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The greening of commercial leases
Abstract
Purpose
– This paper seeks to consider how policy changes may drive a change in leasing practices, in order to reduce environmental impact (particularly carbon dioxide emissions) from the commercial building stock.
Design/methodology/approach
– In many countries, including the UK, environmental policy (particularly on carbon dioxide emissions from energy use) is beginning to impact on the commercial property market. This paper explores barriers to improved performance, two models for greening leases (a light green and dark green approach) based on work by the authors from Cardiff University and the Australian government, as well as how tenanted buildings can be managed “more greenly”. It then explores how green leases may penetrate the market.
Findings
– The conventional relationship between the landlord (as building owner) and tenant (as occupier) largely neglects environmental considerations. However, change may be rapid, disruptive and challenging.
Originality/value
– The paper lays out some of the issues, solutions, and pathways for the commercial property industry.
... There is no globally understood definition of "green leasing." Hinnells et al. (2008) stated that "all leases can be made 'more green' in the sense of providing a legal framework that facilitates and encourages environmental performance to be part of the conversations and agreements that take place between landlords, tenants and, importantly, facilities managers." Up to now, green leases have not had a fixed form but have facilitated and supported the usage of a building in an environmentally efficient manner (Roussac & Bright, 2012). ...
... Using this tool, landlords and tenants select types of green clauses and assess to add to their lease to optimize sustainable operations and collaboration throughout the life of commercial leases (Bright, Partick, Thomas, Janda, Bailey, Dixon, & Wilkinson, 2015). In the U.K., lawyers and various consultants created guides and checklists to facilitate and incentivize green leasing (Hinnells, Bright, Langley, Woodford, Schiellerup, & Bosteels, 2008). Government and industry leadership have been crucial to the emergence of green leasing to overcome conservatism and riskaversion associated with leasing practices, especially for the commercial property sector due to its diversity, building types, and various stakeholders (Bright et al., 2015). ...
Although the term “green leasing” is not yet well defined, its primary purpose is clear. With an aim to create a collaborative environment through legal provisions between a building owner and a tenant, green leasing may ultimately help resolve the energy paradox in tenanted properties. Issues surrounding split-incentives are driven by a mismatch between owners' capital expenditures on improving building energy efficiency and an uncertainty of tenant or occupant behavior that might affect a building's energy consumption. Though some countries have started to develop guidelines promoting the adoption of green leasing, especially in government buildings and commercial real estate, implementation has not been overly successful globally. This study has two focuses, the first of which is to compare green leasing guidelines from various countries and to suggest six comprehensive categories of green leasing components: management relationships, information sharing, certificates, legal stipulations, financial factors, and operation. The second core area of research places government-tenanted properties' lease agreement contracts. The goal is to find any evidence in a legal condition between a building owner and a tenant, in this case federal government, to improve building energy efficiency with less environmental impact in the United States. The findings of the study indicated 41 out of 400 leases had green clauses. Three out of six categories proposed in this study were found in the U.S. government-tenanted properties, while the other three types were not shown. The findings of this study also suggest categories of green leasing clauses can contribute to defining green leasing and provide empirical evidence of green leasing in governmenttenanted properties. Ultimately, this study produces arguments for possible reasoning behind the employment of some green lease categories but the lack of use of others, specifically in the U.S. office market and government-tenanted buildings.
... Landlordtenant relationships are important to ensure explicit communication of key sustainable features of the building, to manage expectations in relation to knowledge and performance (Jailani et al., 2015). Although guidance on the adaptation of the so-called "green leases" (IPF, 2009;Hinnells et al., 2008), of varying "shades" of detail, and memorandums of understanding (MoU), have become more commonplace between landlords and tenants/ investors and occupiers, their interpretation is subjective (Hinnells et al., 2008) and the nuances of these relationships are yet to be fully explored. There is a need for transparency and co-ordination between the various market actors involved, to ensure that further barriers are not created which negatively affect the occupier's experience of sustainable buildings. ...
... Landlordtenant relationships are important to ensure explicit communication of key sustainable features of the building, to manage expectations in relation to knowledge and performance (Jailani et al., 2015). Although guidance on the adaptation of the so-called "green leases" (IPF, 2009;Hinnells et al., 2008), of varying "shades" of detail, and memorandums of understanding (MoU), have become more commonplace between landlords and tenants/ investors and occupiers, their interpretation is subjective (Hinnells et al., 2008) and the nuances of these relationships are yet to be fully explored. There is a need for transparency and co-ordination between the various market actors involved, to ensure that further barriers are not created which negatively affect the occupier's experience of sustainable buildings. ...
Purpose
The purpose of this paper is two-fold. Primarily, it examines the relationship between sustainable buildings and occupiers, by summarising the key extant literature. Secondarily, the paper proposes avenues for future research relating to the impact of sustainability on corporate real estate strategy.
Design/methodology/approach
The paper reviews over 90 relevant publications related to sustainability, real estate market responses and corporate real estate, focussing on the role and response of occupiers. The approach concentrates on occupier strategies, specifically considering influences such as corporate social responsibility (CSR), landlord–tenant relationships, the changing occupier role and the “circle of blame”.
Findings
In recent years, literature has increasingly begun to reflect nuances in occupier responses to sustainable, prime, office real estate, with some conflicting findings as to the importance of sustainability. Location remains the dominant consideration in decision-making for occupiers, but sustainability is key to CSR and “value-add” in certain sectors. More effective use of sustainable buildings requires improved communication between landlord and tenant. The authors’ review demonstrates that challenges still remain in relation to the “circle of blame”. More research needs to be done in relation to the emergence of sustainability in the non-prime and retail sectors.
Originality/value
Through collating key literature in this topical research area, the paper provides a critical review of occupier responses to sustainable real estate, and, therefore, a fuller understanding of emerging market practices. Additionally, it suggests future research directions.
... To ensure compliance by both parties will require more stringent management methods including metering and monitoring which can be incorporated and managed through the leasing structure. [5] » The EPBD led to the requirement for Energy Performance Certificates (EPCs). These certificates are based on the energy efficiency of a building and are required when buildings are sold, let or renovated. ...
... "Experience from the Australian Green Lease Schedule is that the costs associated with refurbishment and retrofitting can provide economic benefits for both parties." [2,5] The survey undertaken as part of the Property Industry Alliance/ Corenet UK Occupier Satisfaction Index [33] identified that sustainability issues were very important to almost 1 quarter of respondents but over 80% thought that over the forthcoming year, the issues would become increasingly important to occupiers. A key driver for an increase in sustainable building provision will be occupier demand. ...
Variations in leasing arrangements within the UK and differing business priorities may prove difficult for incorporating green leases across the board. This guidance document provides a variety of options, including Memorandums of Understanding and aspects of "light" and "dark green" clauses that can be discussed and agreed between landlords and tenants according to business priorities and starting point, building on Guidance Documents Parts 1 and 2 in 2007.
