The Empire State Building isn’t just one of the most popular tourist attractions in Manhattan and a global symbol of New York City. It’s also a prototype of how to retrofit an older building with cutting-edge equipment and materials intended to meet rigorous environmental standards.
Those lessons could come in handy for other New York landlords who must soon comply with a new city law, a measure some architects, developers and policy analysts are calling one of the most aggressive environmental requirements in the United States.
The updates that Empire State Realty Trust completed at its namesake building, including the replacement of 6,514 windows with more efficient models and rebuilding inefficient air-conditioning equipment, were done before the city approved a new law meant to curb carbon emissions. The real estate investment trust proceeded with the investments after its own economic analysis found the updates will pay for themselves with higher rents and more tenants, said Dana Robbins Schneider, director of energy and sustainability at Empire State Realty Trust.
“We don’t make decisions only because of carbon emissions,” Schneider told CoStar News. “When some equipment needs to be replaced, we replace it with the most resilient and modern equipment. That’s the best way to make investments.”
Now, more New York landlords will need to consider their own investments or whether they want to pay fines instead of making the improvements. By the end of next month, landlords for most commercial and residential properties measuring at least 25,000 square feet must upload documents with the city’s Department of Buildings that show detailed data on a building’s carbon emissions. The documents must be certified by a registered architect or engineer.
The June 30 deadline for Local Law 97 is the first step in a process that the nation's biggest city hopes will lead to a 40% reduction in carbon emissions by 2030 and the near-total elimination of carbon emissions from the largest commercial and residential properties by 2050. Landlords face fines if their buildings surpass limits for carbon emissions, and the limits get tougher over time.
Climate change costs
New York’s laws are among the nation’s most aggressive for tackling emissions that cause climate change, according to industry executives like Ben Shepherd, co-managing director of the New York office of environmental design consulting firm Atelier Ten. The nonprofit sustainability group Urban Green Council estimates about 50,000 buildings in New York are subject to the new laws. Boston, Denver and Washington, D.C., among other cities, have approved similar measures, though Boston, Denver and Washington have not disclosed estimates of the number of buildings in each city that will be affected by their laws.
“I’ve heard commercial real estate people say this is possibly the largest disruption in our lifetimes in New York,” Shepherd told CoStar News. “It’s where we need to go if we’re going to address the climate crisis.”
A number of landlords said the city’s hardcore approach will be far too costly and could wreck its commercial real estate sector. The Real Estate Board of New York, a trade association that goes by the acronym REBNY, estimates the new measure will result in more than $900 million in fines from building owners by 2030.
The requirement puts the onus of reducing carbon emissions on landlords, when the source of power on the public electrical grid is half the equation, said Daniel Avery, director of policy at REBNY.
“The city is banking on the grid getting green, but buildings don’t have any control over that,” Avery told CoStar News.
Some major initiatives to replace fossil fuels in the grid with renewable sources face major threats, Avery said. President Donald Trump's tariffs, a type of tax added to goods imported into the U.S., could block imports of hydropower from Canada, Avery said. And Trump has threatened to halt construction of the fully permitted Empire Wind offshore wind-power project.
Local Law 97 will probably have the biggest effect on landlords of residential properties built before World War II, said Peter Varsalona, principal at New York-based Rand Engineering & Architecture. The number of multifamily properties that will meet carbon-emissions limits is expected to drop from 94% this year to 49% in 2030, according to the Urban Green Council.
“Steam is still omnipresent in a lot of pre-war buildings and steam runs on oil or gas,” Varsalona said. “To mothball those steam systems is such an overwhelming type of upgrade and the costs are so significant.”
Architects, developers and real estate policy analysts don’t expect Trump to come to the rescue. The city’s new congestion pricing program assesses tolls on motor vehicles in Manhattan’s central business district, partly to reduce carbon emissions. Trump has threatened to cancel federal funding to the city unless it ends congestion pricing. But the city’s new carbon emissions mandate for buildings doesn’t involve federal funds, Avery said.
“It’s conceivable Trump could try to ban all laws that implement carbon emissions caps, or say it’s pre-empted by an [U.S. Environmental Protection] mandate, but either of those would be a stretch,” Avery said. The White House did not respond to CoStar News' emailed request for a comment.
Assessing whether to pay fines
The city approved Local Law 97 in 2019, giving landlords plenty of time to prepare. About 92% of buildings that are subject to the law will meet the current limits for carbon emissions, according to the Urban Green Council. That still leaves about 5,000 buildings that won’t comply, subjecting owners to fines.
City officials acknowledge the law is aggressive.
“Meeting the climate crisis head-on requires all of us, but like most ‘worth it’ things, reducing carbon emissions isn’t always easy,” Meera Joshi, former deputy mayor for operations, said in a statement in September. The mayor's office did not respond to a request this month to comment.
