What does green leasing have to do with energy efficiency? A green lease can touch on everything from tenant build-outs to the use of green cleaning products, but one major focus is energy transparency–how energy consumption is measured, reported, and billed. This is covered in multiple sections of any commercial lease. As the saying goes, you can’t manage what you don’t measure, and the current lack of transparent data in the leasing process presents a major barrier to efficient operations.
Sub- or separate meters for electricity, water, and natural gas are typical for some building types (like outdoor malls), but many office and retail tenants are still paying a simple pro-rata share of utilities based on square footage. That means if one tenant business reduces energy use–say by changing to ENERGY STAR-labeled electronics–that business won’t actually save money.
In some shopping centers, tenants paying utilities on a square-footage-based pro-rata share (also known as Electric Rent Inclusion) may be considerably overcharged simply due to a mix of low- and high-intensity uses. For example: a 5,000-square-foot math tutoring center could pay the same bill portion as a similarly sized home theater retailer next door, even though the tutoring center could be expected to use significantly less electricity.
Additionally, since many companies now catalogue and report their GHG emissions via the Carbon Disclosure Project or other standards, the lack of measured energy usage impedes their ability to provide transparent reporting to investors and other interested parties.
Energy transparency can be an important issue for landlords as well. In cities like New York or Washington, DC, which have benchmarking and disclosure regulations, landlords have to report whole-building energy usage or potentially face fines. Many separately metered tenants will provide utility data to help their landlord comply with the law–but other tenants have thus far refused to do so on the basis of privacy. Writing energy use transparency into the lease would save these landlords the headache of a possible legal battle.
Transparency can translate into lease terms in several different ways, depending on the type of lease (gross or net) and how much space the tenant is taking, among other considerations. In the event that metering is brought up by either party during an existing lease term, a simple amendment (or even a handshake agreement) can lead to metering changes and the desired exchange of data. The most reasonable solution is usually for the party receiving the potential benefits of a sub- or separate meter to pay for the installation.
Studies show that in homes, energy use transparency leads to a 4-12% reduction in consumption. So it’s reasonable to assume that encouraging transparency for commercial tenants by putting in sub- or separate meters will yield similar results, and a short, simple payback period.