... As a response to some of the more widely recognised shortcomings of traditional leases, the idea of 'green leases' has been developed in several nations including Australia, Canada, the UK, and the US. Recent research (Hinnells et al. 2008;IPF, 2009a;2009b;Bright, 2008;BBP, 2009) shows how leasing arrangements can be developed to improve environmental performance standards in commercial property. Anecdotal evidence suggests that the idea of using environmentally sensitive leases needs to be introduced very early in the letting process as it is very difficult to get a green lease agreed unless it forms parts of the 'heads of terms'. ...
... This theme addresses how recent environmental policy demands are being interpreted and applied by building industry stakeholders, as well as the role that organisational responses can play in setting and delivering environmental agendas. New policies, particularly the European Union's Performance of Buildings Directive (EPBD) and the UK Carbon Reduction Commitment Energy Efficiency Scheme, and new opportunities (such as the UK Green Deal) are beginning to have an impact on the buying, selling, and leasing of property (Hinnells et al, 2008). Existing standards, which include building regulations, also shape the physical infrastructure of the building stock. ...
Reducing energy use in tenanted commercial property requires a greater understanding of 'buildings as communities'. Tenanted commercial properties represent: (1) the divergent communities that share specific buildings; and (2) the organizational communities represented by multi-site landlord and tenant companies. In any particular tenanted space the opportunity for environmental change is mediated (hindered or enabled) through the lease. This discussion draws on theoretical and practical understandings of (1) the socio-legal relationships of landlords, tenants and their advisors; (2) the real performance of engineering building services strategies to improve energy efficiency; (3) how organizational cultures affect the ability of the sector to engage with energy-efficiency strategies; and (4) the financial and economic basis of the relationship between owners and occupiers. The transformational complexity stems from: (1) the variety of commercial building stock; (2) the number of stakeholders (solicitors, investors, developers, agents, owners, tenants and facilities managers); (3) the fragmentation within the communities of practice; and (4) leasehold structures and language. An agenda is proposed for truly interdisciplinary research that brings together both the physical and the social sciences of energy use in buildings so that technological solutions are made effective by an understanding of the way that buildings are used and communities behave.
... These efforts aim to promote inclusive growth and align with international commitments such as the Paris Agreement and the SDG 2030 Agenda. This growing alignment of the Malaysian property market with ESG standards reflects the increasing importance of sustainability in property (Hinnells et al., 2008;Janda and Parag, 2016;Larsen and Jensen, 2010;Moorthy et al., 2012;Nicholls, 2012;Palmer et al., 1995;Shiers, 2000). ...
Purpose-This study aims to examine the integration of environmental, social and governance (ESG) considerations in Malaysian public-listed property companies, focusing on how these entities incorporate sustainable practices into their operations. The research evaluates the extent of ESG adoption and its implications for the sector's competitiveness and sustainability. Design/methodology/approach-The study employs an ESG matrix derived from existing literature to systematically evaluate companies' adherence to ESG principles. Variations in implementation across the sector are highlighted, providing insights into the challenges and opportunities of ESG integration. Findings-The results reveal that while some companies demonstrate strong ESG performance, others encounter barriers such as high costs and limited awareness. Additionally, the study identifies the impact of ESG integration on corporate governance and financial performance, influenced by regulatory pressures, investor demands and global sustainability objectives. Originality/value-The findings emphasise the growing importance of ESG frameworks in driving long-term competitiveness within the Malaysian property sector. The research calls for enhanced governance structures and greater transparency in ESG reporting to address existing gaps and align with global sustainability trends.
... However, in return, climate change also impacts on buildings with extreme weather conditions occurring more frequently, hampering indoor comfort, and impacting productivity (Clarke, 2009;Cleugh et al., 2011). Increased temperatures make many advanced technologies applied in buildings ineffective, which then require more energy to maintain indoor comfort Hinnells et al., 2008). The situation is particularly severe in office buildings as people spend most of the time indoor during working hours. ...
Over many decades, buildings have been recognised as a significant area contributing to the negative impacts on the environment over their lifecycle, accelerating climate change. In return, climate change also impacts on buildings with extreme heatwaves occurring more frequently and raising the earth’s temperature. The operation phase is the most extended period over a building’s lifespan. In this period, office buildings consume most energy and emit the highest amount of greenhouse gas pollution into the environment. Building upgrading to improve energy efficiency seems to be the best way to cut pollution as the existing building stock is massive. The paper presents an economic analysis of energy efficiency upgrade of buildings with a focus of office buildings. The paper identifies upgrading activities that are commonly undertaken to upgrade energy efficiency of office buildings and a case study of three office buildings in Sydney, Australia has been used to analyse the results. The upgrading activities can improve the energy performance of the case study buildings from 3 stars to 5 stars NABERS energy rating in compliance with the mandatory requirement in the Australian government’s energy policy. With the potential increase in energy price, energy efficiency upgrading will become more affordable, but currently, most of them, except solar panels and motion sensors show a negative return and would not be undertaken if they did not also contribute to higher rental income and an increased life span of the building. The upgrading discussed in the paper represent a potentially attractive alternative to demolition and building anew.
... Similarly, organizational tenants have recently begun to display a desire for green leases that would improve the overall environmental performance within commercial buildings. The Australian government spearheaded the development of the Green Lease Schedule, which is a contractual agreement between tenants and landlords in reference to setting environmental performance goals for both parties (Hinnells et al., 2008). ...
This research expands the traditional triple bottom line (people, profit, and planet) by splitting profit based on benefits from resource savings or productivity enhancements. In the context of corporate real estate, the suggested quadruple bottom line (PPPP) is defined as general environmental goals (planet), employees' productivity (people), the tenant firm's profitability (profit T), and landlord's profit (profit L). Tenants' perspectives on specific sustainability categories and the relative importance of PPPP are examined through a survey of over 700 tenants in U.S. office buildings. The findings suggest that different ways of evaluating the direction of profit is warranted, because tenants' attitudes toward profit diverge significantly when landlord profit and tenant profit are considered separately based on lease structure. The results also suggest that while planet, or resource conservation, is a major priority for tenant respondents, detailed analysis of sustainability components shows that people, a proxy for occupant well-being and productivity gains, are the highest priority. This is of particular importance in sustainable real estate as new products and developments are considered.
... However, Collins and Junghans (2015) argue that the transition from a commercial real estate lease to a green lease can cause potential friction in the relationship between landlord and tenants, which could pose problems for negotiating or implementing green leases or more costly FM services. For example, as Hinnells et al. (2008) note, there are difficult questions to answer regarding who has to undertake the extra costs of the environmental and energy improvements of a building, whether these improvements would increase the lease, and even whether the tenant is authorised to make any improvements. To address such issues effectively, in the context of green leasing, there is a need to establish terms and commitments on both sides (i.e. ...
The purpose of this paper is to propose a practical framework that integrates energy and environmental management systems to satisfy the monitoring and verification requirements of facilities energy conservation and greenhouse gas emissions reduction; these requirements are essential for organisations to access financing mechanisms, such as carbon funds. As a reference point, the framework uses the ISO 50001 standard, which pertains to an organisation’s energy management procedures. This framework is enriched with elements from other standards, such as ISO 14001 (environmental management system) and ISO 14064 (GHG verification system). The framework also incorporates sound technology management practices and other obligations, such as those arising from international law. It, thus, allows for the systematic quantification, assessment and forecasting of the energy and environmental footprints of facilities throughout their life cycles, enabling them to qualify for carbon funds.
