Office to residential conversions: The carbon story (w/ David Farnsworth & Tess McNamara)

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Q&A

John Mandyck: Did you factor grid changes in the analysis variance?

Tess McNamara: If you remember those two whole life carbon cumulative emission graphs, the baseline, there’s a much steeper slope to the operational carbon piece. That’s because a lot of these existing buildings are running on steam and they’re still running on gas. So your total emissions are basically increasing incrementally each year. You’re taking into consideration some grid carb for your existing electricity load, but it’s not the full energy load of the building in the case, the converted case where we electrified everything, we were able to place that full energy use of the building onto this decarbonizing grid.

We used Local Law 97 emissions factors out to 2030, and then projected further for how the grid in the city will decarbonize. That’s why that line sort of flattens out, because over time, if you’re fully electric and the grid is theoretically fully renewable or mostly renewable, you’re not adding emissions every year. That’s the goal. That’s why the city is trying to incentivize electrification.

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John Mandyck: Can you still get the carbon savings even with a carbon-based energy source right now?

Tess McNamara: Right now in terms of carbon, the buildings running on their fossil fuel systems are actually performing better than if they were electrified today based on how dirty the grid is in New York City today. Obviously it’s going to change, what that overall graph would look like if you didn’t electrify is you would mainly be seeing you could get some, benefits from some of the just efficiency measures we looked at. So, the facade replacements, the window replacements. It wouldn’t be quite as much. You’d be losing that 7% electrification, which expands out over time because of the decarbonizing grid, but you would still get that full embodied carbon benefit. So, the full 61% reduction, which is significant.

John Mandyck: Isn’t there a beneficial trade off there because you’re just upgrading systems to that are just inherently more efficient because of modern technology?

Tess McNamara: Yeah. That’s true. You would see some efficiency improvements from swapping the technology. But it’s when you look out to 2050 where we have the full impact of the decarbonized grid, that that percent reduction would start to shrink if you’re still relying on fossil fuels.

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John Mandyck: Would you say that more of the carbon savings come from ICBMs, or the use type change?

Tess McNamara: Yeah, that’s a good question. It’s the first the use type change takes us from an average UI of 70 to an average UI in the 50s, so that’s a pretty considerable difference. That’s about like 20%. It’s almost half and half from the use type change and then half from the, the ICBMs, although that’s looking at energy use intensity. That is not factor in carbon. So, the impact of the electrification and the grid over time increases that, that one measure to have a much bigger impact than the 7% initial UI drop that it gives us. That’s a good question.

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John Mandyck: If a developer wants to do this type of analysis for a single building, where would they start?

Tess McNamara: It’s a good question. I mean, I think you start with your existing energy bills to understand how your building is, is performing. The values we used for the embodied carbon baseline case are just, number per square foot of new of new construction. It’s an average benchmark number. That’s easily done. They would expect to see if the buildings are in the same time period, a similar percent saving result. That we saw, like your overall graph would look basically the same. It just had a much smaller magnitude.

David Farnsworth: If they were interested in assessing, I guess trying to figure out what the question was related to. Are they looking to do a carbon assessment of a conversion, or are they just looking to test out whether a conversion is feasible for the building? If it’s the latter then the right approach is to take a look at what your floor plate is and get an architect or, or a team to take a look at it and see what a test it is because the shape of your building is going to dictate kind of what type of conversion. Is it a deep retrofit or is it a or is it effectively a fit-out modification. And that’s all around that the shape of the floor plate the way your elevators are organized and where they’re positioned. Then that initial kind of test fit layout can then input into a carbon assessment.

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John Mandyck: Here’s a question on product selection. What type of heat pump systems would you propose using in these in these models?

David Farnsworth: A lot of the conversions are utilizing a lot of the current conversions are utilizing a wall unit heat pump. And it has a compressor in the unit. They’re utilizing the facade modifications to expel heat directly through the facade. They’re trying to utilize that’s an all-electric scheme, right? Snd it minimizes the amount of pipe work that is needed to reach that heat pump. It’s kind of contained per person, per apartment. So, it minimizes all the piping that you have to run through the rest of the building. There are other there are other options that could be more energy efficient, that could utilize heat recovery.

