SUMMARY OF THE FINANCIAL 

BENEFITS OF ENERGY STAR®

LABELED OFFICE BUILDINGS

EPA 430-S-06-003 

February 2006 

Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings 1

The financial benefits of improved building energy efficiency and lowered energy costs

are widely recognized. Many corporations and real estate firms have actively invested

in energy efficiency, cutting energy costs while improving building 

performance and financial returns. 

Nonetheless, the national economy as a whole and its building stock in particular remain

inefficient and wasteful of energy. In 2001, total national energy expenditures were nearly

$700 billion.1 Commercial buildings accounted for nearly one-fifth of the total energy used

and one-third of end use electricity.2 Commercial buildings incur $132 billion per year in

energy bills, and this cost is rising rapidly.3 Many commercial properties waste about onethird of the energy they consume, burdening their corporate owners with large and rising

energy bills. 

This paper summarizes the findings from a study on the financial benefits of energy 

efficiency in commercial buildings, prepared for the U.S. Environmental Protection Agency

(EPA), entitled, The Financial Benefits of ENERGY STAR® Labeled Office Buildings. The study

provides a detailed analysis of the benefits of using ENERGY STAR to achieve a high level of

energy performance in commercial buildings.4 The benefits analyzed include significant direct

financial savings from reduced energy use and persistent savings from improvements in

energy performance, and improved building occupancy and greater building asset value. At a

time of rising energy costs, the use of ENERGY STAR is increasingly recognized as a

hallmark of fiscally sound building management and operation. ENERGY STAR is a smart

building strategy from both a fiscal and risk reduction perspective.

Summary of the Financial Benefits of

ENERGY STAR® Labeled Office Buildings

A new study of commercial office buildings concludes there

are substantial financial benefits associated with achieving

the ENERGY STAR label for buildings. 
2 Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings

What Are ENERGY STAR Labeled

Buildings?

ENERGY STAR is a voluntary public-private

partnership program. As one important program

strategy, EPA supports ENERGY STAR in the

commercial sector to help businesses and other

organizations monitor, understand, and reduce

building-wide energy use, as well as assess the financial

impact of improved energy performance.

A key element of this approach is EPA’s National

Energy Performance Rating System for buildings,

unveiled in 1999. EPA’s online benchmarking system,

Portfolio Manager (PM), allows building owners and

managers to enter data about their buildings’ energy

consumption, hours of operation, number of

occupants, location, and other building characteristics.

The system compares each building’s energy

performance with the performance of similar

buildings across the country—providing insights into

how well each building is designed, maintained and

operated. Each building receives an ENERGY STAR

rating from 1 to 100 based on one year’s energy

consumption. 

EPA awards the ENERGY STAR label to owners of

buildings with ratings in the top 25 percent of energy

efficiency performance ratings nationally. To receive

the ENERGY STAR label, the owner of the building

must have a professional engineer verify that it has

earned a rating of 75 or higher based on 12

consecutive months of data. In addition, the building

must conform to current industry standards for

thermal comfort, air ventilation, control of indoor air

pollutants, and illumination.

Buildings can be re-benchmarked periodically, which

helps owners determine whether energy performance

is improving, remaining the same, or deteriorating,

and can also help owners verify the impact of building

improvements and changes in management practices.

EPA recognizes buildings rated 75 or higher in

subsequent years with a new ENERGY STAR label.

Through 2005, more than 2,500 buildings had earned

the ENERGY STAR, including more than 1,000

office buildings.

Many building owners find that the ENERGY STAR

rating process helps them identify opportunities to

cost-effectively reduce waste and achieve significant

energy savings. Some also attribute value to the

recognition provided by the ENERGY STAR for

buildings label. For example, Equity Office Properties

has stated that “the ENERGY STAR label signals to

its tenants and investors that it has capitalized on an

ENERGY STAR Buildings Program Elements

Portfolio Manager

(PM)—National

Energy

Performance

Rating System

An online benchmarking tool used 

to measure a building’s energy

performance on a 100-point scale. 