... From the perspective of building owners, Wiley et al. (2008) note that there is interest in answering as to "whether the economics of "green" design will result in higher occupancy, rents or selling prices for their project" (Wiley et al., 2008, p.229). Looking directly at coupling trends with those of tenants, Langley et al. (2008) write that a move to more sustainable real estate is stemming from corporate social responsibility (CSR), and is manifesting in better environmental management systems and policies in buildings, which in turn may result in tenants eventually becoming reluctant to sign leases for buildings that have poor energy performance (Langley et al., 2008, p.2). Hinnells et al. (2008) try to make clear to scholars and practitioners that there cannot simply be a development of green leases that adopt a format for everyone, as "different classes of occupiers will have different attitudes to the greening of leases" (Hinnells et al., 2008, p.549). ...
This paper investigates the drivers and barriers for green leasing associated with the relationship between building owners and tenants, whilst also considering the extent to which this should be considered during the life cycle phases of a building. The procurement of appropriate rental property and its services is an important consideration for businesses. In terms of issues associated with this, few are more topical than factoring in sustainability. Emerging from this trend is a leasing product that deals with this directly. This product is a green lease. This not only impacts on the operations associated with a tenancy, but also requires a re-evaluation of the traditional owner, tenant and facilities management (FM) relationship. Using a mixed methods approach, this paper evaluates how green leases and tenancies require a reconsideration and re-evaluation of the key drivers and barriers for the development, refit and occupancy of sustainable commercial office spaces. This is evaluated using a theoretical model that outlines the interrelation between the roles of owner, tenant and FM. This research is based on existing literature and semi-structured interviews that studied qualitative and quantitative elements in the context of ownership and tenancy of sustainable buildings. The data collection and analysis is supported by literature research, with a focus on the provision of rental space and services in commercial office buildings with a 'Building Research Establishment Environmental Assessment Methodology' (BREEAM) certification. This paper concludes that data gathered from practice contradicts some of the statements within existing literature, diminishing the importance of cost and the barrier of split incentive, but instead illuminate the importance of less tangible considerations such as company policy or a sustainability strategy. These findings have the potential to further develop theories, and provide an insight into how actors' relationships need to be developed to ensure more proactive green leasing of sustainable 2 buildings, along with where strategic attention is required during the building design, construction, operational and use phases.
... Whereas traditional leasehold relationships are frequently characterised as adversarial, distant and distrustful, some greener leasing practices attempt to foster better communication between the parties. Interest in green leases and leasing is growing, and articles on them have been published in a number of countries in the last decade, including the UK (Langley & Hopkinson 2009;Hinnells et al. 2008;Bright & Dixie 2014), Australia (Roussac & Bright 2012;Woodford 2007), Sweden (Lind, Bonde & Zalejska-Jonsson 2014), Singapore (Chua 2014), the US (Kaplow 2008;Oberle & Sloboda 2010), Canada (Sayce et al. 2009), and 20 countries across Europe (Duquesne 2011). This paper uses five case studies to investigate the evolving role of 'green leases' in the environmental governance of tenanted non-domestic property in the UK and Australia. ...
Improving the environmental performance of non-domestic buildings is a complex and ‘wicked’ problem due to conflicting interests and incentives. This is particularly challenging in tenanted spaces, where landlord and tenant interactions are regulated through leases that traditionally ignore environmental considerations. ‘Green leasing’ is conceptualized as a form of ‘middle-out’ inter-organizational environmental governance that operates between organizations, alongside other drivers. This paper investigates how leases are evolving to become ‘greener’ in the UK and Australia, providing evidence from five varied sources on: (1) UK office and retail leases, (2) UK retail sector energy management, (3) a major UK retailer case study; (4) office leasing in Sydney, and (5) expert interviews on Australian retail leases. With some exceptions, the evidence reveals an increasing trend towards green leases in prime offices in both countries, but not in retail or sub-prime offices. Generally introduced by landlords, adopted green leases contain a variety of ambitions and levels of enforcement. As an evolving form of private–private environmental governance, green leases form a valuable framework for further tenant–landlord cooperation within properties and across portfolios. This increased cohesion could create new opportunities for polycentric governance, particularly at the interface of cities and the property industry.
... In the US when they tried to take into another segment it failed miserably… 12 Several interviewees highlighted the potential of alternative policy initiatives and business models to overcome these barriers-as summarised in box 3. These ideas draw upon recent experience in the USA and Australia (Dixon et al. 2008;Fawkes 2013;Kim et al. 2012;Sayce et al. 2009;Supple 2010) and were considered by one interviewee to represent: '…a huge flowering of innovation and change that will completely eclipse the EPC market in time….' 13 However, the UK has yet to develop an equivalent of PACE or MEETS; green leases have attracted only limited interest (Dixon et al. 2014), and a policy initiative based upon on-bill financing (the 'Green Deal') was not a success (Rosenow and Eyre 2015;Rosenow and Sagar 2015). More generally, energy efficiency improvements in the commercial and other sectors are hindered by the difficulty financiers have in recognising energy cost savings as security for loans: …Energy efficiency projects do not yet meet the requirements of capital markets. ...
This paper provides an overview of the UK market for energy service contracts in 2014 and highlights the growing role of intermediaries. Using information from secondary literature and interviews, it identifies the businesses offering energy service contracts, the sectors and organisations that are purchasing those contracts, the types of contract that are available, the areas of market growth and the reasons for that growth. The paper finds that the UK market is relatively large, highly diverse, concentrated in particular sectors and types of site and overwhelmingly focused upon established technologies with high rates of return. A major driver is the emergence of procurement frameworks for energy service contracts in the public sector. These act as intermediaries between clients and contractors, thereby lowering transaction costs and facilitating learning. The market is struggling to become established in commercial offices, largely as a result of split incentives, and is unlikely to develop further in this sector without different business models, tenancy arrangements and policy initiatives. Overall, the paper concludes that energy service contracts can play an important role in the transition to a low-carbon economy, especially when supported by intermediaries, but their potential is still limited by high transaction costs.
... Emerging from early reticence and enthusiasm is a more nuanced understanding of how evolution, rather than transformation, of better, 'greener', leasing practices can contribute to improving the environmental performance of rented commercial property. In particular, greener leasing practices have the potential to address a number of widely acknowledged problems with traditional commercial leasing practices, which can be broadly grouped into three classes: a structural problem with the split incentive, an adversarial relationship between landlords and tenants, and lease wording that largely ignores environmental considerations and may have negative environmental impact (Hinnells et al. 2008). Collectively, these account for the 'landlord tenant divide' that is said to constitute a major barrier to improving energy performance in commercial property. ...