Many landlords will simply pay the fines this year, concluding that it would be more expensive to comply with the first wave of rules, Varsalona said. The fine for exceeding carbon caps is $268 per metric ton of emissions over a building’s established limit.
In an example provided by Triacta Power Solutions, a maker of energy-management equipment, a 50,000-square-foot multifamily property that emits 400 metric tons of carbon would be fined $19,430 this year.
“If I’m a landlord and my boiler is 40 to 50 years old,” Varsalona said, “do I want to spend the money to replace it, or do I want to consider the alternative” of paying a fine?
Caps on carbon emissions become more stringent in 2030, subjecting a larger number of buildings and landlords to fines. As a result, more buildings will likely be out of compliance unless they invest in major upgrades and repairs, Avery said.
“Even if some owners decided to pay the fines for now, that’s not viable over the long term” to continue paying fines instead of making upgrades, Avery said.
Landlords with many properties may be better prepared
Institutional investors in commercial real estate, such as Empire State Realty Trust and Hines, said their buildings are ready to comply with the new law.
Empire State Realty Trust said all New York buildings in its portfolio, including the Empire State Building, will comply with Local Law 97 this year. SL Green Realty, owner of One Astor Plaza and One Vanderbilt, said in its 2025 proxy statement that it expects to be in full compliance with Local Law 97 through 2029 and is evaluating incentive options to finance investments to reduce carbon emissions.
The joint venture Hudson Square Properties recently completed a decarbonization project at 345 Hudson, an office building that opened in 1931, and is in the process of decarbonizing the 99-year-old 225 Varick, according to Jason Alderman, senior managing director and head of Hines’ New York office. The joint venture’s partners are Hines, Trinity Church Wall Street and Norges Bank Real Estate Management.
Until the city begins analyzing data submitted by landlords by the June 30 deadline, it’s not possible to know which specific buildings will fail. But it’s possible to find clues as to which buildings are vulnerable.
A law approved in 2020 requires building owners to post the Building Energy Efficiency Rating on street-level windows. The report includes a grade, ranging from A to F, based on its energy efficiency, according to New York-based Paul A. Castrucci Architects.
Though not specifically tied to the carbon emissions requirements of Local Law 97, the reports can indicate which buildings may need to pursue significant environmental remediation, Varsalona said.
“The grades are more intended to embarrass owners and get them to adopt maintenance programs,” Varsalona said.
Financial analysis of compliance
Landlords who take a long-term view will see that the new laws can provide immediate financial benefits, such as lower energy costs and improved recruitment for tenants looking to occupy buildings with sustainable energy sources, said Brandon Sheiner, CEO of Sheiner Energy Engineering.
Landlords should research various financial incentives and expert assistance available for building upgrades, Sheiner said. This includes the city’s Accelerator program, the New York State Energy Research and Development Authority, PACE financing for energy-specific projects and rebates and incentives from the utility Con Edison. Sheiner advises landlords on Local Law 97 compliance.
Landlords can also take a few relatively inexpensive steps to improve emissions, said Brett Bridgeland, senior director of sustainability advisory at CBRE.
“Optimizing heating and air conditioning and lighting controls can help bring a building into compliance,” Bridgeland told CoStar News. He also recommended converting old lighting to LED and installing energy meters in problem areas of a building to identify specific problems.
Certain types of building upgrades can be extremely expensive and disruptive to tenants, Sheiner said. If the owner of an apartment building wants to fully replace fossil fuels, such as steam radiators powered by oil or natural gas, that project requires temporarily moving residents out of the property while work is performed.
“That’s much more disruptive than other projects, because you’ve got to break through walls to get into each apartment,” Sheiner said.
Planning for upgrades
It's smart for landlords to plan for upgrades instead of simply responding as crises emerge, Bridgeland told CoStar News.
“Don’t wait until equipment fails to try to replace it overnight with heat pumps,” Bridgeland said, referring to a common type of equipment used in energy-efficiency upgrades. “Plan ahead now so you can do it on your own terms, aligned to your capital plan.”
He added that landlords need to "understand your capital plan and identify when investment moments are naturally going to occur. When will major equipment need replacement? When are major tenant leases rolling? When are you repositioning, refinancing or recapitalizing?”
REITs and other large institutional investors have the luxury of choosing one building from a large portfolio to serve as a testing ground for sustainability improvements. Empire State Realty Trust uses its namesake building for that purpose.
“This is a 2.9 million-square-foot, historically landmarked building with tens of thousands of daily occupants and millions of annual visitors,” said Schneider, the REIT's director of energy and sustainability. “This is a large, incredibly complex building.”
If a new procedure or type of equipment passes a test at the Empire State Building, the REIT will then roll out the initiative at its other properties.
“We like to make sure things work there,” Schneider said. “We know if we can make it work at the Empire State Building, we can make it work anywhere.”