Green Leasing: Supporting The Clause
Five years ago, green lease clauses were practically unheard of. Today, there are over a billion square feet covered by these clauses, thanks to programs like Green Lease Leaders (GLL). Joining BOMA International to discuss the risk and rewards of such clauses this afternoon were BOMA International VP of advocacy, codes and standards Karen Penafiel, who moderated; GSA Office of High-Performance Green Buildings deputy director Donald Horn; Institute for Market Transformation program director of commercial real estate Adam Sledd; and Kilroy Realty Corp VP of sustainability Sara Neff.
Adam says his company focuses on four clause categories: how space is metered and built; how data is shared between owners and tenants; making sure space is built out to high-performance standards; and defining operational policies.
The foundation of a green clause is energy cost recovery, Sara notes—when you do a capital improvement, you want to capture the money during the payback period. And as a landlord, these clauses are important in protecting yourself. For instance, the West Coast—where Kilroy operates—has a lot of benchmarking requirements, and the clause forces tenants to give Kilroy the data for investor disclosures. Since introducing a clause, data capture jumped from 68% to 96%, and Kilroy has been able to see just how much energy its buildings are using. When they’re in the lease, these types of policies stick.
The GSA has always been pushing leasing to be greener, Don points out, starting in 1999 with an executive order that the GSA create a model green lease clause for the entire government. Green leases are now standard, he says, even though there is an educational process to get everyone on board. It’s important, he says, because the GSA wants landlords to provide them buildings with certain characteristics (for instance, ENERGY STAR buildings are required for federal leasing).
Green leases don’t necessarily save landlords money, Adam adds, but they do give you the ability to get data from tenants. But there are instances where landlords saved big—a Green Lease Leader had a tenant coming up for renewal that wanted to reduce rent. They came to an agreement that the landlord would replace all the tenant’s lights yet keep the rent the same—and it wound up saving 43% in energy costs.