Improving the environmental performance of the built environment is a ‘super wicked’ problem, lacking a simplistic or straightforward response. This is particularly challenging where space is rented, in part because the relationships between the various owners, users and managers of the space is regulated – at least in a formal sense - through the lease. Traditional leases largely ignore environmental considerations and present barriers to making energy efficient upgrades. Leasing practices are evolving to become greener. Evidence from a Sydney Better Buildings Partnership (BBP) study, Australian leasing experts, a UK commercial lease study and a case-study of a major UK retailer, Marks & Spencer (M&S), suggests an increasing, trend towards green leases in most of these markets and opportunities for improving environmental performance through green leasing. Further research is needed in both countries to understand the impact that greener leasing has on environmental performance of buildings.
... This situation is exacerbated by the lack of detailed metering by space, so that neither owners nor lessees can easily obtain information on consumption patterns. Hinnells et al. (2008) suggest that to promote buildings being used in an environmentally efficient way and to further support progress in increasing environmental performance of buildings, the tenant and landlord relationship needs to changed, and suggest two different models for greening the leases. The authors differentiate between ''Light green leases'' and ''Dark green leases.'' ...
The role of environmental sustainability has increased in the real estate sector. The adoption of sustainable principles, however, has been slowed by a lack of evidence relating to the financial benefits and uneven distribution of costs and benefits between owners (investors) and occupiers. This study identifies the drivers and benefits of environmentally sustainable buildings from the real estate investor's perspective. The research is based on a comprehensive literature review focusing on the previous research showing scientific evidence on the benefits of investing in environmentally sustainable buildings.
... Emerging from early reticence and enthusiasm is a more nuanced understanding of how evolution, rather than transformation, of better, 'greener', leasing practices can contribute to improving the environmental performance of rented commercial property. In particular, greener leasing practices have the potential to address a number of widely acknowledged problems with traditional commercial leasing practices, which can be broadly grouped into three classes: a structural problem with the split incentive, an adversarial relationship between landlords and tenants, and lease wording that largely ignores environmental considerations and may have negative environmental impact (Hinnells et al. 2008). Collectively, these account for the 'landlord tenant divide' that is said to constitute a major barrier to improving energy performance in commercial property. ...
Improving the environmental performance of the built environment is a ‘super wicked’ problem, lacking a simplistic or straightforward response. This is particularly challenging where space is rented, in part because the relationships between the various owners, users and managers of the space is regulated – at least in a formal sense - through the lease. Traditional leases largely ignore environmental considerations and present barriers to making energy efficient upgrades. Leasing practices are evolving to become greener. Evidence from a Sydney Better Buildings Partnership (BBP) study, Australian leasing experts, a UK commercial lease study and a case-study of a major UK retailer, Marks & Spencer (M&S), suggests an increasing, trend towards green leases in most of these markets and opportunities for improving environmental performance through green leasing. Further research is needed in both countries to understand the impact that greener leasing has on environmental performance of buildings.
... This situation is exacerbated by the lack of detailed metering by space, so that neither owners nor lessees can easily obtain information on consumption patterns. Hinnells et al. (2008) suggest that to promote buildings being used in an environmentally efficient way and to further support progress in increasing environmental performance of buildings, the tenant and landlord relationship needs to changed, and suggest two different models for greening the leases. The authors differentiate between ''Light green leases'' and ''Dark green leases.'' ...
The role of environmental sustainability has increased in the real estate sector. The adoption of sustainable principles, however, has been slowed by a lack of evidence relating to the financial benefits and uneven distribution of costs and benefits between owners (investors) and occupiers. This study identifies the drivers and benefits of environmentally sustainable buildings from the real estate investor's perspective. The research is based on a comprehensive literature review focusing on the previous research showing scientific evidence on the benefits of investing in environmentally sustainable buildings.
... One of the common conscious agreements is that we need to act immediately and effectively to save our ecological environment and leave a sustainable planet to future generation. As many researchers pointed out, including construction, occupation and operation of house, buildings or built environment contribute for almost half of the energy consumption and emission of carbon, which is the main cause of global warming (Dixon et al, 2008;Hinnells et al, 2008;Lorenz and Lützkendorf, 2008;Miller and Buys, 2008;Pivo, 2009). Therefore, any strategy or solution concerning sustainability issues must have an emphasis on the property sector. ...
... The so-called ' institutional lease ' , with its hallmark upward-only rent review, full repairing liability and long period of fi nancial commitment by the tenant, was the prevalent interface between these two communities for the period from approximately the mid-1970s until the 1990s and almost into the millennium. The institutional lease created a vehicle by which investment in innovative buildings and SAM was hindered ( Hinnells et al , 2008 ), fostering an adversarial landlord and tenant relationship characterised by limited communication and often high levels of dispute between the parties with an in-built lack of incentive on the part of either landlord or tenant to invest in the fabric of the building during the term of a lease. This lease structure in particular provided little ability for tenants to negotiate terms other than the standard lease ( Crosby et al, 2003 ). ...
The current rise in the sustainability agenda among both corporate occupiers and institutional investors has given rise to discussion about the landlord and tenant relationship. Within Australia this has resulted in tenant-led moves towards ‘green leases’, and in Canada too the green lease has gained momentum. Within the United Kingdom, however, there has been little evidence of widespread adoption of green leases. This article reviews the case for green leases in the light of research conducted for the Investment Property Forum. It reports on the result of interviews conducted with a range of occupiers and concludes that, currently, the market is not ready for the introduction of green leases; instead it advocates that a more dynamic relationship between landlord and tenant is required.
... It recognizes but does not explore the critical importance of the lease (iii) in tenanted properties. A full discussion of this issue is beyond the scope of this paper, but has been taken up elsewhere (e.g., Hinnells et al., 2008;Langley and Hopkinson, 2009;Axon et al., 2012). ...
... The original focus by property companies on risk reduction and future proofi ng, driven by the sustainability legislation, has also now expanded to a fuller articulation of the business case, based on a proven return advantage. This has seen the sustainability research agenda expand in recent years from the valuation implications of sustainability (for example Sayce et al , 2004 ) to become more focused on assessing the impact of specifi c functional criteria ; ( Sayce et al , 2007 ), identifying sustainability best practice ( Newell, 2008 ; Newell and Manaf, 2008 ), sustainability practices by property professionals ( Dixon et al , 2008 ), green leases ( Hinnells et al , 2008 ) and identifying a proven return advantage from green buildings ( Miller et al , 2008 ). Signifi cant sustainability reports are also available from the websites of The United Kingdom: British Land, Land Securities, PruPIM, Hermes, Hammerson, Great Portland Estate, Capital & Regional, Liberty International The Netherlands: Wereldhave, Redevco, Multi France: Unibail-Rodamco, Klepierre, Bouggues Imobilier Germany : Metro, ECE Portugal : Sonae Sierra Sweden : Castellum Australia : Lend Lease, GPT, Stockland The United States: Hines, Regency Centers, Simon Properties Japan: Mitsubishi Estate, Mitsui Fudosan Singapore: CapitaLand, City Developments Hong Kong: Swire Properties, Sun Hung Kai, Link REIT Malaysia: YTL Philippines: Ayala Land India: Ansal, Sobha Source : Author's assessment of sustainability information at property company websites. ...