This is the building’s “rating.”

National

Benchmark

A rating of 75 or greater, which denotes

superior energy performance.

ENERGY STAR

Label

A certification mark to recognize

superior energy performance for

buildings with a rating of 75 or greater.

ENERGY STAR Buildings Program Statistics

More than 26,000 buildings have used the rating system.

More than 2,500 buildings have earned the ENERGY STAR

Label.

More than 40% of ENERGY STAR labeled buildings are office

buildings.

The ENERGY STAR Label for Buildings
Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings 3

extraordinary opportunity to make its buildings

environmentally and fiscally sound.”5

To help communicate the successful energy

management practices used in ENERGY STAR

labeled buildings, EPA encourages building owners to

submit case studies about their building upgrades and

the benefits realized, such as economic payback, peak

demand reduction, and increased valuation. These

case studies are available on the ENERGY STAR Web

site at <www.energystar.gov>.

What Are the Financial Benefits 

of ENERGY STAR Labeled Office

Buildings?

Approach

To determine the financial benefits associated with

buildings that have earned the ENERGY STAR label,

data were analyzed for office buildings that earned the

ENERGY STAR label between 1999 and 2004. The

data come from three sources:

● Portfolio Manager data. Supplied by EPA, these

data cover 882 buildings that received the

ENERGY STAR label through September 2004.

The data consist of snapshots of each building at

the time it was labeled. There were 283 buildings,

labeled in multiple years, resulting in 540

additional observations. In all, 1,422 snapshots of

building energy performance were analyzed.

● ENERGY STAR Web site building profiles. A total

of 305 building profiles for ENERGY STAR

labeled office buildings had been submitted to

EPA for listing on the ENERGY STAR Web site

as of October 2004. The profiles provide

narratives of the buildings’ energy upgrade

histories as well as insight into the financial

benefits of these upgrades.

● Interviews with ENERGY STAR partners.

Representatives of major ENERGY STAR

commercial partners—including Arden Realty,

Inc., Hines Interest Ltd., Transwestern

Commercial Services, and USAA Real Estate

Company—were interviewed about the benefits

they attribute to ENERGY STAR, and to draw

from the data that these companies have gathered

on their buildings.

The performance data for ENERGY STAR labeled

office buildings were compared to that of a national

subset of buildings derived from the U.S. Department

of Energy’s Commercial Buildings Energy

Consumption Survey (CBECS). The “CBECS Subset”

shown in the figures below represents “average”

performance for the stock of buildings that is similar

in age, size, etc. to buildings that have earned the

ENERGY STAR label.

Key Findings

The analysis finds that ENERGY STAR labeled office

buildings provide benefits in several key areas:

● Direct energy savings. ENERGY STAR labeled

office buildings are one-third more energy

efficient than average U.S. office buildings,6 and

have annual energy bills that are, on average, at

least $0.50 per square foot lower per year, or 35

percent lower than the average building.

● Persistence of energy performance and savings.

The energy performance of ENERGY STAR

labeled office buildings improves over the first

several years, and these savings persist. Buildings

that earned the ENERGY STAR label in six

consecutive years are 20 percent more energy

efficient in the sixth year than in the first year

labeled.7
● Higher occupancy trend. Managers of Real Estate

Investment Trusts (REITs) with large ENERGY

STAR portfolios confirm that both tenant

comfort and occupancy are higher in their

ENERGY STAR labeled buildings.

● Increased asset value trend. Reliably persistent

energy performance makes it more likely that the

higher net operating income from energy cost

savings will be recognized through higher building

valuation. Experienced managers of large

portfolios of ENERGY STAR labeled buildings

interviewed for the study confirm that ENERGY

STAR helps increase building value.

● Additional benefits. In addition to the benefits

examined in this study, energy-efficient buildings

contribute to lower emissions, reduced exposure

to volatile fuel prices, and savings in operations

and maintenance costs.

