Ulta Beauty: Breaking the Landlord-Tenant Incentive Barrier

Overview

Better Buildings Initiative partner Ulta Beauty, a retailer with over 1,100 leased locations in the United States, is breaking down the split incentive barrier by implementing industry-leading roof-top unit (RTU) guidelines that are beneficial to themselves as tenant and to their landlords.

Ulta Beauty’s RTU Requirements

At a majority of its stores, Ulta Beauty typically advocates for the installation of new RTUs and its equipment specification is designed to meet, if not exceed, the Consortium of Energy Efficiency (CEE) Tier 2, which aligned with the Better Buildings Advanced RTU Campaign's Technical Specification for RTUs. Additionally, Ulta Beauty’s Energy Team customizes the feature set of the RTUs based on each store’s geographical location. For example:

Hot gas bypass for dehumidification in the South
Improved coil coatings to prevent corrosion due to salty air on the coasts
Hail guards, hurricane ties, and seismic brackets to account for unique weather patterns
Single zone variable air volume for energy efficiency

During the landlord and tenant negotiations, Ulta Beauty typically advocates for landlords to provide a one-year equipment and labor warranty on the RTUs as well as perform preventive maintenance (PMs) for the first year the store is open. After the first year, Ulta Beauty ensures the performance of necessary repairs, maintenance (including PMs), and replacement of equipment through the balance of the lease term, which consists of a robust 50-point quarterly PM program. In the case where the existing RTUs are less than two years old and meet the CEE Tier 2 equipment specifications, Ulta Beauty endeavors to partner with the landlords to retain those units for its leased space – a collaboration that typically includes Ulta Beauty handling maintenance of the units and the landlord being responsible for repairs and replacement. Overall, the result is beneficial to both the retailer and the landlord in that Ulta Beauty can ensure a better guest experience through quality maintenance and operation of the RTUs and the landlord’s obligation for maintenance is limited to only the first year after the store opens.

In-House HVAC Maintenance

To handle maintenance at scale, Ulta Beauty has developed a HVAC Site Survey for both its in-house HVAC Maintenance Program and the Proactive Replacement Program. This survey identifies opportunities for early retirement of aging and inefficient equipment that is approaching the end of its useful life, as well as providing Ulta Beauty with an inventory of the equipment in its store portfolio.

Ulta Beauty Recognized for Best Practice in RTU Efficiency

Ulta Beauty joined the Advanced RTU Campaign in 2016, and was recognized with a 2017 Advanced RTU Campaign Award in two categories:

For having the most successful landlord/tenant arrangement for RTU efficiency in leased spaces.
For having the highest percentage of its portfolio upgraded with high-efficiency RTU installations in a four-year period.

Related Resources

Tenant Efficiency Toolkit

10 Green Leasing Tips for Building Owners

Successes in Sustainability: Landlords and Tenants Team Up to Improve Energy Efficiency

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