Green: Of LEED and Landlord/Tenants
Almost everytime we speak about LEED and LEED certified buildings we talk about the design aspect of it and how the building/space got LEED certified. But we seldom talk about what happens after the space is occupied. How do we make sure that the space maintains its certification or commitment to being a sustainable space? How does a spec office building which has recently been awarded a LEED certification try to hold the same commitment from the tenants? Welcome to the world of Tenant Guidelines and Tenant Sale Lease Agreements.
This article includes excerpt from an interesting webinar I attended back in February 2016 which included industry leaders in the real estate industry. They discussed best practices and identified useful resources regarding Tenant Guidelines and Tenant Sale Lease Agreements (TSLA). The panel included USAA Real Estate Company, Forest City Enterprise and Cushman and Wakefield.
Here are the key takeaways of the event:
1: TSLAs and Tenant Guidelines are optional requirements in LEED. However, Tenant Guidelines have a more direct involvement in the credit process. The lease agreements dictate terms of rents, payments, dos and donts, utility bills and HVAC allowance. Lease agreements which allow tenants to pay for their own electricity and HVAC energy consumption may help in achieving measurement and verification credits in LEED v3-2009. However, Tenant Guidelines are more like rules for design and construction that every tenant shall comply to and they normally include green building and LEED requirements. LEED Core and Shell have a specific credit associated with tenant design and construction guidelines and projects may earn direct points for having such guidelines.
2: If a project team decides to draft a Tenant Guideline, then this should be started early on in the design process with a team member working on it. It should be properly scoped out prior to the start of the project.
3: Look Ahead Policy – If starting with a new tenant guideline or TSLA, then it is highly recommended to follow the LEED v4 guidelines for drafting. The reason being LEED v3 will be phased out starting October 31, 2016 and all tenants who need to register their Tenant Improvement projects with LEED, have to be in LEED v4. Therefore, creating a guideline complying with LEED v4 will go a long way in making sure the tenants projects comply with LEED v4 as well.
Leading real estate firms then shared some of the lessons learned from their experiences:
1: Forest City Enterprise stressed strong lease causes and also shared some examples. Stronger interdisciplinary collaboration between their legal, sustainability and tenant coordination teams helped a lot in implementing stronger and stricter leases and also making sure tenants are not scared by those terms, instead taking them as a challenge. This definitely helped in improving their portfolio in terms of sustainability and energy efficiency.
2: A different approach was presented by Cushman and Wakefield. They generally use a “corporate occupier sustainable site selection questionnaire and site selection guidance” tool when they go to market for new offices for corporate clients. The questionnaire asks the landlord questions on topics such as energy, waste, water, utility, green building features, sustainability goals, indoor air quality, access to alternate transportation facilities and certifications.
3: USAA Real Estate Company shared examples where drafting guidelines and leases early on especially with the help of LEED v4 guidelines helped a lot, especially with unique clients such as Data Centers. When it comes to sub metering requirements, LEED v4 guidelines were very useful.