How Green Is Windy City CMBS Office?
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How Green Is Windy City CMBS Office?

Chicago River Cityscape at Sunset

In September 2013, Chicago’s city council and then-Mayor Rahm Emanuel adopted a building energy benchmarking ordinance that aimed to raise awareness of energy performance as well as unlock energy and cost saving opportunities for businesses and residents. The ordinance, which was fully phased in by 2016, calls on commercial, institutional, and residential buildings larger than 50,000 sf to track whole-building energy, defined as the usage of electricity; natural gas; and any other fuels to operate both common and tenant-occupied spaces. The ordinance requires information to be reported to the city annually and verified every three years by a licensed in-house or third-party professional. The law covers less than 1% of Chicago’s buildings according to, but roughly 20% of total energy consumed across the city. While the ordinance does not currently require building owners to make mandatory investments, a 2019 energy benchmarking report published in April 2021 revealed $24.6 million in annual energy reduction savings between 2016 and 2019 (approximately $74 million in total) and a 15% decline in carbon emissions per building sf over the period.

KBRA Credit Profile (KCP), a division of KBRA Analytics, utilized its environmental, social, and governance (ESG) database to further examine the impact of Chicago’s 2013 energy benchmarking ordinance on securitized and non-securitized commercial real estate (CRE). In this report, we compared the environmental profile of 28 Chicago CMBS office buildings (the studied cohort) across four metrics—the Energy Star score, site energy use intensity (EUI), source EUI, and greenhouse gas (GHG) intensity—against the broader Chicago and U.S. national office markets. The studied cohort, which collateralizes $5.61 billion in securitized balance, ranged in size from 250,000 sf to 3.8 million sf, and averaged 1.3 million sf. Across our agency, conduit, large loan, and single-asset single borrower (SASB) coverage universe,[1] there are 223 unique Chicago CMBS addresses, including 36 office buildings, though only 28 office buildings reported one or more of the four metrics considered in our analysis. Additional limitations exist with the Chicago source data. For example, for the 2019 data set, only 60% of buildings reported a primary property type. The statistical averages and medians were calculated on a simple, unweighted basis.

As we examined the factors driving environmental efficiency, several key themes emerged:

  • Chicago office properties have seen improvements in energy usage on average since the onset of the ordinance in 2013, and they have reported above-average median Energy Star scores relative to the national median since 2014.

  • In 2019, the most recent reported data year, Chicago CMBS office properties outperformed the broader Chicago office market in three of the four analyzed metrics: Energy Star score, source EUI, and GHG intensity. In total, 18 of the 28 CMBS office buildings received LEED certification from the U.S Green Building Council (USGBC), including six that are Platinum certified. Fifteen of the 18 LEED-certified office buildings are also considered Class A.

  • Improvements in energy usage and emissions since the ordinance was implemented may be partly due to Chicago office building owners investing in infrastructure upgrades.

  • Despite improvements made in site and source EUIs since 2014, Chicago office buildings continue to lag the national median EUIs.

Energy Star

The first data point in our study, which is captured through the Chicago Energy Benchmarking Ordinance, is the Energy Star score. The Energy Star program, which is run by the Environmental Protection Agency (EPA) and Department of Energy (DOE), provides a means of benchmarking the energy efficiency of specific commercial buildings and industrial plants against similar facilities nationwide. The score is expressed on a number scale from 1-100 and rates performance on a percentile basis, considering normalized business activity and relying on source EUI. A score of 50 represents median energy performance, while 75 or higher indicates top performance and eligibility for Energy Star certification. Energy Star-certified buildings use 35% less energy and generate 35% fewer GHG emissions than their peers, according to Energy Star data. A total of 188 properties subject to Chicago’s energy benchmarking, across all property types, were certified in 2019, up from 142 properties in 2016.

Chicago office properties outperformed the national average from 2014-19 with median Energy Star scores between 59 and 79. Chicago-based CMBS office properties also outperformed the national average, with median Energy Star scores between 62 and 82. In each period from 2015-19, Chicago-based CMBS office outperformed the broader Chicago office market in terms of both median and intra-90% average Energy Star scores, the latter of which excludes the lowest and highest 5%.

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Sources: The City of Chicago, KBRA Credit Profile (KCP), Trepp

In our study, 18 of the 28 CMBS office buildings reported an Energy Star score in 2019, including six that reported a score above 75 (see Figure 3). Five of those six buildings are considered Class A office buildings and have received LEED certification from the USGBC, including three that are certified LEED Platinum.

