the necessary education and investment, the penalties must outweigh the cost of compliance.

Early BPS adopters like Reno, NV, and St. Louis, MO, structured their BPS with limited penalties ranging from $5,000 to $20,000. Functionally, these become a fine on the building, as the work to comply outweighs the potential risk to building owners, and the average owner could choose to face penalties rather than invest in their buildings. Insufficient fines do not seem likely to achieve meaningful emissions reductions from the jurisdiction’s standpoint, and they do not help mature the energy efficiency industry across the private sector.

More advanced and subjectively successful BPS policies set the cost of compliance at a level sufficient to reduce energy use. A few jurisdictions have also developed graduated fines based on a building's performance, incentivizing owners to reduce energy and emissions even if they do not meet the required targets. In some jurisdictions, such as Seattle and Boston, if owners pay these fees, the building is placed into compliance, serving as both a compliance mechanism and a penalty structure. These building-first, fine-structure designs drive energy reductions and justify investment, regardless of a building’s starting point.

TREND 2: COORDINATION BETWEEN STATE AND LOCAL POLICIES

Mature BPS have recently reckoned with the reality of overlapping state and city governance. In 2025, Colorado and Denver issued guidance for buildings covered by both state and city BPS, and Maryland and Montgomery County did the same. This allows owners to use a single set of standards, technical guidance, and energy-use exemptions on the path to compliance. We anticipate that Washington and Seattle, as well as California and its local governments, will negotiate the same relationships.

BPS Pain Points for Building Owners

The evolution of these policies, both in their authorship and in their management at the jurisdictional level, is streamlining compliance. However, the growing pains remain as local challenges become national issues for institutional real estate investors.

DATA ACCESSIBILITY

Building performance standards require the managed reduction of energy and emissions at the building level. Any owner hoping to comply with a policy’s targets must first understand how the building is performing.

The Challenge:
Many building owners find difficulty in accessing energy data – in both past and current years – which can stall the compliance process.

A Solution:
‍Jurisdictions that pair performance standards with policies that facilitate easy access to utility data are crucial to a building’s ability to act in accordance with BPS policies. Annual benchmarking requirements motivate owners to collect and inspect data at a regular cadence, well before BPS deadlines.

The Benefits:
‍With commercial property holding periods of 5-10 years, utility data disclosure laws offer the best chance for owners to automate utility usage, collect cost data, and implement energy conservation measures (ECMs) within the 3–5-year BPS compliance cycles.

INCONSISTENT HISTORIC RECORDS

The Challenge:
Despite a rosy view of public data disclosure and objective intensity targets, baseline-year data and even gross floor area values can be called into question.

Targets set via a baseline year acknowledge that building stock encompasses a range of high- to low-performance. However, obtaining and quality-checking baseline-year data and building-level details can prove difficult for owners, especially if the jurisdiction does not have a formal mechanism to advertise energy use at the time of listing or to require energy use data transfer at the time of sale.

Historic records can differ from submitted benchmarking data due to updates to property details, lags in utility data pushes, and undocumented building adjustments. Intensity targets become complicated to calculate as owners juggle gross floor measurements from the Department of Finance, an offering memorandum, and the building’s submitted benchmarking data.

A Solution:
Successful BPS jurisdictions mandate data verification and assign a clear source of truth for gross floor area assessment.

OBJECTIVE – NOT RELATIVE - TARGETS

The Challenge:
‍Several early BPS policies set their performance targets based on ENERGY STAR® Scores or greenhouse gas (GHG) emissions. These measurements are relative to change associated with individual building consumption, local energy grids, and market performance. These are often not entirely within the owner’s control. It is difficult to plan for energy consumption at a site that may experience fluctuations in utility usage, outperformance from competing buildings, and grid upgrades. GHG emissions-based targets require the building owner to project ‘greening’ of the local energy grid, where renewables supplement energy output, while ENERGY STAR scores can fluctuate based on the progress of peers in the market. In either case, the investment in a building’s energy efficiency may ultimately be deemed insufficient due to external factors.

A Solution:
The best BPS policies have standardized around objective metrics such as weather-normalized site energy use intensity (EUI).

The Benefits:
Transparent utility data streams, coupled with calculable metrics, enable owners and advisors to more accurately assess risk. At the end of the hold period, asset-level energy performance can be clearly communicated to the public and potential buyers.

