Now is the time to “green up” your lease.

10 Feb 2011

A recent survey by GE Capital Real Estate polled more than 2,220 office tenants in various countries about green building practices.  An average of 50% of those surveyed said that green building initiatives are a high priority.  Japan (59%), Canada (52%) and Sweden (52%) placed the greatest importance on green building practices, compared with only 43% in the U.S., the lowest of the countries surveyed.  According to the survey, energy efficiency remains the No. 1 priority for tenants in most countries, followed by waste reduction programs and indoor air quality. 

So what do the numbers mean to commercial landlords?  It shows that owners, if they haven’t already, need to start incorporating green building practices into their facilities.  More and more studies are showing that green buildings influence tenants’ decisions on where they choose to lease.  If owners of Class B vacant spaces want to stay competitive with Class A spaces, Class B owners will need to make capital improvements and replace dysfunctional equipment in a green way.

Green building practices, however, don’t necessarily mean having to invest significant capital into state-of-the art upgrades.  Among other things, property owners and building managers can: (i) develop a waste strategy for the building which encourages recycling, (ii) require that cleaning contractors comply with green practices (which is more than just using different chemicals and cleaners), (iii) install separate sub-metering of the individual units and the common areas to monitor energy usage and encourage energy efficiency, and (iv) incorporate green provisions in the building’s rules and regulations.

So, can an owner immediately start to incorporate these measures?  The short answer is, depends upon what your existing leases say.  This also raises the important point that even if you are not yet ready to go “green,” you probably are going to be forced to do so either by market demand or government involvement via code compliance sooner rather than later.  Therefore, now is the time to have your form lease reviewed and revised so that you will have the flexibility to employ these practices in the near future and be at the desirable cutting edge in an ever more competitive market.

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