When it comes to energy efficiency, most commercial buildings in Canada's largest cities are behind the curve. In fact, many of these structures in Vancouver and Toronto predate modern building codes. However, according to Mike Singleton, Executive Director of Sustainable Buildings Canada, gradual -- and economic -- retrofits can make a world of difference, as well as augment a building’s value.

“In terms of retrofits, you have an opportunity to really do it right, and if you do, you can realize a 40-50% reduction in energy use, and that really is dramatic. If you can half your energy bills, that has obvious advantages, especially today with the price of fuel going up,” he says.

“The modern building code is updated every four or five years and energy performance requirements have improved to have better energy performance. The modern code is still 50 years old, however, requirements around energy performance a the beginning weren’t very much, but now they’re more and more stringent. The current version of the code is quite advanced compared to the ‘70s.”

READ: New Green Standards for Toronto Buildings to Kick in May 1

Decades-old buildings can be modernized to ameliorate their energy consumption and, by extension, reduce utility outlays -- which are usually borne by tenants -- by fortifying their envelopes. Singleton says envelopes in such older buildings are leaky but can be tightened with better insulation, especially on the edifice’s exterior through superior glazing. Windows, in particular, are the most obvious way address air leakage and other thermal bridging issues, he adds, and exterior insulation is a good solution because it can mitigate energy loss and minimize problems caused by moisture.

Decades ago, windows were single-pane, but using today's triple-pane will very noticeably improve energy efficiency -- although it remains a little more complicated than that, Singleton says.

“You have to think about elevation, like which way the window faces, because there are heat-gain considerations; windows facing north have different requirements than windows facing the south or west, and would require different glazing,” he says, adding it primarily has to do with comfortable temperature than efficiency, although those gains aren’t as dramatic.

While those retrofits are pricier, involving mechanical upgrades and brand new HVAC systems, the benefits in the long run speak for themselves, Singleton added.

Getting Ahead of Rising Carbon Costs

In 2030, Canada’s carbon tax will increase from $40 per metric ton (MT) today to $170/MT, which Singleton believes should elucidate to commercial landlords the necessity of energy efficiency retrofits.

“That’s going to have a big impact on space heating costs, so the more you can do, the more advantageous it is in terms of potential equity, because if you can demonstrate your building is operating at half the cost as a similar building next door -- it will also have a big impact,” Singleton said, adding, “the upward price pressure on fuel is going to start playing out and that may be where some of the impetus for change is going to come from.”

Energy efficiency upgrades through retrofits can, indeed, boost a commercial building’s value, according to Alain Rivère, Vice President of Office Leasing and Sales at CBRE’s High Technology Facilities Group -- but other factors would influence whether or not retrofits are worth undertaking at all.

Inhered in a commercial building’s value, perhaps more than anything else, is its rental income potential, and although an energy efficient building -- and the cosmetic improvements that come with it -- can attract tenants, location and accessibility remain the two most important criteria. Rivère says that, before committing to retrofits, a mechanical engineer would need to conduct an assessment and help calculate the cost-benefit analysis because, in certain cases, razing the edifice and building a newer, improved, and more economically viable commercial structure, might make more sense.

Nevertheless, certain buildings are attractive to tenant companies that are willing to pay rents commensurate with quality, Rivère added, and a comfortable office with large windows through which natural light flows and lower operational costs reign supreme.

“Every building is different; for some buildings, it makes a ton of sense. [The landlord] should retrofit a building with good bones, as people say, and that has large windows that are old, mechanical systems that are super old and need to be replaced anyway, but that’s in a great location,” Rivère said.

“If you can build a building three times bigger and retrofitting is too expensive to bring it up to today’s standards, it might make more sense to build brand new than to retrofit. Location is always critical, as is the bones of building and what you’re working with. Some older buildings with inefficient floor plates and small windows, which would be replaced by small windows anyway, and other things you can’t change, make less sense to retrofit.”

Bringing Heritage Up to Date

In Vancouver, 1110 Hamilton and 1132 Hamilton are notable for their efficiency retrofits, as are the Sun Tower, at 128 West Pender, and 609 Granville.

Allied Properties is known for owning ‘vintage’ buildings with exposed brick and beams, and its portfolio is replete with such examples in Toronto and Vancouver.

Efficiency retrofits make a lot of sense in heritage buildings, Rivère added, and Vancouver has a lot of them.

“Older buildings that are attractive to retrofit are the heritage, brick and beam, character buildings, which are sought after, with their exposed beams and exposed ceilings,” he said. “Those are in strong demand, and older buildings like that, which are 60-plus years old, Vancouver has had great success in retrofitting.”

Those “character” buildings are commonplace in Vancouver’s Yaletown and Gastown neighbourhoods.

“It goes back to charm and character, which is what companies want, and they want it because these offices are interesting places to go to work that breed innovation, and they’re where people want to go,” he said. “The company’s office becomes a selling tool to attract talent.”

In addition to rising carbon tax rates, another reason companies will look into energy efficiency retrofits more in the coming years is the popular corporate neologism: environmental, social and Governance (ESG). Not only are companies increasingly conscious of their public image in today’s hyper-environmentally conscious world, so too are their employees, particularly younger ones, who will define the workforce for decades to come.

“[ESG] is more on decision makers’ radars when it comes to tenants looking for space, so a building that’s more environmentally friendly and energy efficient, and gives employees a better experience -- with bigger windows and more natural light and better quality air, which is secondary to cost because it’s a better experience -- that’s all part of ESG, and it’s on a lot of people’s radars these days,” Rivère said. “It’s another component of the reason for retrofitting.”