With many businesses re-opening after pandemic-related closures, it’s a critical moment to re-evaluate the structure of landlord-tenant relationships going forward. While rent relief is one way for landlords to respond to the economic fallout of COVID-19, it is inherently a short-term solution. One promising long-term approach is to reduce overhead costs for both parties through green leases. Also known as “high-performance” or “energy-aligned” leases, these agreements equitably align costs and benefits of energy and water efficiency investments, incentivizing lower usage and shared savings.
Since 2014, IMT has partnered with the U.S. Department of Energy’s Better Buildings Alliance on Green Lease Leaders, a program recognizing landlords and tenants that leverage green leases for higher-performing buildings and better landlord-tenant relationships. Altogether, Green Lease Leaders manage nearly 3 billion square feet of commercial and government space across North America, representing a huge potential for converting traditional leases to high-performing green leases. In the commercial sector alone, green leasing has the potential to affect eight percent of leased space nationwide.
The 2020 winners range from small commercial office landlords to local governments to retail and data center tenants and together they demonstrate two exciting trends: a majority of awardees have put their leases into action and there is a small, but rising, number of tenant awardees. In 2018, the program created two classifications: Silver and Gold. These made a distinction between organizations seeking credit for a leasing strategy vs those which had implemented one. This year’s winners are majority Gold status, indicting leases are no longer theoretical. The second trend, tenant awardees, speaks to the growing recognition that buildings play a key role in corporate sustainability goals. Tenant awardees like the California Department of General Services are committing to putting 80% of their portfolio into green leases in the next three years. Similarly, Mastercard has incorporated sustainability questions into its RFPs for office space and Ulta Beauty requires its leasing team to collaborate with its Energy Team to ensure leases will support corporate energy goals.
This year we will again releasing case studies that provide a more in-depth look at the value of green leases for these industry leaders. As the nation works to recover from the impact of the COVID-19 pandemic, a closer landlord-tenant relationships as demonstrated by this year’s winners, showcase how improved collaboration can achieve healthier more efficient buildings, lower costs, and keep occupancy higher. Please stay tuned for the weekly case study releases in June and share broadly.