Decree Tertiary and Real Estate Asset Management: Meeting the first deadline and integrating this new regulatory requirement into asset management

The 2021 deadline has been simplified, but it's getting closer!

By 09/30/2021, commercial buildings with more than 1,000m² floor area will have had to meet the first deadline of the Tertiary Eco Energy Scheme (DEET - formerly the Tertiary Decree), i.e. their initialization on the government platform OPERAT. Gone is the selection of the reference period, pushed back to September 2022 at the latest. The first deadline now includes :

  • The "administrative" creation of buildings subject to the law and therefore of the players affected;
  • Description of buildings subject to the regulations (type, surface area, lots, delivery points, etc.);
  • Energy consumption in 2020 and associated intensity of use.

Although it has been known for some time, since the publication of the decree, this first deadline is frightening, for the following reasons:

  • Uncertainty about the OPERAT platform:
    • Who fills what?
    • Who is responsible for what?
    • How to avoid multiple declarations?
  • How do I retrieve the requested data?
  • How to deal with the many special cases of commercial real estate (condominium ownership and management, single/multi-tenancy, AFUL, ASL, shopping centers, vacations, etc.).
  • Who is obliged? Do I have to act on behalf of my tenant? ...
  • Are my leases solid enough to integrate this approach?
  • How can the approach be integrated with other regulatory issues (environmental appendices to leases, regulatory energy audits, SRI labeling, Extra Financial Reportng, etc.)?

Added to the very specific context of 2020 and 2021, which could lead to strained relations between lessors and lessees, the first declaration in September 2021 promises to be a sporting one!

How to prepare the first decree declaration

The text itself is an obligation of result. In the end, it leaves the door wide open to the method used, as long as the objective is achieved by 2030 (then 2040 and 2050), in a reliable and verifiable manner.

To this end, the legislator has provided the OPERAT regulatory performance management tool (administered by ADEME, whose full range of functions is not yet available), which lists for each building :

  • Actual energy performance for each year (from 2020);
  • Actual usage intensity for each year (2020 onwards) ;
  • Actual reference energy performance (taken between 2010 and 2019)
  • Reference intensity of use.

As the 2021 deadline relates to 2020 reporting, it requires :

  • The declaration of buildings and lots subject to OPERAT ;
  • Quantification of actual energy performance in 2020 and associated usage intensity.

In order to reply to this first declaration, the following steps must be followed:

The first 2 "individual" stages

  • Delineate the "physical" perimeter of the building to be taxed: since the building is the first to be taxed, it should be remembered that whatever the tenant, as long as it houses more than 1,000 m² of tertiary floor space, the entire building is concerned.
  • Define the functional perimeter subject to reporting: since this building is subject to reporting, which stakeholders will be involved in 2020?

Clarifying responsibilities :

  • Meet with stakeholders to validate a building-wide response strategy:
    • Who initially declares the building?
    • Who declares the entities?
    • Who fills in the information?
  • Clarify data flows

Once all the elements and their origins have been clarified, it's time to map the data. The aim is to collect as much energy data as possible in order to :

  • Collecting 2020 energy data ;
  • Identify and set up data exchange flows;
  • Depending on your responsibilities, fill in your data on OPERAT.

As an example, for a portfolio of 30 sites, an extract of the information mapping is given below, the information gathering stage was carried out as follows:

  • Initialization of the scope of monitoring with the management company ;
  • Consolidation of the energy perimeter (list of meters) with the various property managers;
  • Launch of information gathering from stakeholders:
    • PM and syndicates: Historical invoices, automated collection mandate, tenant contact ;
    • Tenants: Historical invoices, automated collection mandate, tenant organization in response to decree ;

The follow-up and awareness-raising phases with tenants are a joint stage with the MPs.

Discussions with each of the parties involved enable us to validate or reject the automation of data collection, and to gather the necessary and sufficient information for 2020 reporting.

