In Focus: What Color Is Your Lease? "Green" Leases for Business

[Helen M. Banks]

A green building uses energy efficiently, reduces environmental impacts, and protects the health of its occupants. A “green lease” incorporates some or all of these goals into the contract. The parties to a green lease agree on the goals, allocate the costs of achieving those goals between the parties, and assign the parties tasks or covenants. Buildings owners are finding that some tenants are willing to pay a premium for green space.

[George Gosieski]

Helen,

Regarding your comments. I disagree with your first statement. There is no such thing as a "green" building. "Green" is a poorly defined marketing term that is impossible to quantify. A more realistic, quantifiable term is "high performance".

Your second statement is incorrect. Leases that address sustainability must include all the components you've identify plus several more components. Some of these additional components include: data collection and reporting, split incentives, revenue sharing, utilization, and behavior.

A sustainable transaction is heavily influenced by each party's sustainability strategy, stakeholder reporting needs, and financial goals.

Creating a sustainable lease is not as simple as you imply. It requires a more holistic, collaborative, and inclusive process than traditional leases. It also means that this process requires a higher degree of care and due diligence.

Your final point is not accurate. There are very few tenants willing to pay a premium for "green" space.

I would also point out that there is a an increasing risk of being charged with "greenwashing" if the property does not perform as claimed. For example, claiming that a LEED certified building is "green" when it can't achieve an Energy Star certification would open the "door" for to a law suit as the injured party tries to reclaim the costs associated with defending and repairing its brand.

I also referenced revenue sharing. It is now possible to generate carbon credits through building energy efficiency and conservation programs. These credits can be sold to generate revenue. Any meaningful lease addressing sustainability needs to address current and future market mechanisms that provide an incentive to reduce the lifecycle footprint of a building or real estate portfolio.

BTW, are you aware that Corenet's Sustainability Community has created a Sustainable Transactions Technical Working Group (TWG)? Anyone interested in more information about joining this TWG or TWG status may contact me.

Regards,

George Gosieski, MCR, CSM, GHG-IQ
Corenet Global Sustainability Community Chair
Corenet Global Sustainable Commercial Real Estate Consortium Chair

[Helen M. Banks]

http://www.areadevelopment.com/viewpoint/Apr09/green-lease-energy-e...

Hi George,
So glad you have decided to join CREOpoint. We all enjoy a spirited topic from time to time. However, you will see by the above link (posted in June of 2009) that it was a posting of an article from Area Development & Site Magazine. Since it was so long ago, some of the information may no longer be there, so I can understand why you thought it was coming from an individual virewpoint. Sustainability is an ever evolving discipline especially with real estate and I look forward to seeing your future postings. Best regards,