In May 2009, the Alliance released the results of a study examining the current state of green commercial buildings in California and challenges and opportunities for the accelerated adoption of green leasing in California’s existing office space.
Titled Greening California’s Leased Office Space: Challenges and Opportunities, the report provides information to policymakers and market participants about the pivotal role green leasing plays in achieving the resource efficiency, environmental, and societal benefits of green buildings. The report outlines the constraints on green leasing and recommends changes that need to be made to policies, programs, and practices in order to establish green leasing as standard practice in California.
90% of California’s commercial office space is leased, and the greening of this space is constrained by several challenges, notably:
- Real estate owners not economically motivated to invest in building retrofits as the financial benefits flow to tenants;
- Tenants may be less inclined to adopt conservation measures as financial benefits can accrue to other tenants and/or the building owner;
- Imbalanced benefit distribution or ‘split incentives’ on core and shell retrofits, between the building owner and tenant. These retrofits (usually the responsibility of the owner) often have long financial payback periods. These costs, if they cannot be passed to tenants, discourage the building owner from making such capital investments; and
- The ever-growing range of standards, concepts and protocols requires negotiating a unique balance of benefits and burdens for each leased property, which consequently adds time and complexity to the lease transaction.
Green leasing can be a key strategy for greening existing office space. In order to boost the market adoption of green leasing, the report concludes that owners and tenants who are motivated to find mutual benefits can collaborate to significantly improve the resource and environmental performance of California’s existing building stock.
The Alliance, in consultation with its Green Building Advisory Committee, recommends a broad range of strategies for accelerating green leasing in California – from establishing consistent statewide standards and definitions of “green”, to documenting and publicizing the costs and benefits of green buildings (also known as the green building value proposition), implementing building labeling, and modifying state and local policies, ordinances and utility programs to recognize the different needs and interests of landlords and tenants under various types of lease structures.
Green buildings are a growing segment of California’s overall building stock. In late 2008, LEED® and ENERGY STAR rated buildings accounted for 10% of California’s total office space. 6 months later, they comprised 13% of the state’s total office space – a 30% increase. They feature prominently in class A buildings (35% of all class A buildings in California), but implementation in lower grade properties is more limited (class B and C, at 3.6% and 0.2% respectively).
To download the full report, click here.
The 2017 update serves as an addendum to the 2009 report, with special focus on the mixed-use sector and recommendations for achieving natural gas savings via green leasing. It contains a discussion of several important topics in 2017, including the rise of corporate sustainability policies driving green leases, the prevalence of green building certifications and standards, examples of tenant engagement strategies, the impact of new reporting standards such as the Global Real Estate Sustainability Benchmark (GRESB), and the increase in energy disclosure laws, among other topics. The update also continues the ongoing conversation on the split incentives challenge. To download the 2017 update, click here.
Image source: Thomas Properties Group