Gil-Bar in the News: “HVAC Solutions are Crucial to NYC’s Most Ascendant Asset Classes Right Now”

The following article originally appeared in the March 2021 edition of Mann Report.

Over the past few years, four property types have been gaining steam with commercial real estate investors, especially in the Tri-State area, where commercial and residential were king before Covid-19. Now, the talk is largely about life sciences, healthcare, warehouses and fulfillment centers, and data centers. Recent research by leading brokerages shows that favorable supply and demand metrics for these assets are not abating. 

For instance, the supply of U.S commercial laboratory space has grown 12% this year to 95 million square feet, with another 11 million square feet under construction, according to CBRE, which says rents will continue to climb despite supply. In terms of data center space, about one-third of the 373.6MW under construction has already been leased, according to CBRE, a figure that reflects stronger preleasing for the asset compared to last year. Regarding healthcare facilities, total private construction spending for healthcare has been at its highest in over a decade, per FRED data. And the volume of investment into medical office buildings is settling into a higher equilibrium, according to JLL, which cites $13.4 billion invested in 2019, nearly double the $6.8 billion spent in 2012. Meanwhile, an October report by NAIOP predicts that by 2025, there will be enough demand to satisfy 1 billion square feet of additional industrial real estate state space.  

What isn’t necessarily discussed are the specifications necessary for these facilities to perform optimally, especially HVAC requirements. Consider the following:

Life Sciences 

Life-sciences properties require some of the most highly specialized HVAC systems, and the property types are enjoying a renaissance in New York City. Nationally, demand for buildings that can accommodate life sciences research continues to climb, bolstered by public and private funding. 

These buildings typically house research labs, creating distinct challenges in airflow and filtration that need to be addressed by a robust HVAC system. These labs operate by BSL (biosafety level) ratings mandated by the CDC for containment of bioagents. The structure of HVAC systems becomes more complex to answer higher biosafety levels. A project may need separate breathing air systems, air handling units, exhaust systems and decontamination systems. These systems need to be structured within the building as to ensure researchers and scientists have a fresh supply of air and are not inhaling dangerous chemicals and bioagents.

Healthcare facilities

For healthcare and medical facilities like hospitals, medical offices or nursing and rehabilitation centers, it’s crucial to keep air as clean as possible. Infectious agents can spread quickly between rooms and common areas. In addition to temperature control, HVAC systems implemented into healthcare facilities need to be able to offer infection and odor control. Optimizing these systems to be able to operate with resiliency in the face of a power outage is also crucial. For larger facilities, HVAC systems need to carefully account for the number of air changes and proper filtration, based upon the number and types of rooms that could be in use at any given time.

Data Centers and Warehouse/Fulfillment Centers 

Even before the Covid-19 pandemic highlighted our reliance on ecommerce, a crescendo of demand for industrial space was fueling speculative development and repositioning of fulfillment centers. 

Although data centers and fulfillment centers represent different types of industrial space, they have similar HVAC needs. Data centers, for instance, require an optimal humidity and temperature to ensure their server rooms don’t fritz. Specialized HVAC solutions for data centers include systems that pump refrigerant, chilled water or indirect air evaporation. Environmental sensors are exceptionally useful to a data center HVAC system for tracking humidity, air flow and temperature.

Likewise, fulfillment centers humidity and temperature levels to shelter goods from damage. In the case of centers that may employ robots or other automation technology, humidity and temperature is especially critical. Another consideration for these types of warehouses is whether they function for distribution and are trafficked by cargo trucks. In those cases, a DOAS system or OA/RA system can provides a dedicated supply of outdoor air and combat the threat of high carbon monoxide levels.

Covid-19 and digitization continue to drive the need for industrial and data center square-footage, many commercial and retail spaces are repositioning to meet these needs. But it will take more than a remodel or a white box solution to deliver an effective and strategic space; HVAC considerations are crucial, as they are for all development and construction plans.

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Gil-Bar in the News: “Modernized HVAC Systems Have Key Role in New York City”

The following article first appeared in New York Real Estate Journal on March 23, 2021.

New energy-efficiency requirements mandated by NYC in Local Law 97, part of the Climate Modernization Act, amount to some of the most sweeping sustainability measures passed by any city globally. Commercial properties spanning more than 25,000 s/f will see their carbon emissions caps tighten starting in 2024 and must achieve a 40% reduction to their carbon footprints by 2030, based on a 2005 emission data baseline. By 2050, the city is targeting an 80% reduction for commercial buildings. In November, the city amended the law to include buildings with rent-regulated units, which were originally exempt. As it stands, Local Law 97 will affect 50,000 buildings in NYC.

The progress of NYC’s landlords in meeting the 40% reductions required by 2030 target is not uniform. Closer to reaching the new 2024 caps are larger, institutional level landlords–they can more easily access the capital needed to begin retrofitting older buildings with advanced, energy-efficient systems and incorporate energy-efficient infrastructure into their new projects. But the majority of Manhattan’s commercial landlords do not operate at an institutional scale and the majority of its buildings are at least 30 years old. As emissions caps tighten, significantly more capital improvements will be needed for the vast array of Manhattan commercial buildings. The Urban Green Council has forecast that by 2030, the energy retrofit market opportunity in NYC will range from $16.6 and $24.3 billion. (In comparison, about $235 million was spent on energy-saving building improvements in 2018.) Right now across the city, owners of commercial real estate are consulting with HVAC, engineering and efficiency experts to understand and roll out the types of retrofitting they will need.

To really make a dent in their carbon footprints, landlords will need to assess and upgrade their HVAC systems. Engineering research has shown that installing energy-efficient systems can have a significant impact on the carbon-emissions performance of older buildings. The heating and cooling of a building is one of the biggest contributors to its carbon footprint; traditional HVAC systems can account for about half of a building’s energy use.

A number of new HVAC systems and technologies are available to building owners to help reduce energy consumption. These efficiency systems utilize less power load thanks to advances in materials, engineering technology and installation procedures. For example, dedicated outdoor air systems are a type of HVAC that can dehumidify air, improve indoor air quality and reduce energy load by venting outdoor air separately. Passive and active chilled beam systems for ceilings are another HVAC option for reducing energy output and thus, building emissions. Sophisticated HVAC options are complex enough to create microenvironments within buildings that can be independently controlled by occupants. Besides being energy efficient, a variable flow HVAC system runs more quietly and offers fine-tuned environmental control with multiple heating and cooling zones.

Working closely with an HVAC specialist is essential to the equation of balancing new energy-efficiency requirements within a commercial building’s envelope. Through the scope of projects, HVAC specialists coordinate with manufacturers on a continuing basis and can leverage these relationships to the benefit of landlords making decisions on retrofits or new installations. Because manufacturers know their products inside and out, they are valuable partners working in concert with HVAC specialists to decide which systems will produce optimal efficiency results for their properties. Landlords should regard the guidance gained from HVAC specialists as essential to solving the puzzle of Local Law 97 compliance.

HVAC systems are far from blanket solutions. Every commercial building in the city has unique characteristics of age, building material and existing infrastructure, and bringing in the right expertise is crucial to ensuring a building is optimized for a reduced footprint. These proactive measures will ultimately help owners avoid penalties and even realize facility management savings in the long run.

See the article in its original form and read more from New York Real Estate Journal here!