Implementing Green Leases From BOMA 2018

June 27, 2018

Dr. Kathleen Hogan, Deputy Assistant Secretary for the Department of Energy’s EERE, discusses the challenges of implementing green leases.

Building sustainable practices into your leases isn’t just the right thing to do for the planet. Leading-edge landlords know green leases are the right thing to do for your budget too.

“We look to our commercial sector partners — office building owners and managers, retailers, restaurants, grocery stores, you name it — to help lead the way in energy savings,” said Dr. Kathleen Hogan, Deputy Assistant Secretary for the Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE).

Dr. Kathleen Hogan, Deputy Assistant Secretary for the Department of Energy’s
Office of Energy Efficiency and Renewable Energy, honors the 2018 Green Lease Leaders
at the 2018 BOMA International Conference & Expo.

EERE and the Institute for Market Transformation (IMT) honored 23 organizations as Green Lease Leaders this year, and for the first time, recognized progress toward implementation with two levels of recognition. The nine Silver level honorees have implemented foundational policies and business practices, while the 14 Gold level organizations have built on the requirements for Silver by executing the sustainable leases and fit-outs they’ve negotiated.

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“Buildings use 40 percent of our nation’s energy and we spend almost $200 billion each year to power our commercial buildings. About 20 percent of this energy is being wasted on average. If we can save this energy, it reduces costs, reduces pollution and can help improve the reliability of our energy systems. I’m sure it’s no surprise to you to hear that commercial real estate is leading the way in these efforts.”

BOMA International is a Supporting Partner of Green Lease Leaders and recently issued an updated Green Lease Guide, which has helped building owners and managers implement energy- and water-efficient practices in leases and corporate guidelines for more than 30 years.

“It always comes down to understanding what you can do that makes sense for your bottom line,” Hogan said after the conference. “A lot of what we do at the Department of Energy is to try to work with leading organizations that are trying to put sustainable technologies in place and show that it really does pay from a cash-flow standpoint.”

Changes and Challenges

Hogan sat down with BUILDINGS at the 2018 BOMA International Conference & Expo to discuss how green lease language can help address the hurdles landlords typically run into with energy and water conservation initiatives.

BUILDINGS: How do green leases attempt to address some of the challenges building owners face when they’re trying to implement sustainable technologies in their buildings?

DR. KATHLEEN HOGAN: Green leases are a way where the building owner takes on a role and responsibility, the tenant takes on a role and responsibility, they do it together to make sure that each can benefit from the savings opportunity. In some tenant-landlord situations, if the landlord invests but they’re not paying the bill, they can’t get their money back.

So you have to look at the lease structure and make sure that both parties based on what they’re investing can also get the savings back in a way that makes sense based on the investment.

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BUILDINGS: Are you noticing certain energy efficiency and water efficiency trends in commercial buildings with regards to technologies or operational strategies?

HOGAN: We’ve been working with the commercial sector, commercial real estate industry for many years. Certainly there’s just a lot of attention on these issues. It was great to see what’s going on at the trade show here and hearing the stories from a lot of the leading organizations that are here.

It’s great to see what's going on technologically. I think the other thing you’re hearing is as the younger people are coming into the workforce there are even more reasons to figure out how to put these technologies in place and still make it make sense economically because people want spaces that are really good places to be at while you're working. A lot of growing demand for these solutions.

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BUILDINGS: How do you see the built environment evolving over the next 5-10 years?

HOGAN: I think there’s big awareness of the issues that are out there around water, around the value of energy efficiency. One of the other big conversations these days is how to maintain a very reliable grid. We all want electricity when we want it.

I think we’ll see buildings being able to do more based on controlled loads and available storage to play a role in that space as well, which I think will contribute in many ways, in cost savings to the building owner but also just a good solid workspace and a more community approach to what a building can do as part of contributing to reliable energy and the grid.

BUILDINGS: What do you find sets Green Lease Leaders apart from other building owners who are trying to implement some sustainable policies, but haven’t yet achieved the heights that Green Lease Leaders have?

HOGAN: I think again, you’ve got to figure out in buildings where you do have a lot of tenant-occupied space, you do have to figure out where the savings are going to happen and then how the various investors can share in those savings to make it make sense.

If you can do that, you've got the opportunity to go as deep as possible based on what’s cost-effective and available.

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There are other buildings that are owner-occupied, so they can also go quite deep too because they don’t have that issue. It’s really looking at the ownership structure building by building and figuring out how to share in the savings so that you can empower the ability to make the investments.

BUILDINGS: Can you recommend any best practices for building owners who are looking to incorporate sustainable practices into their leases, but haven't’ taken the plunge yet?

HOGAN: First, you’re trying to understand the energy performance of your buildings. You hear a lot about benchmarking the performance of your building, so understanding where your building is relative to other buildings that look like it.

There’s both the ENERGY STAR Portfolio Manager approach that’s based on energy bills, and the Department of Energy has also developed a tool that’s more of an asset rating so you can understand the performance of the systems in your building based on what they are. That’s an asset scoring approach. Those types of assessment tools are really helpful.

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I think it’s also sitting down and understanding what the opportunities for improvements are and if somebody were to make those improvements, how do you get paid back, what are the payback paths and what level do you have to engage your tenants so you can all benefit?

BUILDINGS: How do tenants seem to respond to green leases?

HOGAN: I would speculate that given that they’re sitting down with the lease, they don’t have to sign a green lease if they don’t want to so they’re going in with eyes open in terms of what this will mean for them in terms of lower cost and in a nice space. I think you’re engaging people that have a pretty interesting community approach for what it is that can get done.

Janelle Penny [email protected] is senior editor of BUILDINGS.

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About the Author

Janelle Penny | Editor-in-Chief at BUILDINGS

Janelle Penny has more than a decade of experience in journalism, with a special emphasis on covering facilities management. She aims to deliver practical, actionable content for facilities professionals.

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