

The day is coming when borrowers that can demonstrate sustainability in their commercial properties will reap the benefits with lenders, according to Anthony Malkin, CEO of Empire State Realty Trust.
“Already in Europe, if you are not energy efficient, if you are not sustainable, you pay more for debt and soon you will get reduced proceeds,” Malkin told attendees of the CRETech New York conference last week. “You need to future-proof what you do going forward.”
The New York-based real estate investment trust, best known for a local portfolio that includes the Empire State Building, is also known as a leader is energy efficiency, sustainability and other ESG-related principles. As it has modernized its portfolio, the REIT has developed what Malkin called a replicable model for energy optimization.
This is particularly important as New York City moves toward implementing Local Law 97, which will mandate that most buildings of more than 25,000 square feet meet new energy efficiency and greenhouse emission caps by 2024. The city will implement more strict guidelines by 2030, with the aim of cutting emissions produced by the largest buildings in New York 40 percent by 2030 and 80 percent by 2050.
Malkin brought the impact of the 2019 law home by warning that the mandated changes will have a negative impact on tenants and landlords that don’t move quickly toward energy efficiency and sustainability.
“Don’t think you’re insulated, because you’re a tenant, from the fines that are coming,” Malkin said, noting that the impact of tenants on a building’s total consumption will be considered in the implementation of the new law.
How real estate has been ‘asleep at the wheel’
While the real estate industry has refined its messaging around climate change, these words have not yet translated into enough action, Malkin said.
“For nearly two decades, [the] dirty secret is very little progress was made,” Malkin said, adding that cosmetic changes to buildings have masked unsustainable deficiencies. “We have lived a world in which new glass box buildings and LEED Platinum status have been celebrated and attracted the highest rents and prices.”
But these cosmetic changes, which include plant walls, water features and bike racks, concealed bigger problems around the need to eliminate indoor volatile organic compounds and reduce carbon dioxide levels, Malkin added.
In contrast, Malkin cited what he believes are the Empire State Building’s more comprehensive, if less flashy, ESG efforts.
“We’ve taken the time to learn how to retrofit for energy efficiency and [indoor environmental] quality. We make healthy, energy-efficient buildings available to virtually all at an accessible price per square foot,” Malkin said. “We don’t charge triple digit rents in our portfolio [and] our entire portfolio is powered with renewable wind energy.”