Property companies have taken a strong leadership role in the area of environmental sustainability, particularly in the retail property sector. This article highlights some of the strategies used by property companies in the United Kingdom, Europe, the United States, Asia and Australia in developing excellence and best practice in sustainability for retail property. The future implications for sustainability practices in retail property are also highlighted.
When it comes to sustainability, improving existing buildings is arguably more important than developing better new facilities. But that can be more difficult because it requires cooperation between owners and tenants. Fortunately, owners are finding ways to cooperate thru green leasing, incentives, and educational programs. This paper presents eight examples from the United States, Europe, and Australia. They demonstrate that property firms can work with new and existing tenants toward greater cooperation around sustainable real estate concerns. Transformation to sustainable property investing will be a "sociotechnical" process. It will require technical skill to improve eco-efficiency, but also new social capabilities that facilitate cooperation among owners and their tenants. Fortunately, the cases presented illustrate ways this can be done.
Renovation of commercial buildings was studied to analyze typical energy improvements and to determine the performance gap in relation to major NZEB level renovation. To provide input for Estonian long-term renovation strategy, building samples and interviews were used to study how the commercial property companies deal with the building renovation need in Estonia. Results show that in office buildings renovations improved energy performance marginally and a performance gap of about 40% existed after market-based renovation. About one third of trade buildings reached the NZEB level, but within the rest, the performance gap was about 50%. A common renovation cost was around 10 €/m², but major renovation will need 130-150 €/m². The main obstacle was the long, 20-30-year payback time and uncertainty of the measures for major renovation. This increases the risk of investment for a real estate company preferring max 10-year payback time. Interviewees pointed out, that tenants are not motivated to invest because the expected 2-3% saving in the sum of rental and energy cost seems invisible. To start the NZEB renovation, building owners recommended preparation of new energy or carbon taxes together with incentives and knowledge about energy efficient renovation.
This thesis discusses Green Leasing in office buildings, and the drivers and barriers associated with its development and implementation, with a particular research focus on Norway. The research for this project was funded by NTNU, more specifically the Centre for Real Estate and Facilities Management at the Department of Architecture and Planning in the Faculty of Architecture and Design. The aim of this thesis was to explore Green Leasing and related topics (such as Green Leases) in the context of their potential (both currently and prospectively) in the context of the built environment. This project is a three-phase study using mixed methods and is for the most part exploratory, containing a combination of interviews, a survey and literature research. The end objective was to better understand the state of current research and terminological penetration, the drivers and barriers for the development of Green Leasing in offices, as well as the current situation and future possibilities for facilities management in this context. The results of these studies are presented in the thesis as well as the attachment of eight articles, seven of which have undergone full peer review and acceptance for publication in their respective journal or conference at the time of this thesis publication.
Purpose
A green lease incorporates sustainability practices to reduce a building’s negative impact on the environment. Facilities managers play an important role in ensuring these best practices are implemented during the operational stage of a building; however, green leasing is an under-researched area in the emerging field of sustainable facilities management (SFM). This paper aims to investigate the common barriers encountered in ensuring environmental performance when a green lease agreement is in operation between a landlord and tenant.
Design/methodology/approach
This research was conducted in three stages using the principal-agent problem as the theoretical foundation for data collection. Stages 1 and 2 used semi-structured interviews to collect data with policy/corporate-level professionals, landlord and facilities management representatives who have considerable experience in green leases. Stage 3 used document reviews based on summative content analysis to further evaluate the extent of the contextual use of green leasing concepts as used within the facilities management community.
Findings
The study confirmed a strong incentive gap and information asymmetry between the landlord and facilities manager, forming a typical double principal-agent problem when the split incentives between the landlord and tenants are also taken into consideration, which results in agents acting on their own self-interest rather than the interests of the principal. Goal alignment is found to be key for the successful operation and management of a building throughout its life; when present, these goal conflicts can lead to disharmony between the parties to the contract.
Research limitations/implications
The study proposes a few practical measures to close the gaps in incentive and information asymmetry that create the principal-agent problem, while providing recommendations to the facilities management professional community. These recommendations could be included in future revisions of the SFM guidelines or code of practices used by the industry. Although this study exposed a rather neglected area of the facilities manager’s role in green leases, the findings are limited by the relatively small sample size used for the interviews.
Originality/value
This study contributes to the SFM body of knowledge from a green lease perspective, and the theoretical framework in the double principal-agent problem introduced in the study could be used in future research endeavours.
Purpose
This paper aims to identify the state of the art in Green Leases and Green Leasing in theory and practice, while also identifying how the roles and motivations of the stakeholders of “owner/landlord”, “lessee” and “facilities management” are different in a building that uses Green Leasing and Green Leases, as opposed to the one without.
Design/methodology/approach
Through existing literature and existing case studies from 1995 to the present day, this paper will identify the state of the art of Green Leases and Green Leasing and the extent to which literature-based discussions have played out in their practical application in the real estate sector. The roles of key stakeholders will be analysed and then compared to the interactions and roles identified in a theoretical model that describes the same stakeholders but from a more traditional stakeholder perspective. This will be achieved through using literature from journal papers mostly from the disciplines of built environment, facilities management, finance, investment, law, management and real estate.
Findings
The literature and case studies found in literature demonstrate a gradual move towards advancing Green Lease adoption and development. While the roles of key stakeholders do see a change in Green Leased buildings in terms of, for example, changing competencies for facilities managers (FMs) and more user engagement with their buildings sustainability, the literature indicated most of the changes are realised through a strengthening of existing interactions already evident in buildings without a Green Lease or Green Leasing.
Originality/value
This paper provides a state of the art review on the development of Green Leasing and Green Leases in theory and practice from a stakeholder perspective. It provides possibility to expand further on the changing roles of these stakeholders in Green buildings, which in turn could also positively affect the further development of Green Leases themselves, as well as sustainable certification methodologies such as Europe’s leading certification “Building Research Establishment Environmental Assessment Method” (BREEAM).
Purpose
This paper aims to investigate the drivers and barriers for green leases and tenancies in sustainable “Building Research Establishment Environmental Assessment Method” (BREEAM) and “Leadership in Energy and Environmental Design” (LEED) certified office and office buildings in Norway, the UK and the USA. This study focuses on the differing perspectives between owners and tenants. It is then considered as to how these issues are dealt with during different phases of a buildings life cycle. This research is based on existing literature and semi-structured interviews that studied qualitative and quantitative elements in the context of ownership and tenancy of single and multi-tenanted sustainable office buildings.
Design/methodology/approach
Using a mixed-method approach involving semi-structured interviews with both qualitative and quantitative elements along with desk research, this paper evaluates how green leases and tenancies in offices and office buildings that are BREEAM and LEED certified require a reconsideration and re-evaluation of the acquisition, operation and disposal of office buildings by building owners and their tenants. These stakeholder relationships are supported theoretically using a theoretical model that outlines the interrelation between the sustainable building and the relationships of the building owner, the user and the FM service provider.