A lot of our new buildings are utilizing air source heat pumps systems. They effectively have, a fan coil unit in the apartment. They have an air source heat pump located either on the roof or in a mechanical, room that has access to outside air. Those units can generate both heating and cooling at the same time and transfer heat from one part of the building to another, as well as generating domestic hot water. There’s definitely efficiency gains to use a system like that, but it’s reasonably significant capital cost increase might add about ten bucks a square foot to a cost of conversion to go to an air source heat pump like that, like a centralized air source heat pump like that with oil units in the units. There’s kind of a scale of MEP systems that could be used for these thing, but the cheap and cheerful one is the wall unit heat pump.

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John Mandyck: Does the carbon analysis take into consideration all the interior and structural modifications that need to take place to make these offices work as residences?

Tess McNamara: There’s a distinction there. There’s the structure and then there’s the interiors. This analysis was looking just at structure and enclosure in terms of embodied carbon which is typical of lifecycle analysis just because of where the data is at. That was where that wide typology building we accounted for some carving of the structure, demolition of the existing floor plates, end and main structural system, and then replacement of that same FIR on top. We didn’t account for interiors. If you think about it, that sort of cancels out from a new build scenario because in both cases you’re putting in new interior walls. It’s a good question.

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John Mandyck: Next question here. What’s the typical construction timeline for this type of work, how long does it take to convert?

David Farnsworth: Yeah, so one thing that I didn’t mention in terms of barriers to conversion and this is both kind of falls under the economic bucket, but it’s also the vacancy. If any of these office buildings have tenants that are holding out the best building to convert is one that’s fully vacant, right? Because there’s a cost to to cutting out leases. So, a lot depends on whether or not they have to phase it around existing tenants. There are developers that are that have a couple of floors that are remaining in office and they’re converting the rest of the building to residential until those leases run out, so that can drag that timeline out to 4 or 5 years.

If you’re just doing a conversion and it’s under the eyes of REIT rules, I think it can be done in on the order of two years. it’s effectively a fit out if it’s if it’s pretty light. A lot depends on whether or not you’re doing a full replacement of the curtain wall, or if it’s a deep retrofit where you’re doing major structural modifications that might drag that schedule out another year.

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John Mandyck: Has an economic analysis been done for all these changes, and if so, is it accounted for the revenue loss due to the vacancy rate?

David Farnsworth: We haven’t done an economic analysis as part of this study. We have looked at cost estimating for conversions and it’s very hard to do this. If a building is fully occupied, the owners are not incentivized to convert to residential. It’s very hard for them to walk away from their monthly paycheck, when they get the lease payments every month. Where the buildings that are good candidates for conversion are the ones that are struggling to attract the tenants as offices. Part of the the carbon benefit here is that these buildings, if they’re 50 or 60% vacant, a lot of the base building systems are still running and still utilizing operational carbon while, while they’re very under utilized as office assets.

Over time, what we found from the post-pandemic kind of workplace preferences, is that the the new buildings are much better performing environmentally. They’re laden with amenities, they’re close to transit, they’re not having trouble leasing up the new Class-A office spaces. It’s the older Class-B and Class-C office buildings that are struggling to attract the tenants. The best assets to convert are the ones that kind of fit the geometric requirements and at the same time are struggling to be successful as office buildings. If they’re not currently getting lease payments because they’re empty, then there’s no vacancy cost to feed into that economic equation.

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John Mandyck: Do you have clients that are asking for conversion? Is there strong demand from owners and developers?

David Farnsworth: A lot of people are looking at it, and a lot of people are figuring out what they want to do. It’s kind of a scenario planning. We’ve worked with a number of developers to look at portfolios, and to look at individual assets to see what modifications to the based building systems are needed to enable office conversions.

