Dallas CRE Leaders Took Swift Action During This Week's Extreme Heat Event To Avoid Uri-Like Fiasco

Commercial real estate executives in Dallas sprung into action earlier this week after the Electric Reliability Council of Texas sent word that demand on the grid could lead to widespread power outages.

The extensive damage seen during Winter Storm Uri was largely avoided this time around. But extreme heat across Texas — which pushed demand to a record high of 78.3 gigawatts on Monday — meant many buildings were at risk of seeing exorbitantly high electricity bills if immediate steps were not taken. 

As soon as Stream Realty Partners received the request from ERCOT to conserve electricity, all thermostats in office buildings with automated systems were raised from 73 to 78 degrees, Senior Vice President of Building Operations Mike Burnett said. Around 95% of buildings in Stream’s office portfolio are at least partially automated, he added. 

“That’s a five-degree change, and it’s a considerable amount of savings per degree,” he said. “It’s quite a bit of money — I’d say 25% of your daily bill, easily.”

Conserving electricity during peak demand means walking a tightrope between heeding ERCOT’s requests and honoring lease requirements that say buildings must stay within a certain temperature range, Transwestern Principal of Asset Services Mike Ogden said. 

“It’s a delicate balance,” he said. “You always want to make sure that your tenants are comfortable and that the environment is stable, and at the same time be responsible about the demand of the building.”

Even at highly sophisticated properties, skilled professionals work in the background to reduce usage without significantly increasing the temperature, JLL Group Manager Bill Moebius said.

“It takes a good engineering team who know how a system works and can intelligently take action to cut back on those peaks,” he said. “Our systems, even the best ones, don’t necessarily do that completely automatically.”

Avoiding peak usage by ensuring systems are running as optimally as possible is the ultimate goal at all buildings, which is why property managers proactively prepare for extreme weather conditions year-round, Moebius said. Industrial tenants are responsible for their own electricity, so office buildings are where companies like JLL have the most control over energy usage.

“On an ongoing basis, we have very extensive protocols for maintenance of our buildings,” he said. “We have extensive checklists, both for property managers and building engineers to complete annually and quarterly, to document that good operations are being done and maintained.” 

Electric rates are structured to incentivize staying below peak usage levels during periods of high demand, and if a building fails to do so, it will result in higher electricity bills for the next 12 months, Burnett said. 

“You set your peak, and you try to stay below that peak forever so you don’t get a new peak,” he said. 

As far as Burnett, Moebius and Ogden know, there were no buildings in any of their portfolios that hit peak usage as a result of the extreme heat event. To avoid such a scenario, some buildings may have chosen to shed some of their electric load voluntarily, however, ERCOT did not initiate its demand response program, which requires enrolled buildings to return energy to the grid.

ERCOT’s extreme hot weather notice is in effect through Sunday, but so far, this event has not been nearly as disruptive as it could have been, and Ogden thinks the current state of the office market may be one reason why. Because many office buildings are still not fully occupied, it has been somewhat easier to conserve energy.

“We didn’t shut any of our buildings down during the pandemic,” he said. “We ran them as if we were on holiday — we just shortened our hours and maybe raised our temperatures. In all of our vacancies, that is the case, and in all of our spaces that haven’t returned to normal work from office, that’s still the case.”