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The Value of Green Leasing

This sustainability-driven effort can reduce costs and increase resident satisfaction and retention.

Environmental protection encompasses climate initiatives, such as clean air and water quality, as well as reducing waste and recycling. However, commercial organizations and rental housing owners have taken this idea several steps further with green leasing.

This effort, highlighted in NAA’s recent webinar, “The Value of Green Leasing,” offers a solution to the split incentive challenge. While the flow of investments and benefits are not always equally spread among residents and owners, green leasing exists to provide a better balance to align costs and benefits of investment with sustainable living.

In the split incentive challenge, the party responsible for the cost of paying for the energy-efficient upgrade is not always the party realizing the direct benefit. Why are residents reaping the rewards at no cost? Also, residents want to be more energy efficient, yet they have no incentive to use less energy, e.g., paying a flat rate for utilities.

The key elements in the green leasing solution, according to webinar moderator Andrew White of RE Tech Advisors, are to implement energy-efficient improvements during apartment home turns; transparency to provide sustainability contacts and to track and share utility data between the owners and residents; and standardizing efficient building operations.

According to White, the opportunity for green leasing is vast and has the potential to impact nearly 2.9 billion square feet of commercial and government space in North America. If all leased office space were to experience energy savings expected from the program, it would yield $18 billion in annual energy savings.

From an apartment community perspective, green leasing can reduce costs and increase community values, reduce maintenance costs and improve resident satisfaction and retention.

Steps to Follow

Emily Pierce, Director with ULI Greenprint Center for Building Performance, outlined the Tenant Energy Optimization Program (TEOP) and 10 steps to follow when implementing green leases. “There’s a tremendous opportunity for upgrades to be done.”

Pierce said that according to the American Council for an Energy-Efficient Economy, there’s $3.4 billion on average in available savings for energy and sustainability upgrades.

Pierce’s 10 steps were broken down into three phases: Pre-lease, design and construction, and post-occupancy. Having a team in place is among the initial factors to focus on in green leasing. Phase Two starts with setting realistic goals. Also important in this phase is to calculate financial results—what does ROI mean for you? Phase Three covers the plan execution and communicating the results.

Jonathan Bauer, Sustainability Manager with The Tower Companies, says lease language is important. Pay careful attention to data transparency—collecting data from residents and utilities is difficult, which is what makes it so vital. Encouraging language pertaining to certain temperatures for thermostats is also something to think about. It can’t be enforced, but statements surrounding them need to be included in green leases. Baseline language regarding environmental quality includes having communities be smoke-free and to avoid certain products that are known to be harmful.

It is important to having everyone onboard and to collaborate with internal and external stakeholders, such as residents, general contractors and property owners.

“Green lease language is a tool, but the success is in the engagement,” says Erin Hatcher, Vice President of Sustainability with AMLI Residential. “Engage with employees and residents…. Have residents sign off to share utility data and be smoke-free in units and outdoor communities.”

It’s the engagement with residents that builds the importance of the green leasing program, and it has to be constant and continuous, according to the panelists. The lease is the vehicle to build a green residential base and a green portfolio brand.

What’s extremely important at a higher level is being able to track electric and gas usage for greenhouse gas emissions and water waste. You’re only seeing part of the picture if you’re not receiving utility data from residents. This data is needed to be authentic in setting and tracking goals, Hatcher says.

Training is also important, and it’s important to know how to coach onsite teams—maintenance, leasing agents, community managers—as the areas they focus on are all different. “Focus on where they have impact. [I’ve found] that to be the best way they can engage,” Hatcher says.

Clear communication with onsite teams will help as well. Organizations will want everyone on the same page, whether that’s planning fixtures or installing the appropriate green appliances. Partnered with communication is listening: Listen to the people on the ground that know the residents and the needs of the building to drive sustainability.

For those lost in the green leasing journey, finding a place to start is the first step. The panelists suggested following a program like Green Lease Leaders or ENERGY STAR Tenant Space. This can be done without applying for the recognition, as well. Given capital restraints, it’s best to start small and don’t try to do it all at once. Using these programs as a roadmap can help ease you into green leasing.

View the webinar.

Michael Miller is the Managing Editor for NAA.