Building owners, managers to gather here

They are a legion of stressed-out people nearly 2,000 strong - and headed to Center City.

For the next three days, members of the Building Owners and Managers Association, commonly known as BOMA, will gather at the Convention Center to commiserate about this foul economy's impact on them.

Vacancies have been on the rise. Tenants are pickier, emboldened by the awareness that all that empty space means they can easily move if not satisfied where they are.

Property improvements that would help lure or retain tenants? Nobody has the cash to pay for it.

"Everything has been put on hold," said Stephen Resinski, director of management services at Grubb & Ellis, where he oversees more than 35 office, industrial, and retail properties from South Jersey to Harrisburg.

In the region's commercial office market, the vacancy rate was more than 15 percent for the first quarter of this year, up from 14 percent for the same period in 2008, according to data compiled by Grubb & Ellis.

Worse conditions are likely before recovery comes, warned Jeff Goggins, a commercial real estate expert at national builder Trammell Crow Co. To support his prediction, he cited "shadow vacancy" - space that companies are currently leasing but will jettison because of recent layoffs or other business consolidations.

"That's not going to bode well for landlords," Goggins said.

And yet Resinski, who is co-chair of the entertainment committee, insists the BOMA gathering "will be a joyful event" - and not just because of the Sensational Soul Cruisers, the band he has lined up for tomorrow night's kickoff festivities at the National Constitution Center.

Property managers have reason for optimism thanks to the green movement, Resinski says. The call - from the White House and environmentalists alike - for a more sustainable way of living and working is fueling a push by BOMA and others for stimulus funds and other financial and legislative incentives to help building owners pay for energy-efficient retrofits that would shave operating costs.

"With the amount of buying power that BOMA has . . . a lot of us can get behind and push legislation that is going to help us," Resinski said.

The group's 16,500-plus members own or manage more than 9 billion square feet of commercial space in North America.

In Pennsylvania, the primary motivation behind the growing interest in energy efficiency is the end of state-imposed rate caps on electric utilities by 2011. New Jersey lifted rate caps in 2003.

But aside from caulking around drafty window frames, energy-saving building retrofits can be quite costly - a turnoff in such capital-starved times.

Dane Taival plans to be the "Yes You Can" voice at the conference. Monday at 2 p.m., he will help lead a primer on a financing option known as performance contracting, which allows building owners to use future energy and operational savings to fund improvement projects.

Taival is vice president of contracting solutions for the heating/ventilation/air-conditioning firm Trane Inc., which specializes in sustainable business environments.

Though more commonly used as a financing tool by schools and institutions, performance contracting has had relatively little application in the commercial office market because "it hasn't been well understood" and an industry standard was lacking, Taival said. BOMA is working to correct both.

Under a typical performance contract, a property manager enters into a deal with an energy-services company, or ESCO. That company first assesses energy consumption of a building or buildings, and then works up a plan, if possible, on how to reduce the amount of energy being used. The ESCO then lines up the contractors to do any installation work and arrange for financing.

Savings property owners realize from the retrofits can then be applied toward paying off the loans, whose terms are usually seven to 10 years. Taival said the interest rates on those loans were not usually higher than those for traditional financing, though there were fees associated with engineering and consulting services provided by the ESCOs.

What sold Thomas Jefferson University and Hospital on performance contracting in 2000 was the ability to implement $7 million in energy upgrades without laying out any capital and without having to include them on the company's balance sheet, said Randy Haines, energy manager for the education and health-care system.

The changes have resulted in annual energy savings of $1.7 million, Haines said. Jefferson is considering another $3 million in energy-conservation initiatives, to be funded and implemented through performance contracting.

"The beautiful part about saving energy," Haines said, "is it goes right to the bottom line."