Figure 1 - Energy data mapping and data flow validation
Figure 1 - Energy data mapping and data flow validation

Preparing for the 2nd deadline of the decree and managing the process

Whether by building, by lot or by asset, the tertiary sector decree imposes a long-term vision on the players involved, which needs to be clarified and framed to make it a strong strategic lever. For each building, complying with the tertiary sector decree means :
  • Define the initial situation ;
  • Assess how far we still have to go;
  • Manage interim deadlines and integrate the approach into day-to-day management

1.1 Defining the starting point

This amounts to a response to the text on the notion of reference consumption. Taken over a period of 12 consecutive months from 2010, the only requirement is that it be reliable and verifiable. Essential but time-consuming, the collection of historical energy data is essential to enable a global analysis of performance. By looking back in time, the selection of the reference year and its associated consumption is guided by :
  • The availability of data vs. the difficulty of obtaining it ;
  • We've come a long way, and it would be interesting to see how far we've come.
By involving all stakeholders in the process, by building, the aim is to produce a reliable energy mapping of data, the source of the energy assessment to be carried out to select the ideal starting point.

1.2 Assessing the road ahead

The validation of reference consumption has been postponed until September 2022, giving players more time to go back in time and assess the historical energy performance of those liable. So, for each building, we need to assess the energy trajectory of each asset towards each possible target typology, in order to identify the optimal trajectory to follow. This is defined by :
  • The amount of energy savings still to be made to achieve one or other of the objectives;
  • The financial impact of implementing improvement measures on the building's financial performance;
  • Forward planning for "just-in-time" improvements.
Evaluating the starting point/path to be taken means defining the active/active reference period and its associated consumption, as well as the objective to be reached. The following diagram shows how the trajectory is obtained for an office/public administration asset. Based on the collection of historical energy data, it is necessary to :
  • Evaluate initial energy performance in 2017, 2018 and 2019, taking climate impact into account;
  • Identify the 2 possible strategies:
    • Strategy 40% :
      • Most energy-intensive year: 2017 ;
      • Distance to go to reach -40%: 31% from 2019;
    • Threshold strategy :
      • Evaluation of threshold according to Site indicators: 114 kWhef/m².
      • Remaining distance to cover to reach the threshold: 11% from 2019 (and even 9% based on 2018 performance).
Figure 2 - Assessment of possible energy trajectories
Figure 2 - Assessment of possible energy trajectories
Strategically for this asset, it is therefore preferable to declare the base year and associated consumption at 2017 and guide multi-year plans to reach the threshold target, which is only around 10% of current observed performance. On the other hand, and in this specific case, the 2017 data is reliable because it is based on invoices and verified by an energy audit, but otherwise it would be more appropriate to select 2018 or 2019 as a reference if these were more reliable. Reaching the threshold rather than the -40% target is still the most realistic and feasible option. On the basis of this validated trajectory, we will then act to consolidate multi-year plans adapted to our ambitions. Being close to the threshold target, and having already undergone extensive renovation, the asset is likely to be optimized via :
  • Raising occupants' awareness (of best practices, but also of how their building works);
  • Actions to control and optimize programming and regulation;
  • Replacement of light equipment.

1.3 Managing interim deadlines

As the Eco Energie Tertiaire scheme has a long timeframe, the legislator is seeking to ensure as far as possible that the roadmap is taken on board by the various players, and that the objectives will be achieved. While OPERAT is the legal monitoring tool, many new players in online energy monitoring have emerged with this new obligation: online energy monitoring platforms. Whatever the technologies used to automatically retrieve energy data (and sometimes other data), they all promise to save a considerable amount of time in the administration and management of annual reporting. In order to deploy them successfully on all or part of a property, however, a few questions need to be answered first:
  • Without the tertiary sector decree, would I have needed to collect energy data automatically (at least as far as possible) on my property? If so, in what context and for what scope?
  • Once deployed, who will use the tool and how often?
  • What are the essential functions the tool should have?
By answering these questions, the framework for deploying the tool becomes clearer. It will then be necessary to identify :
  • Where to retrieve energy data :
    • Where measured (on existing or future meters);
    • Where the measurement is processed (at energy distributors or on in situ energy monitoring tools);
    • Where it is billed (by energy suppliers);
    • Where it has been post-processed (usually by maintenance teams).
  • On which perimeter :
    • Consumption for which I am solely responsible ;
    • Consumption of the building fully subject ;
  • How to retrieve these elements:
    • In situ instrumentation with meters and connected objects
    • Capturing existing data (invoice flows, distributor flows, in situ metering already in place, etc.)
  • If existing contractual relationships are robust enough to deploy without difficulty.
Finally, even with the right framework, the deployment of these tools requires considerable time and human resources to ensure that, in the end, we have the necessary and sufficient elements to manage the decree's intermediate (and final) deadlines.  