Each of these key findings is discussed in more detail

below. In addition, analysis of the data provides some

insight into the characteristics of the best-performing

ENERGY STAR labeled buildings.

Direct Energy Savings

An important benefit from energy efficiency is direct

energy savings, resulting in lower energy bills.

ENERGY STAR labeled buildings, when compared to

an analagous subset from the national stock, were

found to use 40 percent less energy. As shown in

Figure 1, energy intensity in ENERGY STAR labeled

buildings was 61.6 kBTU per square foot per year

(kBTU/ft2/yr), compared to 103.2 kBTU/ft2/yr in an

average building—a difference of about 35.0

kBTU/ft2/yr, being conservative.

These energy savings are equivalent to about $0.50

per square foot per year in lower energy costs. For a

100,000 ft2 office building, this translates to an

annual energy bill that is $50,000 below that of an

average building.

Figure 2 shows the improvement in performance of

ENERGY STAR labeled buildings relative to average

buildings from CBECS by the construction year of

the buildings, thus confirming that 35.0 kBTU/ft2/yr

is a conservative estimate for the improved

performance of ENERGY STAR labeled office

buildings compared to average buildings.

Figure 2. Energy Intensity in ENERGY STAR

Labeled vs. CBECS Average Buildings, by 

Year Built

4 Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings

0

20

40

60

80

100

120

Energy Intensity 

(kBTU/ft2/yr)

ENERGY STAR CBECS Subset

61.6

103.2

98.4

110.8 110.4

116.5

102.1 98.0 96.1

60.9 60.5 61.8 66.3 65.1 64.1 60.2

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

1880-

1944

1945-

1954

1955-

1964

1965-

1974

1975-

1984

1985-

1994

1995+

Energy Intensity (kBTU/ft2/yr)

CBECS Subset ENERGY STAR

Source: Capital E Analysis of EPA data

Source: Capital E Analysis of EPA data

Figure 1: Energy Intensity in ENERGY STAR

Labeled vs. CBECS Average Buildings
Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings 5

The energy savings potential from ENERGY STAR

labeled buildings, and the value of the energy savings,

will vary across the country, as shown in Table 1 below.

It is important to note that the ENERGY STAR

designation recognizes energy efficiency performance,

without regard to the steps taken to achieve higher

performance. Thus, the lower energy costs associated

with ENERGY STAR labeled buildings are not

necessarily the result of specific investments in energy

efficiency. For example, some buildings that received

the ENERGY STAR label may have already been

performing above the benchmark rating of 75 and

required no additional investment. However, these

buildings may have been designed originally to be

superior energy performers. 

Persistence of Energy Performance

Buildings that receive the ENERGY STAR label in

multiple years consistently outperform comparable

non-labeled buildings, and the performance margin

increases over several years of re-labeling. As shown in

Figure 3, buildings that earned the ENERGY STAR

label in six consecutive years used 20 percent less

energy per square foot in the sixth year than in the first

year of labeling, compared to average buildings.

Although the sample size is small, this is an 

important finding because in the past, lack of 

persistence in energy savings was a disincentive to

making energy efficiency upgrades. Previous 

analyses of the ENERGY STAR program have 

estimated benefits based on the energy performance

calculated for one label year and, therefore, have not

recognized the improvement in building performance

over time.11 As a consequence, some of the benefits of

ENERGY STAR applied over multiple years are greater

than previous estimates and should be recognized.

