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Contract for Sustainable Performance Green Leases Ensure Operations Support Design
January, 2007
By Kevin Gallagher
Knowing they would soon be relocating, a major company recently spent more than a year looking for just the right office space to rent. It wanted to be located in a newer building equipped with state-of-the-art technology in a convenient and well-sought-after business area. And, for the first time in the company's history, it wanted to be located in a green building.
Finally, a location was found that satisfied most of its needs, including the fact that the building was marketed and promoted as a green facility. In fact, this was one of the things searchers appreciated most about the building, which was constructed using several green-certified products, including carpets, wall coverings, general building materials, and flooring.
Yet, although the facility was built with green in mind, the landlord did not necessarily operate it in the same manner. For instance, some - but not all - of the products used to clean the building were green-certified. Such practices can cause problems and minimize the benefits of occupying a green facility since being green requires a composite of environmentally preferable components each working together to ensure the health of the indoor facility.
For example, Greg Norris, a professor at Harvard University's School of Public Health, points to potential problems when a green-certified hard-surface floor is cleaned and finished with conventional cleaning products. "The amount of VOCs [volatile organic compounds] from a single waxing can equal or exceed the VOCs emitted from the flooring materials over the entire life of the flooring material," he says.
Considering that a floor in a top-class office building may be scrubbed, stripped and refinished two to three times a year, this can translate into a huge number of VOCs being released into the atmosphere, completely wiping out any potential benefits or advantages of installing the safer and healthier flooring material.
Tenants looking to rent a green facility should understand the concept and consider entering into a comprehensive green lease. This will ensure the facility is not only built and furnished with certified environmentally preferable products and materials, but also cleaned, maintained and operated with them as well.
DEFINITIONS
When leasing green office space it is essential that both tenant and landlord have a similar understanding of what a green building and a green lease encompasses. Typically, a green sustainable building is one that:
* Focuses on producing a healthier living, working, healing, and learning environment
* Is built and operated using materials and products known and certified to have less negative impact on occupant health and the environment
* Through design, construction and product selection uses less energy and fewer natural resources than a comparable non-green building
* Focuses on the long-term consequences - economic, environmental, and social - of the materials used to build and operate the facility and not just short-term results.
As to the specifics of a green lease, according to Alan Whitson, President of the Corporate Realty, Design, & Management Institute, a green lease, "encourages landlords to compete for tenants by designing, building and managing buildings that are sustainable without sacrificing comfort or service, while maximizing return on investment."
Whitson says that a green lease ensures that the materials used to build and operate the facility are indeed environmentally preferable and that tenants receive full use of this green, high-performance building over the lease term at a competitive price. However, tenants are obligated to do their part by not bringing hazardous materials or other unapproved products into the facility or performing any activities that might endanger the health and sustainability of the building.
Whitson advises that the green lease should contain such elements as:
* A thorough definition of what hazardous materials are, and what cannot be brought into the facility
* Green cleaning specifications that define the cleaning materials as well as procedures and systems to be employed to keep the facility green, sustainable, and healthy
* A guide that explains the building's sustainable features and benefits with insights into how to maximize these features and maintain a sustainable workplace
* A tenant construction agreement that stipulates that only green or sustainable products be used by tenants in their own construction practices in the facility
PAYBACKS FOR LANDLORDS AND TENANTS
When the first green buildings were developed about twenty years ago, developers were very concerned about their return on investment (ROI) when they found that construction of these buildings could cost as much as 20% more than a conventional facility. However, with time, and as more green facilities were constructed, new technologies, engineering and designs have helped reduce these added costs to just 5 or 6%.
Landlords soon found that there were several cost savings to a green building. For instance, energy savings can be as high as 40% when compared to conventional buildings. Engineering specialists calculate this can translate into a savings of $0.50 to more than $1.25 per square foot depending on the size and complexity of the building.
Developers and owners also learned that many of the green materials used in the construction of the facility were more durable than conventional materials. Additionally, some localities provide various tax benefits and rebates to encourage the development of green sustainable facilities, which can help offset added costs of the environmentally preferable materials.
Some landlords have discovered that they can set higher rents and get better quality, long-term tenants with a green building. In New York City, some of the most recently built green buildings, such as the new Bank of America and Hearst buildings, command rents as much as 10% more than a comparable non-green building and are attracting high calibre companies looking for office space in the city.
The combination of reduced costs and higher rents increases the value of the building. Valuation of a building is a complicated subject with many variables. However, at the most basic level, an office building's value can be determined by its net operating income. If rents are higher and operating costs are lower, the building is worth more, plain and simple.
Tenants, too, have found they've profited in moving their staffs to green spaces. For instance, many business owners report financial benefits such as reduced absenteeism, which in turn can result in lower workers' compensation and related insurance expenses. As absenteeism has decreased, worker productivity and performance have increased, as has morale - translating into savings that can more than compensate for any additional rental expenses for a green space.
A green lease helps to ensure these buildings continue to be green in the future. It outlines what a green building is, and the obligations of both parties to keep the facility green, so that both tenant and landlord can reap the often substantial rewards of being environmentally friendly.
Kevin Gallagher is Vice President responsible for the management and application of sales, customer relations and business development activities related to marketing and delivery of the Environmental Choice Program. For more information, see the web site at www.environmentalchoice.com.
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