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Regulatory penalties and higher electricity costs could pressure REIT NAV
Industry principal Randy Moss says building performance standards can trigger ongoing compliance needs, while utility rate increases add pressure to long term cash flows and valuations.
Yardi industry principal Randy Moss, speaking on the REIT Report podcast, described how regulatory changes and rising energy costs can affect real estate performance metrics and, ultimately, net asset value (NAV) for REITs.
Moss said investors still focus on cash flows, but increasingly look for properties that combine strong income with efficiency improvements, which can support higher rents per square foot and occupancy, reinforcing NAV.
He highlighted building performance standards (BPS), including New York City’s Local Law 97, which sets emissions limits and requires reporting based on historical data, with nearly 27,000 buildings affected. Moss noted that non-compliance carries significant penalties that can materially disrupt long term cash flows, and that compliance is not a one-time task as jurisdictions adopt tighter recurring reporting cycles.
Moss also emphasized the need for accurate energy and utility data to navigate compliance, citing the importance of both quantitative and qualitative insights into how buildings are used. While he said AI can help streamline data collection and analysis, he warned that human oversight is important because estimates without review can increase the risk of erroneous reporting, and he pointed to higher electricity costs driven by rising power demand as an additional challenge for investors.