Agreeing and implementing Best Practice/Green Leases

The City of Cape Town has been running an Energy Efficiency Forum for Commercial Buildings for a number of years.  I used to go to each one when I worked there, and a common message that came up was that often energy efficiency interventions were only really feasible where the owner was also the occupant.  The cost of retrofits were for the owner to bear, while the benefits were for the tenant to realise.  This uneven relationship is a sticking point, and both parties are to benefit in order for there to be any real sector change.

Susannah West, the Sustainability Director from Jones Lang LaSalle in Singapore, spoke about her experiences in ‘green leasing’ or best practice leasing in Australia.  These leases are increasing in popularity, as more people become comfortable with the concept, and the roles and responsibilities set out in the leases become more standardised and accepted practice.  In Sydney, she says, around 62% of all leases have some form of green clauses written in.

Typical clauses focus on:

• Environmental initiatives
• Sharing of information
• Energy, water and waste considerations, with an increasing focus on indoor air quality
• Building certification (including NABERS or Green Star)

The trend for the inclusion of green considerations has been further driven by the obligation for building owner’s to declare energy consumption values whenever a building is sold, or the tenant changes, under the Mandatory Building Disclosure programme.  Green Lease Schedules have also been developed, by the Australian government, who are the largest individual tenant, and who are thus helping to drive change.

How to get a green lease?  Susannah recommends:

• Use available best practice and open source leases
• Understand the building type, and interventions that would be appropriate
• Start discussions early
• Undertake an energy audit, and identify improvements that need to be made – this forms the basis of the energy management plan

And once you have a green lease – how do you get the most of it?

• Active management is vital – establish a committee and meet often or get sustainability on the agenda of existing building management committee meetings
• Have a plan, and report frequently on progress
• Establish a baseline and identify targets
• Empower individuals to act on sustainability improvements and plans.  Building, asset and portfolio managers all have a role to play
• Encourage IT improvements from tenants
• Provide training to tenants

It’s also important to recognise that the split of costs and benefit needs to be mutually beneficial.  With increasing pressure for green leases, there will be a natural movement towards the normalisation of green considerations in standard leases, however, any modifications to the building may need to be reflected in the agreed rental rates, which may be offset by lower utility costs.  These leases require collaboration.

I asked Susannah if she’s seen a trend towards most of these leases being implemented where the tenant is a large organisation, with a lot of push, and she said it was, but that smaller tenants are also starting to request green targets or commitments in a lease.  The main thing is to ask upfront and as markets mature, getting green clauses into a lease should become easier and easier.