Impact of Energy Use and Price Variations on Default Risk in Commercial Mortgages: Case Studies

This report documents the impact of energy use and price variations on commercial mortgage default risk in five buildings: an office building in the Denver area, two office buildings in northern California, a hotel in the Denver area, and a multi-family residential building in San Francisco. We used parametric energy simulation to analyze the impact of variations in operational practices on source energy use intensity (EUI). We then computed the impact of source EUI variations on default risk using coefficients from an empirical logistic regression model developed earlier in this research effort as documented in Wallace et al. [2017]. Table 1 shows the relative range of variation in source EUI and default risk for each building. The table also shows the default rate variation relative to the TREPP average default rate of 800 basis points (8%).