A tertiary decree approach integrated into property asset management

Figure 3 - Integrating the tertiary decree approach into building renovation strategies
Figure 3 - Integrating the tertiary decree approach into building renovation strategies

Leases: the key to meeting this new regulatory requirement

Use the lease to define responsibilities

If there's one pre-requisite to retain from the text, it's the agreement to be reached between lessee and lessor in the administration and monitoring of the tertiary decree approach. The legislator has deliberately involved the 2 parties in the process, according to their contractual relationship, in order to maximize the resources available to achieve the objectives.

Reviewing leases and integrating the key elements needed to understand the tertiary sector decree and the issues weighing on the asset in question therefore becomes a priority to remove the contractual obstacles slowing down the implementation of a coherent and reliable approach.

Eventually, the lease will have to specify :

  • Benchmark asset performance ;
  • The objective;
  • Information exchange procedures ;
  • Perimeters of responsibility.

These key elements will enable us to judge the performance and therefore the attractiveness of the asset, the potential risks for the parties involved, etc...

Wider application of the Environmental Annex

Finally, involving the lessee and all stakeholders in the process means applying the principles of the environmental appendix to the lease, mandatory for all commercial leases > 2000 m².

The annual green committee (or monitoring committee) is a powerful and very useful tool when applied to the various stages of a tertiary decree approach:

  • At initialization, to collect mandates, energy consumption, define reporting responsibilities, etc.
  • When defining the tertiary decree strategy, the green committee is the perfect way to present the strategy to be followed and divide up the tasks;
  • In the current period, this committee can be used to monitor the actual performance of each asset, to identify bottlenecks and initiate long-term actions tailored to each player.

Integrate the requirements of the tertiary sector decree into asset renovation strategies

The life of real estate assets is punctuated by phases of occupancy and vacancy.

These renovations, if well anticipated and in line with real estate strategy, are often an opportunity to carry out more in-depth work on the asset to improve its attractiveness. Given the energy challenges posed by the decree, it is essential to work upstream on the renovation scenarios envisaged, in order to ensure "tertiary decree compliance", which is reassuring for the lessor and attractive for potential future lessees.

Numerous tools can then be deployed to put together the best possible scenario and provide key elements of attractiveness:

  • Pre-works energy assessment, freezing the energy performance to date, based on occupancy conditions at time t. It validates the pre-work situation and identifies all the levers for improvement that can be triggered;
  • Tertiary decree energy analysis of renovation. It assesses the intrinsic performance of the scenario;
  • Performance-based commissioning. A popular feature of certification processes, commissioning sets the performance targets, ensures that the project meets these targets during the various phases, and in particular during arbitration, and validates the performance achieved during acceptance;
  • Evaluation of operating costs, simulating the financial impact of renovations on building operations. As energy costs are volatile, it is important to provide future lessees with evidence of financial performance in addition to energy performance.

These elements are all designed to meet the need for certified performance, whether energy or financial, and to bring "regulatory" energy performance (historically assessed via RT studies in particular) as close as possible to actual energy performance.

Finally, to counteract a renewal rate for the building stock that is too low to respond to the climate emergency, the text responds to the need to bring the performance of the existing stock up to the performance of the new stock, soon to be built under RE 2020; what's more, by working on attested and real performance and not just intrinsic and regulatory performance.

While the first deadline is currently the focus of attention, particularly in view of the availability of the government tool OPERAT, it does have the merit of structuring the energy reporting of the various players, giving them the keys to steering the process. To turn this regulatory constraint into a performance lever, it will be necessary to identify all related initiatives that can benefit from this reliable data.

Extra-financial reporting, building certification procedures, regulatory energy audit campaigns and assessments of the climatic impact of real estate activities are all subjects for which energy (and fluid) consumption is an essential input data, the origin and reliability of which are essential to ensure conclusive analyses and results in the future.

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