CHICAGO- Many brokers have begun noticing that an increasing number of clients, both landlords and tenants, want it known that their companies support energy sustainability. And in recent years, the Chicago-based firm Jones Lang LaSalle has been bringing many of them together to sign “green leases,” agreements that set out in detail how each will reduce energy use.
“We've been working on energy sustainability programs for five or six years now as an offering to clients,” says Michael Jordan, JLL's executive vice president for sustainability strategy. He believes “green leases truly are the future of commercial real estate.” Landlords who want to cut energy use naturally begin by examining their buildings' operating systems, but without a detailed understanding with their tenants, any adjustments will probably have a limited impact, he adds.
“I'll never say that green concerns are the drivers of location strategy,” but the increasing popularity of things like recycling, alternative energy and the desire among businesses of all sizes to slice their energy costs means “green concerns are working themselves into the leasing process.”
“It does add a new level of complexity to lease negotiations,” says Mark W. Collins, regional director for JLL, meaning long-term green leases need to have built-in flexibility. “Ten years from now, what we consider the best practices in energy sustainability might have changed.” Collins and Robert J. Roe from JLL represented KeyCorp in its recent negotiations with Columbia Property Trust for a green lease at Key Tower, its Cleveland headquarters. The companies announced the 15-year lease extension for 487,000-square-feet just this week. The trust was represented by Doug Miller, John Klayman and Cindy Greiner of Jacobs Real Estate Services. The terms were not disclosed, adds Collins, but “Columbia was a willing partner and that's the best way for two parties to agree on an overall sustainability plan.”
Jordan helps companies and brokers design these sustainability plans and incorporate them into leases. A successful green lease needs three main components, he says. First, owners and tenants must negotiate the details of whatever energy efficiency programs they want in place. For example, if tenants' employees want recycling programs, detailed lease negotiations can “make sure that there is recycling infrastructure that can support the employees' behavior.” Second, a suitable lease will align the operations of energy programs with agreed financial incentives. “If you're pushing your employees to turn off monitors and lights but you don't have the right lease conditions, you might be saving energy but not costs.” And perhaps most important, each side should agree to the transparent collection and periodic evaluation of data on the impacts of all energy-saving programs.
“You need all three dimensions to make sure it's working,” he says. “But sometimes people think the best way to save energy is to just pack as many performance criteria or promises into the lease as possible. That can make it tough to pull off.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