Findings
The data gathered from the interviews justify and partly contradict some of the statements within existing literature, diminishing the importance of cost and the barrier of split incentive but instead illuminate the importance of less tangible considerations such as company policy or a sustainability strategy. The results also note the realisation of a changing market for commercial real estate driven by the sustainable business needs of tenants for the occupation of workspaces.
Research limitations/implications
These findings have the potential to further develop theories and provide an insight into how the relationships between actors from a business, procurement and contractual perspective need to be developed to ensure more proactive development of green leasing of new and existing sustainable office buildings, along with where strategic attention is required during the building design, construction, operational and use phases.
Originality/value
This paper is based on original research through interviews and literature studies supported by an existing theoretical model. The results have been partly presented and initially discussed at the WBC World Congress 2016 in Tampere, Finland.
Improving the environmental performance of non-domestic buildings is a complex problem due to the participation of multiple stakeholders. This is particularly challenging in tenanted spaces, where landlord and tenant interactions are regulated through leases that traditionally ignore environmental considerations. 'Green leasing' has been conceptualized as a form of 'middle-out' inter-organisational environmental governance that operates between organisations, alongside other drivers. Green leases form a valuable framework for tenant–landlord cooperation within properties and across portfolios. This paper offers a comparative international investigation of how leases are evolving to become 'greener' in Sweden, Australia, and the UK, drawing on experience from an IEA project on behaviour change and a UK project on energy strategy development. It considers how stakeholder retrofit opportunities and interactions in non-domestic buildings are shaped by the (1) policy context in each country (e.g., the EPBD, NABERS, and MEES) and (2) prevailing leasing practices in each country. Based on this analysis, the paper develops a new market segmentation framework to accentuate the different roles that public sector organisations and private property companies play as both tenants and landlords across countries. We suggest that national government policies assist the public sector in leading on better leasing practices, whereas international certification and bench-marking schemes (e.g., BREEAM & GRESB) may provide more fuel to private sector tenants and landlords. The paper concludes with a discussion of the fit between property portfolios and policies , suggesting that international green lease standards might assist multinational tenants and property owners in upgrading both their premises and their operational practices.
energy. Large retailers are aware of the contribution energy makes to their operational costs and of many opportunities available for efficiency measures. However, many retailers are tenants rather than owner-occupiers greatly complicating the implementation of energy and carbon saving technologies (‘energy upgrades’) because of this predominance of leasehold properties. This introduces a barrier as many of the larger, and hence more impactful, energy efficiency measures require active collaboration between the (landlord) owner and (tenant) occupier for successful implementation, possibly requiring changes to either the building fabric or plant/equipment.
New mechanisms have been developed aiming to smooth this possible barrier, through the use of environmentally conscious legal instruments: either Memorandum of Understanding (MoU) between parties with existing tenancy agreements; or directly inserted clauses specifying mechanisms for collaboration between parties within new lease agreements, so called ‘Green Leases’ (GL). This paper aims to explore whether there are quantifiable benefits from their use.
Using data from a large UK retail chain we have investigated, using a number of different analytical methods, the visibility of consumption changes after the introduction of an MoU or GL for a number of different classes of stores operated. With the limited dataset available it is, however, difficult to establish a clear causal link between their introduction and statistically significant consumption changes. As such we discuss these limitations and how with the addition of further sources of information we may be able to improve on the analyses performed.
Improving the energy performance of buildings has become a priority area for energy efficiency policy across the European Union. A cornerstone to achieving carbon reductions in UK buildings is the Energy Act 2011 and subsequent minimum energy efficiency standards. This Act contains a number of provisions which will have implications for the commercial property sector. the paper presents a quantitative study that investigates the implications of the legislation and assesses how key stakeholders, specifically commercial landlords and property agents, are preparing for its implementation. the results reveal there is generally a good awareness of the act and suggest that a number of property owners, and to a lesser extent advisers, are taking greater account of energy and environmental performance in their acquisitive due diligence and asset management strategies, as a result of the act. less preparation was evident with regard to green leasing practice, although this was being considered as an action in the near future.
Purpose
With the impending development of green buildings in Kuala Lumpur, the capital city of Malaysia, managing the criteria within the requirements of the rating tool’s certification shall be the responsibility of the respective parties when these buildings are in operations. In tenanted buildings, a lease agreement spells out the responsibilities of the owner/landlord and the tenants. The paper aims to discuss these issues.
Design/methodology/approach
The main aim of this study is to gauge the implementation of green lease among office buildings in Kuala Lumpur. This is made through an initial review of the adoption of green building criteria as well as the determination of the drivers and barriers perceived by office building managers in implementing green lease.
Findings
A survey amongst the managers of top grade office buildings in Kuala Lumpur revealed that the majority practiced some of the green criteria outlined in the Green Building Index. It also revealed that the most significant green lease terms commonly acknowledged by the respondents were energy and water-saving consumption as well as recycled material usage.
Originality/value
Through the identification of the barriers to implement green lease, the most significant barriers identified were related to cost and financing. Having identified these obstacles, appropriate action can be taken to bring forward green lease awareness amongst the various stakeholders in the office building sector in ensuring the successful operation of green buildings.
Purpose
This paper aims to investigate the practices, drivers and barriers which influence the implementation of green leases in South Australia. Despite some efforts on legal aspects of green leases, only a few studies have examined these aspects from an operational perspective. In addition, very little empirical evidence was presented in previous studies to show how green leases work in real-life settings.
Design/methodology/approach
Data were collected using semi-structured interviews with landlord and tenant representatives who have considerable experience in green leases. These interviewees were selected via a purposive sampling technique that identified buildings which use green leases in South Australia. The concept of interface management (IM) was used to operationalize this research.
Findings
The green leases were found to be mainly initiated by tenants while government involvement, economic and environmental benefits are the main drivers in South Australia. Drivers such as staff retention, well-being and corporate social responsibility are found to be more relevant to tenants. Lack of awareness and transaction costs are the main barriers to the implementation of green leases.
Research limitations/implications
This study focuses on the South Australian context and mainly covers dark green leases. There are implications for the government’s continued involvement and the promotion of lighter shades of green leases to overcome operational issues and barriers identified in this study.
Originality/value
This study contributes to the body of knowledge on the subject of green lease implementation from an operational perspective. In addition, the study introduces a conceptual framework via IM that could be used in future research endeavours.
At the same time that the sustainability agenda has gained purchase within the commercial property market, financialisation has also been having an impact. This article argues that this impact has been concentrated in the prime sector of the market and that there is a significant non-prime sector that also deserves attention. Using a new economic sociology framework, it presents an analysis of how sustainability concerns have penetrated both the prime and non-prime commercial property sectors, looking at the construction of the object of market exchange, the modalities of valuation and the role of calculative practices based on classificatory tools. It demonstrates why promoting sustainability is occurring in the financialised prime sector and largely being ignored elsewhere. While showing the value of a new economic sociology framework, it suggests that the claims for creating a disentangled abstract object of exchange are exaggerated where commercial property is concerned.
