Today’s real estate industry must be equipped to respond to growing climate-related events, bold climate agendas by federal and international agencies, and support corporations setting ambitious Environmental, Social, and Governance (ESG) goals. The Green Lease Leaders program provides a clear framework for what constitutes a green lease, and each awards cycle provides insights into industry trends. Here are the three most important trends from this year’s winners.
- Green leases are growing, and they represent diverse buildings and sectors. Every year the number of companies applying for recognition from the Green Lease Leaders program has continued to grow, and this year was especially impressive. Two years into the pandemic and applications are now up 115%, even during a tremendously difficult period for real estate. These winners represent a range of real estate types, from large and small commercial offices to data centers and industrial and multifamily buildings. They also represent a variety of real estate sectors and geographic locations—including internationally-based companies. This growth reflects the climate urgency now well-understood by corporate tenants, and federal and local governments, and the need for real estate to respond with solutions that address sustainability and social responsibility goals.
- Green leases are emerging as a necessary tool to meet the changing demands in real estate. The majority of Green Lease Leaders earned the Gold certification, signifying they put the leases into practice, and a large number of applicants are integrating green leases into 80%-100% of their portfolio. This means that green leases are not a small vanity project, but rather an increasingly common way of doing business. Those who stick with traditional leases are going to be increasingly less competitive when it comes to tenant demand and will continue to bear larger energy costs. Green Lease Leaders are positioning themselves at the leading edge, ready to take advantage of these market shifts.
- Leases can and should incorporate social goals as well as environmental ones. Leases set the foundation for landlord-tenant relationships. Just as green leases have helped reduce energy use, they can support action on social priorities like health, resilience, economic inclusion, social justice, and carbon reductions. For example, leases can set expectations for indoor air quality monitoring, how spaces can be used in emergencies, and what contractors are preferred for building-related work. This year the program will have its first class of Platinum awards for businesses that synthesize these social and environmental goals in their green leases. Nine companies representing commercial and residential buildings have qualified in this first round. This is a clear indicator that environmental and social goals can and are being integrated in leased spaces.
These trends demonstrate that a growing number of companies are finding ways to make green leasing advantageous for their business models, and are negotiating more flexible agreements between landlord-and tenant to be able to respond to climate, social, and governmental priorities. Green leases have always offered cost savings to both landlords and tenants, but they are more critical than ever in a competitive real estate market as people come to understand the essential role that buildings play in both social responsibility and sustainability goals. This year’s Green Lease Leaders are showing the way forward for the rest of the industry. We are proud of their achievements and excited to grow the program even more in the coming years.