Hot Topic: Green Leases
In honor of Earth Day, we're taking a deep dive into green leases and what they can do for you. (Yesterday we were busy unplugging and frolicking in the grass.)
Locking down a green lease starts long before you sign on the dotted line, according to JLL green lease gurus Michael Jordan, EVP of strategic consulting, and Meaghan Farrell, VP of strategic consulting (snapped hiking in a redwood forest or Peter Pan's Neverland). Site selection is key: an office tenant would benefit from an efficient base building located near public transit and amenities. Even without specific lease conditions, the right multi-tenant building can be "managed green," through a leadership committee or non-binding agreement, if landlords and tenants are like-minded in their environmental goals, they say.
For you Captain Planets who want to reduce your environmental footprint and strengthen your corporate branding with a green lease, terms can be weak or strong, depending on performance conditions and avenues for recourse, Michael and Meaghan tell us. They recommend establishing agreements on: operating the space efficiently, allowing the party making green improvements to benefit from the savings, and sharing performance data to help ID areas of improvement. For renewable power: a company might add a condition allowing the landlord to incorporate alternative/renewable energy sources into the building (solar, wind, geo-thermal), provided it's offered to the tenant at cost-neutral pricing and its installation doesn't disrupt business operations.
Typical green lease terms: temperature boundaries between 69-72 degrees, language enabling the landlord to recover the cost of building efficiency upgrades, landlord and tenant agreeing to an environmental management plan, and a retro-commission every three years. Misconceptions debunked: rents should not be higher in a green lease, they are not just for new buildings, and they are available for any asset class. As environmentally friendly CRE evangelists, Michael and Meaghan also practice sustainability in their personal lives (he kayaks, above, she runs and sails). And yes, one time a building receptionist asked Michael if he was the famous "restaurant owner."