Green buildings are considered a quick and effective approach to protect the environment by slowing down the consumption rate of primary energy resources and by reducing greenhouse gas emissions. In Europe, appraisals of properties should take into consideration this new feature of buildings by implementing data from Energy Performance Certificates (EPC) into real estate assessment. With this respect, a methodology is proposed and analyzed to be considered in the sales comparison real estate valuation process. The originality of the methodology consists of considering the expected costs of the so-called wasted/saved energy as a proxy for depreciations/appreciations of the value of the building due to the obsolete/better energy efficiency. Wasted/saved energy is considered to be the difference between the energy demand of a reference building and the energy demand of the subject property.
Purpose
– The study aims to examine how the vicious circle of blame for sustainable buildings can be turned into virtuous loops of adaptation when considering sustainable buildings and what are the drivers for tenants and investors regarding sustainable buildings and gaining insights of investors’ and tenants’ corporate responsibility (CR) actions.
Design/methodology/approach
– The paper consists of a literature review and two surveys. The literature review concentrates on exploring investors’ and tenants’ CR and sustainability drivers. Empirical evidence was gathered via two specific surveys. The first survey targeted investors, and the second survey targeted tenants to determine the focus areas of sustainability.
Findings
– The findings of this study indicate that the vicious circle of blame can be turned into one of cooperation with respect to sustainable buildings if the mutual drivers for improving sustainability are linked with investor–tenant collaboration. Based on the survey, the tenants claim that productivity, corporate culture and image are the primary drivers for sustainable buildings, whereas the investors claim that corporate culture and image, tenant demand and marketability are the primary drivers. Both parties mentioned the same sustainability drivers: corporate culture and image and lower operating costs. However, it was found that investors are not communicating their CR actions to public or promoting image and productivity benefits of green buildings to potential tenants.
Research limitations/implications
– The limitation of this study is the sampling of Nordic countries, as there are indications of different situation in other markets such as the USA.
Originality/value
– Improving sustainability in the real estate industry is linked to investor–tenant collaboration. In addition to common drivers, both investors and tenants have their own list of benefits and drivers for sustainable buildings. These drivers are linked to each other. Making progress with respect to sustainability in the built environment depends on people in the industry being aware of the importance of and possibilities offered by sustainable buildings, as well as being able and willing to act on this knowledge. Only through partnership can the full potential of the built environment be realised and help deliver an economically, environmentally and socially sustainable future.
Businesses are becoming more environmentally focused, andinteraction between their core processes is essential in adopting a sustainable approach. This can be further complicated in the rental market, where organisational approaches may not be compatible with the sustainable obligations of building owners. This paper's aim is to discuss the potential of “green leasing” and sustainable facilities management (SFM) in meeting these challenges, through literature and case studies. The paper demonstrates the differing corporate approaches through a literature search, in the context of corporate social responsibility and obligatory and voluntary motivators, and how they relate to the triple bottom line of economy, environment and society.
IMMOVALUE: Improving the market impact of energy certification by introducing energy efficiency and life-cycle cost into property valuation practice Contact:
Due to the lack of relevant studies and information regarding the link between green
buildings’ energy performance and property valuation, the independent-trans-European
project “IMMOVALUE” has been initiated in 2008. The project aims to determine and define
common and accepted approaches and methodologies on how new developments such as
EPC/EPBD as well as life-cycle costing (LCC) and analysis (LCCA) could be integrated in
today’s and future practice of property valuation.
This paper investigates the relationship between operating expenses and rents of Energy Star and LEED certified buildings in the Central and Eastern United States. Several studies have shown that sustainable buildings command a rent premium compared to comparable conventional buildings. Lower operating expenses are expected to be a major source of the rent premium that sustainable buildings command. This is especially the case for buildings with triple-net leases, where tenants directly benefit from savings in operating costs. For a large dataset of U.S. office buildings this study finds significantly lower operating expenses in LEED certified buildings. However, savings in operating expenses only explain part of the rent premium. Additional factors must be at work. Surprisingly, we find significantly higher operating expenses in Energy Star rated buildings. Hence, intangible benefits appear to be the major source of rental premiums of Energy Star rated buildings.
Purpose
– The purpose of this paper is to identify the factors present in successful energy efficiency investments that might indicate how to resolve the landlord-tenant dilemma in existing and new commercial property.
Design/methodology/approach
– The paper reviews literature to indicate the importance of energy efficiency in buildings and to explore the barriers to such investments, including problematic landlord-tenant relationships. Such relationships have been investigated by the International Energy Agency, and a similar approach is used here in two case studies in new and existing buildings. These studies explore the nature of landlord-tenant relationships and the importance of policy and standards of building performance.
Findings
– In neither case did landlord-tenant issues constitute barriers to investments in energy efficiency, however, these investments were made for other reasons than simple cost savings. Construction of new commercial property to Passivhaus standards ensures a high-build quality and a comfortable building with low-energy costs. The added value to tenants may justify the cost of construction. The cost of investments in energy efficient buildings can also be justified by the enhanced reputation of landlords which may be more valuable than a DEC rating. In neither case was the commercial Green Deal felt to be an attractive funding mechanism.
Practical implications
– Conclusions based on these case studies must be regarded as tentative, so future studies of successful energy efficient buildings should be undertaken to explore the motivation to invest, particularly the relative importance of indirect benefits of energy efficiency.
Originality/value
– One of the case study buildings is exceptionally energy efficient and is the result of a particularly open and effective contractual relationship. Further study of such cases may suggest a new approach to landlord-tenant problems of energy efficiency, even in refurbishment of existing buildings.
Purpose
– Using a unique data set, the purpose of this paper is to test the hypothesis that tenants pay increased accommodation costs for space in energy efficient office property.
Design/methodology/approach
– The authors obtain lease contracts for office space in central Sydney, Australia. Empirical data on annual gross face rent and contract terms from each lease are combined with building characteristics and measured energy performance at the time of lease. Hedonic regression isolates the effect of energy performance on gross face rent.
Findings
– No significant price differentials emerged as a function of energy performance, leading to a conclusion that tenants are not willing to pay for energy efficiency. Six factors – tenancy floor level, submarket location, proximity to transit, market fixed effects, building quality specification and, surprisingly, outgoings liability – consistently explain over 85 per cent of gross face rent prices in Sydney.
Research limitations/implications
– Rent premiums from an asset owner's perspective could emerge as a result of occupancy premiums, market timing or agent bias combined with statistically insignificant rental price differentials.
Practical implications
– Tenants are likely indifferent to energy costs because the paper demonstrates that energy efficiency lacks financial salience and legal obligation in Sydney. This means that split incentives between owner and tenant are not a substantial barrier to energy efficiency investment in this market.
Originality/value
– This study is the first to thoroughly examine energy efficiency rent price premiums at the tenancy scale in response to disclosure of measured performance. It also presents evidence against the common assumption that rent premiums at the asset scale reflect tenant willingness to pay for energy efficiency.