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John Mandyck: Are there are buildings actually doing this? And what’s magic about 1990, why isn’t it 2005 or any other year? What’s the what’s the rationale for the 1990 days?

David Farnsworth: I think the 1990 cutoff date is because the task force, when they when they were discussing this, they ideally would like it to have been a rolling date. To have said that like any building that’s older than 30 years are 40 years, right? Like a 30 to 40 year lifespan is generally what maybe a 50 year lifespan is what people are designing for. The idea was that it would be a real shame to come in and convert a 2012 building.

That’s the embodied carbon investment. Newer buildings just haven’t had time to pay for itself. The 1990s isn’t some magical date, it was picked out in terms of saying these are 30- to 40-year-old buildings. By the time that they’re going to get converted, they’re probably reaching obsolescence.

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John Mandyck: Did you factor any storage or time of use factor into the electrification?

Tess McNamara: That’s a good question. We did not. We were looking just at electrification, not any battery storage systems. We were looking just at those published grid factors, rather than looking at marginal emissions or time specific emissions factors.

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John Mandyck: Back to the embodied carbon, just to build off of that. Is there a way to calculate existing building materials for the embodied carbon to incentivize the amount of building you keep?

Tess McNamara: Yeah. So this is a good question. I think there’s not much value in quantifying the building itself that’s already there because the embodied emissions was spent 30 years ago. It’s already created, it’s warming, it’s gone. We need to look to the future. That’s why we would rather do the replacement scenario. If you were to tear it down or if you were to build new, what would the embodied carbon impact be that you’re saving? It’s about saved emissions today rather than emissions that happened 30, 40 years ago.

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John Mandyck:  What insight can you share on the cost per square foot for the conversions for some of the more common building typologies? 

David Farnsworth: Yeah. It depends on the invasiveness of the conversion. We’re looking at a building that needed to have something like 30 or 40,000 square foot so it’s like a 750,000 square foot building that needed to have about 40,000 square foot cut out of the lower floor plates in order to achieve the lightener requirements. It was utilizing a complete– it had steam absorption chillers and steam heat with perimeter induction units. So it was completely getting rid of that mechanical system and, and switching it out to an electrified heat pump system. This one was not replacing the facade, but it was making facade modifications to add operability to the existing, facade windows they had just recently converted, they had recently replaced the glazing, and their facade system from single pane to double pane. That was coming out anywhere from 325 to 350 a square foot, depending on whether we’ve added the area that we took out, that we carved out of the base of the building, if we added it up to the top or not.

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John Mandyck: What surprises you the most about the analysis as you start?

Tess McNamara: I think that facade payback really did surprise me. I thought it would pay back within the time frame to 2050, but I didn’t expect to see it pay back within ten years.That was really encouraging, it encourages action, iencourages retrofits and improvements. That was exciting to see.

John Mandyck: Right. And, David would surprised you.

David Farnsworth: Yeah, I think, you know, the facade, it was it was very interesting because the I think like the quality of the spaces that we can create with these
buildings is, you know, a lot depends on whether or not it makes sense to redo the facade
and if and if you take the stance that you’re keeping the facade, then you’ve really
constrained yourself to, you know, to, to move with like internal light wells and things to
convert some of these deep, you know, some of these deep floor plates.

And so, if it’s not an environmental negative to replace the facade, but rather a beneficial
measure, then I think it can create they can unlock some value. When you look at
selectively, carving around the outside of the building and getting real views and market
quality, you know, apartments, rather than some of the shotgun style apartments that are
very efficient and very economically viable, you know, for a certain demographic. Right?
Generally, the, you know, 20 to 25 year old, that’s what a lot of the Financial district, you
know, conversions are targeted towards in their studio apartments with two home offices
which are effectively two, you know, two bedrooms without windows. But, once you once
you look at the replacement of the facade as part of these things and opening up
opportunities to carve around the outside, then you can get, apartments that are that are
really nice and equivalent to what you’d build new. Maybe even nicer because they have
higher Florida floors.