Green Leasing: An Important Tool for Retailers

By Jacob Dowling on Dec 02, 2015

A commercial lease defines a landlord/tenant relationship from the very beginning, detailing rent price, term length, build out standards and a host of other parameters. The lease negotiation process is often adversarial, with both tenant and landlord mindful of maximizing control while minimizing cost. However embedding sustainability and energy efficiency, often a win-win for both tenants and landlords, in a lease offers an opportunity to form a collaborative and mutually beneficial relationship between tenant and landlord.

Green leasing emerged recently to describe a lease that includes language that addresses energy efficiency, sustainability and environmental factors. In 2011, Better Buildings collaborated with the Institute for Market Transformation to launch the Green Lease Library, a one-stop shop for green leasing information and resources. Then, in 2014, IMT and Better Buildings, with guidance from an industry advisory board, launched Green Lease Leaders. This program simultaneously provided a common definition for a green lease and brought attention to the practice by highlight landlords, tenants, and brokers who are committed to creating a better leasing relationship through sustainability. Now, the conversation is evolving to address specific building types or leasing scenarios such as the triple-net lease structure often found in retail buildings.

Greenbuild 2015 hosted a panel on green leasing in retail scenarios that featured two Better Buildings Challenge partners. John Harrison from Starbucks Coffee Company and Billy Anderson from Nike began the session by briefly describing corporate sustainability efforts. Then, Gregg Ankeman, a real estate attorney from Wendel Rosen Black & Dean led the panelists and audience on a moderated discussion describing the particular challenges of green leasing in retail scenarios and actionable considerations for participants to take away. Here are a few highlights:

  • DEFINE YOUR GOALS AND START THE PROCESS EARLY. Understand your sustainability goals prior to finding new space and discuss them with potential landlords early in the process. This will help to ensure that landlords will incorporate sustainability considerations throughout a lease.
  • UTILIZE THE WORK LETTER TO DEFINE ENERGY EFFICIENT DESIGN AND CONSTRUCTION. Both Starbucks and Nike use LEED standards to help guide design and construction standards. The build out phase is often a critical opportunity to ensure energy and water efficiency by installing efficient technologies before occupancy
  • SUBMETERING OR SEPARATE METERING ARE THE FOUNDATION OF SUCCESS. True to the adage “you can’t manage what you don’t measure”, having access to consumption information is key to reduction efforts. Ensure that your lease structure grants access from your landlord and that you are billed for energy use based on actual consumption.
  • DON’T FORGET ABOUT THE ROOF. Heating and cooling equipment and renewable energy opportunities are often located on the roof of retail facilities. Use the lease to understand who has ownership and control over these spaces and consider negotiating for the right to install a solar array or replace inefficient HVAC equipment.
  • YOU DON’T HAVE TO BE BIG TO BE SUSTAINABLE. Nike and Starbucks are high profile tenants with strong corporate commitments to sustainability, but that shouldn’t discourage organizations with less buying power. Even smaller retailers and mom-and-pop shops can use the lease to drive energy efficiency. Set clear goals and start the conversation with your landlord early in the process.