Region

Energy Performance (kBTU/ft2/yr)

Avg. Cost per

kBTU

(2003/2004)9

Cost Differential 

Per Square Foot

ENERGY STAR per Year 10 CBECS Subset Differential

United States 61.6 103.2 41.6 $0.015 $0.62

1- New England 65.2 106.7 41.5 $0.018 $0.75

2- Middle Atlantic 68.2 101.2 33.0 $0.017 $0.57

3- East North Central 55.9 111.5 55.6 $0.014 $0.76

4- West North Central 63.2 134.0 70.8 $0.013 $0.90

5- South Atlantic 64.0 103.2 39.2 $0.014 $0.55

6- East South Central 59.4 101.9 42.5 $0.013 $0.57

7- West South Central 61.4 89.0 27.6 $0.014 $0.38

8- Mountain 61.9 100.9 39.0 $0.013 $0.52

9- Pacific 60.9 94.2 33.3 $0.018 $0.60

Source: Capital E Analysis of EPA and EIA Data

Table 1. Energy Performance Differentials and Cost Savings for ENERGY STAR Labeled Buildings

by Region
Higher Occupancy Trend

Changes in occupancy have a potentially large

financial impact for building owners and managers.

For example, a one percent increase in occupancy in a

100,000 ft2 building renting at $30 per square foot

would be worth $0.30 per square foot, or $30,000 per

year. To achieve such savings through energy efficiency

in a building with annual energy costs of $1.50/ft2

would require as much as a 20 percent reduction in

energy use.

Several factors lead us to expect ENERGY STAR

labeled buildings to be associated with higher levels of

occupancy. First, these buildings are more likely to

have energy-efficient lighting and ventilation systems,

and advanced energy management and control

systems (EMCS), compared to non-labeled buildings.

These technologies have been demonstrated to

improve occupant comfort and attitude toward

occupied space.12 Increased tenant satisfaction can

lead to higher occupancy and greater profitability. As

shown in Figure 4, ENERGY STAR labeled buildings

with the highest occupancy also have higher reported

use of EMCS.

Discussions with senior REIT managers with large

portfolios of ENERGY STAR labeled buildings also

confirm that labeling is positively correlated with

higher occupancy.

Increased Asset Value Trend

Interviews with REIT managers explored the link

between increased energy performance, specifically

ENERGY STAR labeling, and asset value. According

to Bob Accomando at Arden Realty Inc., the savvy

marketplace is starting to recognize the added value of

ENERGY STAR.15 Hines Interest Ltd. claims that its

ENERGY STAR labeled buildings are more

competitive, more valuable, and more profitable.16

David Downey, Managing Director of Transwestern

Commercial Services, states, “When we sell buildings

that are ENERGY STAR, purchasers are more likely

to recognize and pay the increased building value

resulting from the decreased energy use and increased

net operating income. This is true for both lenders

and investors.”17

Factors that increase net operating income and asset

value include:

● persistent lower energy and operating costs; and

● higher occupancy.

6 Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

1999 2000 2001 2002 2003 2004

Year

Energy Intensity

(kBTU/ft2/yr)

66.0

59.3

56.3

52.7

49.3 52.2

Figure 3. Energy Performance vs. Label Year for

Buildings Labeled in All Six Years(10 buildings)

59%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Percent Reporting EMCS

80-90% 90-100%

Reported Occupancy

Figure 4. Reported Occupancy and Relationship

to Energy Management and Control Systems

Source: Capital E Analysis of EPA data

Source: Capital E Analysis of EPA data
Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings 7

Lower energy consumption yields higher net operating

income (NOI). The persistence of energy performance

in ENERGY STAR labeled buildings documented in

this study helps ensure future energy savings and a

higher NOI, which can contribute to increased asset

value. If the market recognizes an increased NOI from

persistent energy cost savings at a capitalization rate of

8.5, a $0.50 per square foot annual reduction in

energy costs would result in asset valuation increase of

$5.90 per square foot. Currently lower capitalization

rates imply even larger increases in building value

from persistent energy efficiency savings.

The ENERGY STAR Web site profiles provide

insights about how ENERGY STAR has directly

impacted valuation in some buildings. For example,

following an energy efficiency upgrade the First

National Bank Center in San Diego cut annual

operating costs by more than $0.50 per rentable

square foot. The building operator reports that this

upgrade increased the building's value by almost 

$4 million.18

As Brenna Walraven of USAA Realty Company notes,

“Increasingly, more sophisticated tenants understand

and renew leases at higher rates with landlords that

work to control expenses without sacrificing tenant

comfort. Energy efficiency and our partnership with

ENERGY STAR help execute on these mutually

beneficial goals.”19

Additional Benefits

Analysis of data on ENERGY STAR labeled buildings

identified several other benefits. These include:

● Better operations and maintenance. Better

performing buildings—such as ENERGY STAR

labeled buildings—tend to be more actively

managed and feature better operations and

maintenance procedures.

