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Title 24 Costs and Its Effects on a Lease

11/24/15

According to CBRE research, the latest update to California’s energy code has far reaching implications that can quickly increase costs and timelines associated with both new construction and renovations. New construction has to comply while renovations must trigger these new codes to take effect.

Title 24 is intended to increase the electrical efficiency of California’s buildings; the energy code impacts the replacement of lighting fixtures and modifications to existing electrical infrastructure. The three distinct areas of a building that are affected are the mechanical systems, lighting and envelope. It is important to note that Title 24 only applies to enclosed space or suites that are being renovated, and can even apply to lighting in outdoor spaces such as parking lots.

The costs per square foot change depending upon the nature of the changes, but can add an additional $20 per square foot which can take up to more than 8 weeks of dedicated planning, engineering and commissioning if all thresholds are met.

“While the new Title 24 codes may seem daunting at first, the future benefits outweigh the cost from a finance and social responsibility,” said Steven Shupp, property management director of CBRE in San Diego and Newport Beach.

There are many implications for both landlords and tenants alike and both sides must ensure a space is compliant with laws and energy efficiency measures; part of this entails agreeing upon who is responsible for paying for these upgrades.

A typical Title 24 upgrade should pay for itself within ten years; however with an average lease term of five years a landlord could pay up to $0.33 per square foot, per month, while the tenant can receive more than $0.02 per square foot per month of savings on their electric bill.





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