Lease agreements can make or break the ability to improve energy efficiency and lower real estate risks. This guest blog post comes from IMT’s partner PropertyWorks, which manages leases for more than 20,000 real estate properties, including multi-unit tenants and franchises, across the US and Canada.
The real estate market is changing rapidly due to overlapping risks from extreme weather, changing market expectations, potential shifts in regulatory environment, and, in some sectors, the shift to telework. To mitigate risks and maximize success, both landlords and tenants need to position themselves operationally and legally for what lies ahead.
Our clients at Property Works are primarily multi-unit tenants operating either company-owned or franchised locations, ranging in size from 6 to 4,000 locations, throughout the U.S. and Canada. Clients include restaurants, auto service, retail, and personal services businesses. Each company has different concerns, but everyone wants to reduce their risk exposure.
One important way to do this is to lower building energy use. The global markets have been increasingly focused on environmental sustainability for several years now, and we see at least five factors that will affect commercially leased locations:
- Building Performance Standards in the U.S. and Canada
- Demand for sustainability and environmental, social, & governance (ESG) metrics reporting
- Investor requirements for data and demonstration of progress in utilities and emissions management and other aspects of environmental sustainability
- Lease language allocating responsibility among landlords and tenants for building performance and certifications such as LEED and other utility efficiency and building performance features.
- Rising costs of electricity, natural gas, and water.
The Partnership with IMT
Property Works is partnering with the Institute for Market Transformation to keep our clients apprised of these regulatory and market shifts and to support our clients’ lease management teams. This partnership will center around:
- Tracking building energy legislation, especially Building Performance Standards, so we can learn which of our clients may be affected and when.
- Coaching in performance-based leasing, so we can see efficiency investments and benefits shared among landlord and tenant and to ensure tenants get the benefits when tenants invest in sustainability within their leased spaces.
- Connecting building performance and energy efficiency efforts to community engagement activities, such as sharing best practices and information with our clients.
In addition to keeping ourselves up-to-speed, we will also be supporting our clients directly. For example, we help management teams to understand any building-performance based features that may already exist in their leases or that tenants may want to add when it’s time to renegotiate.
As we’re already involved with monitoring pass-through expenses for many of our clients, we’re also looking to enhance these cost-tracking features to assist tenants in maximizing efficiency of utilities within their four walls.
Finally, we’ll be coordinating with clients to tailor our software to store unit-specific sustainability details that will be helpful to our clients’ specific reporting needs, such as tracking locations that had an LED-lighting upgrade, or signed on for a food waste compost diversion process, or added insulation during a planned internal rebuild. Changing energy management practices can seem daunting, but no one wants to waste money on utilities that could be better invested in growing and sustaining businesses. The good news is that there are numerous, proven methods for reducing energy, and many new tools that make transition even easier. I look forward to sharing additional information about creating more efficient, more productive work environments in our next posts and in our Sep. 12 webinar, “Mitigating Real Estate Risks through Efficient Commercial Leases.” Register online.
Sep. 12 Webinar at 1pm ET:
Mitigating Real Estate Risks through Efficient Commercial Leases
This webinar will host a panel of industry experts to discuss ways to mitigate risks through energy efficiency, with attention to emerging building performance standards and investor/market interest in the “E” (“Environmental”) in ESG. Speakers will highlight experience with green leasing and other approaches to landlord-tenant collaboration, and provide insights on valuation and market trends related to building performance.