Green Leasing: A Collaborative Approach to Energy Efficiency
You’ve probably seen this stat before —buildings account for 40 percent of total U.S. energy consumption in the U.S. We all know that reducing energy consumption is imperative for the future sustainability of our country, but when it comes to putting words into actions, we sometimes get stuck.
Case in point: the potential for gridlock in traditional lease agreements— where the benefits of reduced energy usage or building upgrades do not “flow” to the person who pays for the transaction. For example, if a tenant is not responsible for monthly utility bills, then there is no financial incentive to reduce energy use.
The good news? Companies such as Brandywine Realty Trust are bringing a fresh perspective to energy efficiency through green leases, which help align the financial and energy incentives of building owners and tenants.
Specifically, property owners can charge tenants for measures that result in operational savings, such as energy-efficient lighting or chiller retrofits, as long as the savings are greater than the cost of the measure. The tenant benefits from reduced monthly utility costs and the building owner is able to increase the value of the building. Most importantly, the lease agreement instills a spirit of collaboration and mutually beneficial financial incentives to reduce energy consumption.
Best of all, green releases are generating formidable results. Brandywine Realty Trust and its tenants have reduced energy costs by roughly 46 percent in a 93,000 square foot, 1980s era, building in suburban Philadelphia. And, the building’s energy cost per square footage is approximately 38 percent lower than the area average. With such a great return on investment, it truly begs the question — why aren’t more real estate companies getting on board with green leases?