ALTERATIONS OF THE RULES DISRUPT MULTI-YEAR CAPITAL PLANNING

The Challenge:
Capital planning can be disrupted when jurisdictions update policy deadlines and performance periods. In 2025, the state of Colorado eliminated the 2026-2029 compliance period, while the city of Denver pushed back its 2030 targets to 2032. For owners only anticipating holding a property for 5-10 years, these updates could set the precedent that targets and risk will be perpetually delayed.

A Solution:
Some jurisdictions, like Boston and New York, have set target periods and emissions limits through 2040 and 2050. They offer a transparent trajectory and an objective result: net-zero building emissions.

THE REALITY OF INSTITUTIONAL INVESTORS, JOINT VENTURES, & THE INTEGRATED NATURE OF PROPERTY MANAGEMENT

The Challenge:
BPS policies are often written as if a single individual owns a building and has direct insight into both the building data and operations. Rarely do BPS policies cover buildings with joint ventures (JVs), split ownership, or triple-net leases. Cost-sharing negotiations are left up to owners and commercial tenants with limited guidance or case studies. Many jurisdictions even lack a mechanism to designate a tenant as the de facto owner.

BPS decision-making and capital planning involves building engineers, property and asset managers, tenants, JV partners, and acquisition and legal teams instead of a single, well-intentioned and informed building owner. These stakeholders operate in a corporate framework and often have competing priorities and job responsibilities.

• Building managers may be empowered to comply with annual benchmarking requirements, but they are often unable to make capital expenditure decisions to meet the full scope of the policy.
• Asset managers may have decision-making capabilities but lack the insight to understand relationships with energy-intensive tenants or to implement operational changes at the property.
• Building engineers often service multiple buildings simultaneously and face competing priorities between tenant comfort and operational capacity.

This fractured stakeholder landscape can make it difficult for institutional investors to comply with BPS, even if the policy is well-designed and risk is assessed accurately.

A Solution:
Some jurisdictions have already begun to consider these concerns and have re-engaged in updated rulemaking based on owner feedback and lessons learned through implementation.

Leaders in BPS Policy:

Denver has published objective 2032 targets for energy intensity limits by property type which are straightforward to calculate without assumptions about grid greening or emissions factors. Through the ‘Energize Denver’ initiative, the city has implemented adjustments specific to commercial real estate owners, such as interim compliance holds, which can buffer targets for up to two years due to lease expirations or vacancies. Beyond these policy design elements, Energize Denver has established implementation solutions to aid owners in understanding their current performance relative to targets and potential penalties, and created a building owner portal that will be used to transfer compliance information and records at the time of sale. Other stakeholders can even be added to the portal, acknowledging the range of participants in BPS compliance that need visibility into the building’s progress.

Like Denver, the jurisdictions of Boston and Montgomery County, Maryland, have invested in sleek software modules to calculate targets and disclose energy usage. We hope to see the same user-friendly visibility into targets and reported performance from Washington, Maryland, and Oregon, as well as California’s forthcoming BPS program.

Designing Policy for the Future

As BPS passages proliferate and policy elements mature, legislative design for BPS should continue to standardize, acknowledge the reality of institutional real estate investment, and invest in transparent public disclosure.

In the midst of a changing political and economic landscape, we remain optimistic for creative and challenging BPS requirements. Denver already incentivizes electrified buildings, while Seattle exempts all-electric buildings from the standard. California has teased using a metric based on load management, and Maryland is targeting net direct emissions, essentially mandating a conversion to all-electric equipment.

Physical risk mitigation could be incorporated into BPS policies; data centers may even become the focus of policies aimed at power-use effectiveness. Further, a jurisdiction could work to develop a mechanism to share the cost of compliance based on tenant energy usage. With these advances, BPS can remain essential levers for decarbonizing the built environment while being tailored to owners and building stock.

Conclusion

The current landscape of BPS remains an ambitious patchwork of policies across the country. Jurisdictions, major and minor, are still engaging in bespoke rulemaking, metric selection, and penalty structures. Local and state coordination is forthcoming, as are mechanisms that address the reality of institutional real estate investment. Policy advisors like RE Tech Advisors are set to navigate this diverse landscape, assisting owners with pathway and metric selection and assessing current performance against local targets to enable direct intervention. Now, more than ever, direct-utility data pushes, artificial intelligence (AI)-driven energy audits, and polished public disclosures will serve as the core policy components of BPS policies, setting owners up for successful compliance and mitigation of transition risk.

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