Purpose
– This paper aims to report on research that investigates the use of green clauses in leases of office and retail premises in England and Wales.
Design/methodology/approach
– The authors examined 26 recent leases of green build properties registered at HM Land Registry. The green clauses discovered were classified and compared with the model form green clauses promoted by the London-based Better Building Partnership's Green Lease Toolkit.
Findings
– Of the 26 leases analysed, 18 contained some form of green provision.
Research limitations/implications
– As the sample selected was not representative, a larger study is needed to detect trends in green leasing. This research method does not show the impact of green clauses on property management.
Practical implications
– This research illustrates the types of clauses that have been used in leases but also shows that green leasing principles are not yet the industry standard. Many new, long leases still make no reference to environmental practices.
Originality/value
– This is the first research to be done examining the green content of agreed leases and develops a methodology that can be used for future research.
In an era of climate change there is increasing attention paid to the carbon contribution of commercial property. In Europe and specifically the UK this has led to a wide range of measures aimed at improving the energy performance of buildings and influencing their energy use. This article explains the range of instruments now in play before reviewing their likely impact upon property transactions in the future. It argues that attention must be given to these instruments in freehold transactions and property investment, where the due diligence issues will be relatively straightforward, and also in leasehold transactions, where the allocation of costs between landlord and tenant may prove rather more problematic.
A ‘middle-out’ perspective is used to investigate potential roles for professionals and practitioners in creating societal change. Social and technological innovations are commonly seen as either being induced from the ‘top-down’ or evolving from the ‘bottom-up.’ Instead, a ‘middle-out’ perspective focuses on agents of change that are located in the middle, between the top and the bottom. This perspective shows that middle actors can affect change in several different directions: upstream, downstream and sideways. By linking the top and bottom more explicitly, this approach is both an alternative and complementary to ‘bottom-up’ and ‘top-down’ efforts to implementing low-carbon innovations and practices in society. One particular kind of ‘middle’ in the built environment is explored: the role of building professionals to encourage (or discourage) societal change. Focusing on the demand side of the energy system, case studies of building professionals in the domestic and non-domestic sectors are used to emphasize the qualities of these middle agents as enablers/disablers, mediators and aggregators. Policy implications from the ‘middle-out’ perspective are drawn, and comments on the near and long-term relationship between building professions and building performance are made.
Purpose – The purpose of this paper is to investigate if a green lease could eliminate the split incentive problem in two office buildings located in Stockholm, Sweden. It aims to provide a theoretical overview concerning the “energy paradox” and to describe a case study in which a green lease was to be implemented in the legal framework for two office buildings in the Stockholm region.
Design/methodology/approach – This paper documents a case study, in which a green lease was to be implemented in the legal framework for two office buildings, to promote a more active engagement in the buildings energy performance. In order to accomplish this, a project group was formed which consisted of representatives from the building owners, tenant, property manager, energy consultants and KTH, Royal Institute of Technology, Stockholm.
Findings – This paper reveals that it is very hard to alter already legally binding agreements. Furthermore, it shows that the separation of ownership and usage of a building may not be optimal from an energy efficiency point of view.
Originality/value – The paper gives an empirical explanation as to why at times energy efficiency measures are not undertaken, even though the investments themselves bring about a positive net present value. In addition, the paper analyses the situation where property maintenance is outsourced to a property management firm, which is a common but seldom discussed situation in the literature.
Purpose
The purpose of this paper is to illustrate, by reference to practical examples, how leases of commercial buildings can be more responsive to environmental issues.
Design/methodology/approach
The paper explains how difficult it is within the structure and content of conventional leases to reduce the environmental impact of the tenanted commercial built environment. It explores the interplay between the content and structure of commercial leases and the behaviour of building owners, managers, tenants and occupants, illustrated through the experiences of a large Australian‐based commercial office building owner/operator.
Findings
With reference to practical examples it shows how conventional leases stifle innovation and illustrates the difficulties in drafting leases that enable a responsive approach to building management to be adopted. It shows how more fundamental changes that align and reward owners and tenants for working together for mutual benefit are required.
Practical implications
The paper presents a number of “model clauses” for encouraging best environmental practices and concludes with a suite of recommendations.
Originality/value
Although there have been conversations about green leases in recent years, there is little detailed evidence of their use in the marketplace. This paper remedies that deficiency by taking a case study approach that: illustrates the opportunities and difficulties in negotiating green leases; and shows how attempts to provide innovative building management can be hindered or supported by lease terms.
‘Sustainable’ or ‘green’ commercial buildings are frequently seen as a growth sector in the property investment market. This research examines the emergence of sustainable commercial buildings in both the UK and overseas. The empirical part of the paper is based on a telephone survey of 50 UK corporate (private sector) occupiers taking leased and owner–occupied office space, which was carried out during the period of April to November 2008. The survey focused on actual moves made within the previous two years, or moves that were imminent during 2006–2008. The research suggests that although there is an emerging and increasing demand for sustainable offices in the UK, other factors such as location and availability of stock continue to remain more important than sustainability in determining occupiers’ final choice of office. Occupiers who moved to a Building Research Establishment Environmental Assessment Method (BREEAM)‐rated building, and were in business sectors with strong environmental and corporate responsibility policies, placed more emphasis on sustainability than other groups in the final choice of office, but location and availability remained paramount.
Background and ContextBuildings and Climate Change: A Global ChallengeSize of the Market for Sustainable PropertySustainable Property Drivers and BarriersThe Investment Thesis for Sustainable PropertySustainable Property Investment OpportunitiesFuture Trends and Risk: A Perfect Storm?Notes
This guidance document provides explanatory notes that should be read alongside Part 1
The aim of this guide is to help landlords and tenants to incorporate a sustainable method which helps them to meet their obligations for reducing resource consumption and waste generation whilst improving the environmental performance and energy efficiency of their building. This guide provides model lease clauses and recommendations which can be discussed and included, as appropriate, during lease negotiation stages.
An overview of climate change mitigation opportunities in the world's buildings is presented, based on the key building-specific findings of the Fourth Assessment Report from the Intergovernmental Panel of Climate Change. Buildings and the building stock can play a major role in mitigating climate change in the short- to medium-term, since substantial reductions in CO2 emissions from their energy use can be achieved over the coming years. A significant portion of these savings can be achieved in ways that reduce life cycle costs, thus providing reductions in CO2 emissions that have a net negative cost. There are indications that the building stock has the highest share of negative- and low-cost greenhouse gas reduction potential among all sectors. Based on 80 collected national or regional studies estimating CO2 mitigation potential in five continents, the global potential for CO2 reductions through buildings is analysed and estimated. The co-benefits associated with the implementation of these measures are also substantial, helping policy-makers justify actions even in the absence of a strong climate commitment. Since the barriers to unlocking the high potentials in the residential and commercial sectors are especially strong, no single instrument can make a large impact. Instead, portfolios of targeted policies tailored to local conditions, combined with strong compliance and enforcement regimes, are needed.
Reducing carbon emissions from commercial and public sector buildings in the UK
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Stability and opportunity: building a strong, sustainable future
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