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Sources: The City of Chicago, KBRA Credit Profile (KCP), Trepp

Site EUI

Site EUI, represented in kilo British thermal units per sf (or kBtu/sf), denotes a building’s annual energy consumption as a function of its size and characteristics. Site energy can be delivered in the form of primary or secondary energy. Primary energy relates to the raw fuel used to create heat and electricity, while secondary energy is the energy product created from raw fuel, such as electricity, purchased from the grid. The Chicago CMBS median site EUI was lower than the Chicago market from 2015-17, indicating better energy efficiency, but higher in 2018-19. For the intra-90% average, the Chicago CMBS office site EUI was lower than the overall Chicago office market from 2015-19. As mentioned, a contributing factor could be the quality of the CMBS improvements. Eighteen buildings in the studied cohort have received LEED certification, including six that are Platinum certified. Fifteen of the 18 LEED-certified office buildings are also considered Class A. CMBS office site EUIs have generally trended downward since 2014. The median CMBS office site EUI of 84.5 in 2019 was 5% below the site EUI of 89 in 2014.

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Sources: The City of Chicago, KBRA Credit Profile (KCP), Trepp

Source EUI

While site energy usage is a valuable measure, source energy better reflects environmental performance, as it accounts for fuel sources and provides a complete assessment of a building’s energy footprint. Source energy use measures the total amount of raw fuel it takes to operate a building, inclusive of energy consumed on site (the site EUI) and energy lost during generation, transmission, and distribution. Source EUI, like site EUI, is measured in kBtu/sf. The EPA uses national source-site ratios to ensure that no specific building will be credited (or penalized) for the relative efficiency of its utility provider. In each period from 2014-19, Chicago CMBS office outperformed the overall Chicago office market in terms of both median and intra-90% average source EUIs. The median CMBS office source EUI fell 14% during the period while the intra-90% CMBS average fell 17%.

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Sources: The City of Chicago, KBRA Credit Profile (KCP), Trepp

Greenhouse Gases

GHGs, a major source of pollution, are a group of substances known to contribute to global warming. The primary GHGs—carbon dioxide, methane, nitrous oxide, and fluorinated gases—enter the atmosphere because of energy use in residential homes, commercial buildings, and industry. In 2015, an international treaty on climate change called the Paris Agreement was adopted, aiming to reduce global GHG emissions with a long-term goal of net zero. The GHG intensity, represented in kilograms of carbon dioxide equivalent per sf, helps to benchmark one property versus another, irrespective of size. Similar to source EUI, in each period from 2014-19 Chicago CMBS office exhibited a lower median and intra-90% average GHG intensity compared to the overall Chicago office market.

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Sources: The City of Chicago, KBRA Credit Profile (KCP), Trepp

The downward trends in source EUI and GHG emissions support the likelihood that CMBS building owners are investing capital to improve existing infrastructures. However, while improvements have been made since 2014, Chicago office continues to underperform the national median EUIs. This may be partly due to Chicago’s climate, which is characterized by hot summers and very cold winters. The median site and source EUIs for the overall Chicago market were 78.3 and 172.8, respectively, in 2019.

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The Future Looks Green

Fueled by the ordinances established in 2013, Chicago office properties have demonstrated an improvement in energy efficiency and a reduction in GHG emissions. While environmental investments are not currently mandated in the city, building owners are capitalizing on opportunities to realize energy cost savings and better position their assets for a greener future. Comparatively, in New York City, the 2019 Climate Mobilization Act and Local Laws 96 and 97 have established stringent emission standards with upcoming benchmarks in 2025 and 2030. As the spotlight on CRE’s environmental impact takes sharper focus, we expect more states and municipalities to require cleaner emissions standards. Stricter standards may have a direct impact on property-level expenses and debt service coverage ratios, an asset’s ability to finance, and greener investment requirements. More information about KCP’s ESG data offering, which now includes social metrics, can be found at

The KCP platform is a subscription-based surveillance service that covers over 1,150 CRE securitizations with an aggregate balance of approximately $750 billion. For each deal, monthly reports are posted to our website that contain color and commentary for CMBS transactions and their underlying loan collateral. Unlike other sources of valuation and loss data, which primarily rely on models, the service is supported by a dedicated team of analysts, who can more readily appreciate the nonhomogeneous nature of CRE, loan, and transaction structures, as well as imperfect servicer information.

[1] Restricted to the 10 largest loans in a given transaction.


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