Industry Insights: What Retailers Needs to Unleash Energy Efficiency and Sustainability Success
What is needed to align priorities between landlord and tenants? Read further to learn about key challenges, opportunities, and trends identified at the Landlord-Tenant Energy Partnership’s 2018 summits.
Many of the challenges inhibiting efficiency best practices in shopping centers are the result of the regular communication pathways between property managers, landlords, and their tenants. Additionally, a shopping center is comprised of global, regional, and small retailers that may or may not have the resources to implement and/or participate in efficiency projects.
In 2018, the Institute for Market Transformation (IMT), the Retail Industry Leaders Association (RILA), and the Professional Retail Store Maintenance Association (PRSM) facilitated a first-of-its-kind collaboration between commercial retail shopping centers and tenant spaces. 33 retail landlords and tenants from across North America attended energy and
sustainability events held in New Jersey, Vancouver, and Ohio.
What Retail Landlords and Tenants Need to Know
Collaboration is the key to integrating sustainability
There are many differences between how landlords and tenants operate their spaces, making it increasingly more difficult for each party to achieve goals such as energy efficiency. Developing synergies between departments to implement strong energy and sustainability programs requires an equally strong grasp of internal hurdles, energy management needs, and associated costs. Departments are defined as internal partners which can include facilities, operations, real estate, finance, legal, energy management, sustainability management, senior leadership, and investor relations.
Common barriers identified
Priorities differ from one department to the next: With limited resources available to advance sustainability projects via financial and/or human capital, it is difficult to obtain buy-in for sustainability-related projects, especially when departments have separate goals.
Established communications between landlord and tenant: Communication between landlord and tenant are typically through a brand’s real estate contact and does not include operations, energy, or sustainability departments.
Communications occur locally, with property occupants: Landlords and property managers typically promote efficiency programs with retail tenant employees, not with brand corporate operations, resulting in low participation in programs. There is also limited communication within departments.
Difficulty finding best point of contact: Neither landlord nor tenant know who is the appropriate contact to communicate store-level efficiency and sustainability opportunities.
Green lease language: Leases rarely incorporate efficiency clauses that promote:
- Access to energy consumption data
- Renewable energy procurement
- Other operational efficiency requirements
Lack of demand: Although there is a growing number of retailers wanting more efficient and sustainable spaces, landlords state that tenants are not demanding efficient spaces during site selection and lease negotiations.
Lack of motivation: In a gross lease structure, the tenant is charged per square foot (sq. ft.) for its energy use. In this case, the tenant has little incentive to invest in operational efficiency measures for its space(s).
Action opportunities discussed
Leverage peer-to-peer learning and network:
Attend in-person workshops, join the LTEP Private LinkedIn Group, and utilize the program’s network to seek help on challenges, participate in collaboration opportunities, and share successes and case studies.
Resource development: Collaborate to develop resources that provide step-by-step recommendations on how to align sustainability objectives with overall business and department goals.
Plan before budget is set: Learn how to present efficiency and sustainability projects before the budget planning period.
Establish leasing policies: Define and set priorities during lease negotiations to align with sustainability goals. This includes:
- Set goals and parameters: Establish language that supports sustainability goals and can be used in a real estate negotiations.
- High-performance lease language: Implement lease clauses that enable efficiency and higher performance, reducing operational costs.
- High-performance build-out standards: Implement energy- and water-efficient build-outs for leased space.
Efforts to make improvements are currently being tackled individually by companies, consuming tremendous amounts of time and resulting in slow progress and small rewards. To alleviate these incremental efforts, the LTEP Retail Energy and Sustainability Summits emphasized the importance of collaborating with peers and working as a collective to advance sustainability projects at an accelerated pace.
“It was enlightening to hear tenants’ perspectives on their priorities and challenges regarding energy and sustainability initiatives during the Retail Energy and Sustainability Summit. This insight as well as the relationships I developed at the Summit helped me to advance a renewable energy project with a tenant partner shortly thereafter.” – Daren Moss, VP Operations & Environmental Management at Brixmor Property Group
Finding win-win solutions through landlord-tenant collaboration
Meeting with landlords and tenants in intimate workshop settings during the LTEP Retail Energy and Sustainability Summits illuminated the fact that progress cannot be achieved one property or brand at a time. It requires a willingness of landlords and tenants to find a common ground and come to solutions that help each party meet its environmental goals together. Areas both parties see opportunity to work together in 2019 include financing, landlord-tenant engagement and communication strategies, and access to energy use data. Attendees also saw the value of internal cross-collaboration, submetering, high-performance (green) leasing, and recycling. LTEP is excited to work with retail landlords and tenants in each of these important areas in 2019. Will you join us?
Join the Landlord-Tenant Energy Partnership
Real transformation is achieved through collaborative action. As the Landlord-Tenant Energy Partnership works to solve the challenges identified at the retail energy & sustainability summits, we encourage real estate practitioners, operators, energy and sustainability managers, to join our growing community of change makers that are pushing the retail industry towards higher performance and more sustainable shopping centers.
By joining the Partnership, you can:
- Leverage the collective experience and knowledge of participating landlords and tenants.
- Receive access to exclusive events, industry experts, and tailored tools and resources that will help you reach your energy and sustainability goals.
- Participate as a stakeholder in cities motivated to implement efficiency policies.
Send us an email at firstname.lastname@example.org to learn how to join as a participant and receive access to the private LinkedIn group and visit landlordtenantenergypartnership.org for more information.
Looking to take the next step in your energy and sustainability journey? Not sure where to begin? The Landlord-Tenant Energy Assessment gives commercial landlords and tenants clear guidance on deploying win-win efficiency solutions that decrease energy use, save money, and achieve energy and sustainability goals. Click below to get started!
The Landlord-Tenant Energy Partnership (LTEP), an initiative of the Institute for Market Transformation (IMT) the International Council of Shopping Centers (ICSC), and the Retail Industry Leaders Association (RILA) — in collaboration with its strategic partners at the Professional Retail Store Maintenance Association (PRSM) — are continuously working to provide retailers with peer-to-peer learning opportunities in collaboration with industry leaders and energy experts to help them develop easy-to-deploy building energy and sustainability solutions that lower operational costs and create significant value. Together, we are growing a community of like-minded companies that are motivated to improve the landlord-tenant relationship and drive higher performance in leased shopping centers and retail stores across North America.