● Peak load, demand charges, and tiered rate

structure savings. New utility pricing schemes

that better reflect delivered (peak) electricity costs

can be more easily mitigated with a properly

configured EMCS. ENERGY STAR labeled

buildings that feature EMCS can realize

additional savings under such schemes.

● Emissions reduction benefits. The public health,

property, and other benefits associated with

reduced energy use are driving the expansion of

cap-and-trade and other emissions trading

programs. These programs are creating financial

returns for building owners who cut energy use. 

● Hedge against price fluctuations. Consuming

less energy reduces exposure to volatile energy

prices, a significant source of financial risk.

While the financial value of these additional benefits

is not quantified, they nonetheless lend additional

weight to the argument that achieving the ENERGY

STAR label is a smart building management strategy

both from a fiscal and a risk reduction perspective.

“Energy efficiency and ENERGY STAR help us to lower overall operating costs for our tenants.

Furthermore, by being more efficient, we're better able to control building temperatures and thus keep

tenants more comfortable.”

—Brenna Walraven, Executive Director of National Property Management at USAA Realty Company.13

“ENERGY STAR helps attract tenants and increase occupancy. An ENERGY STAR label has psychological

and marketing value, and it is becoming more important to tenants.”

—Gail Sturm, Senior Vice President of Transwestern Commercial Services14
8 Summary of the Financial Benefits of ENERGY STAR® Labeled Office Buildings

For More Information

For more information about the benefits of ENERGY STAR, or to

learn about how to join the ENERGY STAR partnership, please visit

<www.energystar.gov>.

Case Study: Arden Realty

Arden Realty has been named ENERGY STAR Partner of the Year twice, and in 2003 was recognized

with the ENERGY STAR Award for Sustained Excellence in Energy Management. This company has a

strong history of re-labeling ENERGY STAR buildings: While only 8 percent of all ENERGY STAR

labeled office buildings received the label four or more times, 56 percent of Arden’s ENERGY STAR

buildings have been re-labeled four or more times.

Arden Realty’s First Vice President for Asset Management, Bob Accomando, reports that the first step

towards better energy performance is to fine-tune the existing systems—increasing the life

expectancy of equipment through preventative maintenance and increasing energy efficiency by

roughly 8 to 10 percent. Mr. Accomando notes that energy efficiency has improved its property NOI

and enhanced the value of Arden Realty’s buildings.20

Arden reports an average financial payback of 3.5 years from energy savings alone on energy

efficiency retrofits performed on ENERGY STAR labeled buildings, even before the recent surge in

energy prices.

The strong Arden Realty building values are reflected in the December 2005 sale of Arden Realty to

GE Real Estate for $3.2 billion.
1 EIA Web site. <www.eia.doe.gov/emeu/aer/txt/ptb0105.html>. Most recent

available data is $694 billion in 2001. Accessed 10/21/05.

2 EIA Web site. <www.eia.doe.gov/emeu/aer/diagram1.html> and

<www.EPA.doe.gov/emeu/aer/pdf/pages/sec8_3.pdf>. Accessed 10/21/05.

3 2005 Buildings Energy Data Book, U.S. Department of Energy, Energy

Efficiency and Renewable Energy. August 2005. Available at:

<http://buildingsdatabook.eere.energy.gov>. 

4 Greg Kats and Jeff Perlman, “Financial Benefits of ENERGY STAR Labeled

Office Buildings,” U.S. EPA, February 2006. Available at <www.cape.com/publications>.

