Green Leasing: A collaborative tool for a sustainable built environment

Today, employees choose their next employer based on sustainability: 32% of employees agreed they would only work for a company that prioritizes sustainability. Of that total, 42% of millennials and 30% of Gen-X agreed.

To attract these climate-minded employees, more and more companies are setting sustainability goals for their operations, both internally and externally. Deloitte’s 2022 CxO Sustainability Report found that 82% of executives plan to achieve net zero carbon emissions by 2030.

The location and daily operations of office buildings emit a large amount of harmful greenhouse gas emissions. Organizations choose their office spaces with sustainability in mind to combat these negative environmental effects. One way to do so is to enact a green lease.

Green leases include clauses specifically related to sustainability, such as requirements for smart, energy-efficient lighting, heating and cooling, or using renewable energy sources to reduce emissions.

The need to drive energy efficiencies is direr: the latest United Nations climate conference, COP27, called for sustained investments in energy efficiency worldwide to reduce energy demand, avoid CO2 emissions and dampen energy cost volatility.

How green leasing works

The explosion of green leasing around the world is driven by the large amount of emissions that the built environment releases into the atmosphere.

Green leasing is a collaborative way to meet both the demands of sustainably minded tenants and the financial needs of building owners. Although commercial green leases have taken many forms, they are all agreements between building owners and tenants that commit to reducing energy waste, improving system efficiency, and boosting transparency between the two parties.

Given that operational building emissions (i.e., daily energy use) account for more than a quarter — yes, a quarter! — of total global emissions, green leasing is a viable tool for tenants of all industries to impact the climate positively.

While owners control the energy infrastructure of a building, tenants determine the overall energy usage. Thus, a poorly designed building with inefficient heating and cooling can dish out inordinate amounts of carbon emissions.

When evaluating a building space, it’s recommended that tenant/broker teams look for a few items from the building owner:

• Energy use details, carbon reduction goals, social impact programs, and other efficiency ratings like WELL or LEED.
• Whole-building performance metrics, energy use intensity, and whole-building capital improvement plans during the evaluation process.

WELL and LEED certifications have become critical markers for building occupants’ well-being and healthy, efficient, carbon, and cost-saving green buildings.

Additionally, many commercial real estate, laboratory, and healthcare spaces are turning to district energy to provide greener and more efficient energy to power their critical operations. District energy systems typically reduce primary energy demand in heating and cooling by 50% and can achieve operational efficiency of up to 90%.

How does district energy accomplish this? By centralizing and aggregating the production of heat, hot and chilled water to multiple buildings, district energy cuts down on the amount of fuel that would otherwise be required by individual buildings using onsite generation and the resulting carbon emissions.

The potential impact of green leases

Because green leases require building owners to take actionable steps to improve their operations, these agreements can lower both utility costs and energy use.

Through an analysis of current energy efficiency measures facilitated by the signing of green leases, it is estimated that green leases have the potential to reduce energy consumption in office buildings by 11 to 22 percent.

This reduction in energy consumption has the potential to provide the U.S. commercial office market with $1.7 billion to $3.3 billion in annual cost savings.

With the built environment currently generating nearly 50% of annual global CO2 emissions, these efficiency measures can make a big difference in the fight against climate change in cities worldwide.

Green lease growth in the U.S. and beyond

Although relatively new to the United States, green leases are taking off globally. A whopping 34% of all building occupiers have signed qualifying green lease clauses, according to JLL Global Research’s 2021 report, Decarbonizing the Built Environment.

In Europe, France is leading the charge: green leases have become commonplace as part of a mandatory reduction in national emissions. French landlords are now required to include specific benchmarks around the conservation of energy consumption in commercial office leases.

It’s no surprise that market demand for green leasing is growing in the United States. Roughly five billion square feet of building space is now covered by green leases in the U.S., a number that’s expected to grow at a fast clip, according to the Institute for Market Transformation.

Aside from financial and efficiency needs in the U.S., cities like Philadelphia, Boston, and Los Angeles are enforcing ambitious decarbonization goals aimed at reducing building emissions.

In Boston, for example, the Building Emissions Reduction and Disclosure Ordinance (BERDO 2.0) has set requirements for large buildings to reduce their energy and water use, stretch codes mandated, so buildings will achieve higher energy savings, and increase investments in green and renewable energy technologies.

Commercial building owners need an energy partner they can trust to meet the requirements of carbon reduction acts like BERDO 2.0. As the owner and operator of the district energy systems in twelve states in the U.S., Vicinity is uniquely poised to help our customers decarbonize their building operations quickly and affordably.

Vicinity is the first in the U.S. to electrify its operations and offer renewable thermal energy by installing electric boilers, industrial-scale heat pumps, and thermal storage at our central facilities starting in Boston and Cambridge, with other locations to follow.

A way forward with green leasing

Green leasing allows all tenants to advocate for more efficient energy systems and sustainable buildings that mutually benefit them, their landlords, and the global community.

At Vicinity, we support these green lease leaders and believe that cutting-edge solutions like carbon-free eSteam™ are powerful tools to drive rapid decarbonization efforts in cities across the country.