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REIT valuation linked to compliance demands and higher electricity costs
Yardi industry principal Randy Moss said building performance standards like New York City Local Law 97 can create ongoing data and cash flow risks for thousands of affected buildings.
Industry principal Randy Moss of Yardi says the relationship between real estate regulatory changes, rising energy costs, and net asset value (NAV) is becoming more important for REIT investors. In interviews on the REIT Report podcast, Moss argued that investors are increasingly focused on properties that combine steady cash flows with efficiency improvements, which can support higher rents per square foot and better occupancy.
Moss highlighted building performance standards (BPS) as a key regulatory driver, noting they require owners to meet energy and greenhouse gas emissions caps. He pointed to New York City’s Local Law 97, which imposes stringent emissions limits and reporting based on historical data, affecting nearly 27,000 buildings, with penalties for non-compliance that can weigh on long-term cash flows.
He added that compliance is not a one-time step because reporting cycles and emissions thresholds can tighten over time. Moss said accurate energy and utility data is essential for navigating these requirements, and emphasized the need for both quantitative and qualitative insights into how buildings are used.
Rising electricity costs are another complicating factor, according to Moss, as higher utility rates are driven by increasing electricity demand. He said AI can help streamline data collection and analysis, but human oversight remains important to reduce the risk of erroneous reporting that could undermine compliance and valuation.