5 Energy Management & Investor Returns: The Real Estate Sector. 2002.

Innovest Strategic Value Advisors, October. p. 17 Available at:

<www.innovestgroup.com>.

6 The data set used for baseline “average” office buildings is a subset of

the Department of Energy’s Commercial Buildings Energy Consumption

Survey (CBECS) Public Use Data from 1999. EPA selected these buildings

for comparison because they are most similar to the ENERGY STAR

labeled office buildings in size and use.

7 An important problem related to energy efficiency investments, especially

before the mid-1990s, is that energy savings commonly did not persist.

That is, energy efficiency gains eroded over time, reducing energy

savings and making energy efficiency a less attractive investment. Thus,

the persistence of performance in ENERGY STAR labeled buildings is an

important finding.

8 Note that the incidence of EMCS decreases slightly, from 72 percent to 70

percent, when comparing buildings with ratings in the 90+ range to those

in the 80-90 range.

9 Average cost per kBTU for electricity, natural gas and oil. See references

for Table 2-3 in the report for sources of these data.

10 The average for ENERGY STAR labeled buildings is based upon the most

recent year in which the building was rated and labeled.

11 See, for example: Von Neida, Bill and Thomas W. Hicks. 2002. Building

Performance Defined: The ENERGY STAR National Energy Performance

Rating System. Association of Energy Services Professionals.

12 Kats, Greg et al. 2003. The Costs and Financial Benefits of Green

Buildings: A Report to California’s Sustainable Building Task Force.

October. (available at <www.cap-e.com/publications>).

Also see: Sensharma et al. 1998. Relationships Between the Indoor

Environment and Productivity: A Literature Review. Published in ASHRAE

Transactions. Vol. 104. See: <www.dc.lbl.gov/IHP>.

13 Brenna S. Walraven, RPA, CPM, Executive Director, National Property

Management, USAA Realty Company, personal communication with

author, October 7, 2005.

14 Gail Sturm, Vice President, Transwestern Commercial Services, personal

communication with author, February, 2005.

15 Bob Accomando, First V.P. Asset Management, Arden Realty,

conversation with author, February 15, 2005.

16 Andrew Kitchens, Senior Manager, Engineering Services, Hines, email

communication with author, December 23, 2004.

17 Transwestern Commercial Services manages more than 150 million ft2

nationwide. Transwestern began rating its properties through ENERGY

STAR in 2000, and received an ENERGY STAR Partner of the Year award

in 2003. Out of 161 rated buildings, 45 have earned the ENERGY STAR

label. (Conversation with David Downey, February 2005.)

18 ENERGY STAR Labeled Building Profile: First National Bank Center, San

Diego, California.

<www.energystar.gov/index.cfm?fuseaction=labeled_buildings.

showProfile&profile_id=1357> Accessed October 8, 2004.

19 Brenna S. Walraven, RPA, CPM, Executive Director, National Property

Management, USAA Realty Company, conversation with author, October

7, 2005. 

20 Bob Accomando, First V.P. Asset Management, Arden Realty,

conversations with author, February and December 2005.

Endnotes

About the authors

Greg Kats is founding Principal of Capital E <www.cap-e.com>, a national clean

technology deployment and strategy firm. He is the Principal Advisor in developing $550

million of green affordable housing, involving Enterprise, JPMorgan Chase, Fannie Mae,

the American Institute of Architects, and others. Mr. Kats served from 1996 to 2001 as

the Director of Financing for the $1.1 billion Office of Energy Efficiency and Renewable

Energy at the U.S. Department of Energy. He is Chair of the Energy and Atmosphere

Technical Advisory Group for LEED and serves on the LEED Steering Committee. Mr.

Kats co-founded and chaired, from 1995 to 2001, the International Performance

Measurement & Verification Protocol <www.ipmvp.org>.

Jeff Perlman is a consultant with Capital E and the president of Bright Power in New York

City, where he helps design, install, and obtain financing for solar and energy efficiency

projects for commercial and residential buildings.