In an era of increasing environmental awareness and regulatory oversight, energy efficiency has become a critical factor in real estate. One such regulation that significantly influences New York City’s property market is Local Law 84 Benchmarking. Introduced under the Greener, Greater Buildings Plan (GGBP), Local Law 84 requires owners of large buildings to annually measure and report energy and water consumption. While the law is aimed at improving energy efficiency, it has broader implications — particularly for property values. **Local Law 84 Benchmarking has a direct and indirect influence on property values through several key mechanisms. Understanding these impacts is essential for property owners aiming to make informed decisions and maintain competitiveness in the evolving real estate market.**
Local Law 84 (LL84) requires owners of large buildings in New York City—those over 25,000 square feet or part of a group totaling over 100,000 square feet—to annually measure and report their energy and water consumption using the ENERGY STAR Portfolio Manager tool. The data is submitted to the NYC Department of Buildings (DOB) and made publicly available.
The core objectives of LL84 include:
While Local Law 84 does not directly assess or tax buildings based on energy performance, the transparency it enforces leads to several indirect but measurable impacts on property values.
The public availability of benchmarking data fosters transparency in the real estate market. Prospective buyers and tenants can assess a building’s operational efficiency before making leasing or purchase decisions. Buildings with lower energy consumption and better ENERGY STAR scores often enjoy a market premium, while inefficient properties may suffer from reputational damage, decreasing their attractiveness and, consequently, their market value.
Energy efficiency directly influences a building’s operating costs. Lower energy usage translates to reduced utility bills, enhancing net operating income (NOI). Since commercial property values are often determined using income capitalization methods, a reduction in operating expenses can increase a building’s appraised value.
For example, if a property saves $50,000 annually through energy efficiency improvements triggered by LL84 benchmarking, and assuming a capitalization rate of 5%, this could increase the building’s value by $1 million.
Failing to comply with LL84 requirements may result in fines — $500 per missed deadline, up to $2,000 per year — and a public record of non-compliance. This creates a regulatory risk that investors and buyers factor into their valuation models. A building consistently non-compliant with LL84 may be perceived as poorly managed, leading to lower valuations.
Conversely, properties that demonstrate a strong compliance history and commitment to sustainability may enjoy increased buyer confidence and a lower perceived risk profile, positively influencing valuation.
Benchmarking often acts as a catalyst for energy efficiency upgrades. Building owners who engage in benchmarking are more likely to identify inefficiencies and invest in improvements like better HVAC systems, insulation, or lighting.