Green leases: More than environmental benefits

With sustainability securing its place at the top of the business agenda, it's a key consideration for companies looking for a new building to call home.

November 09, 2015

The only problem is that many older buildings weren’t designed with environmentally friendly credentials foremost in the developer’s mind, and their performance on the green scale may well be down on today’s expectations.

So rather than discard a building which may be well suited in every other way to their business needs, an increasing number of companies across Asia are opting for green leases.

A ‘green lease’ is an arrangement that gets tenants and landlords working together on energy and environmental issues – with substantial benefits for both in terms of reaching sustainability targets and improving their working relationship.

“Corporate tenants, in particular, are seeking green leases in the short term to improve the performance of their property portfolio, enhance the well-being of their staff and meet corporate sustainability requirements,” says Susannah West, JLL’s Sustainability Director for South Asia.

“The landlord benefits from initiatives such as building management committee meetings, which encourage good relationships between the landlord and tenant, and the increased appeal to the tenant of an environmentally efficient building,” she adds. “The landlord has the benefit of being able to be involved in the performance of the tenancy and how it runs with house based building systems improving overall performance.”

Green appetite in Asia

Green leases are particularly taking off in markets such as Singapore and Australia, fuelled by factors such as keeping pace with the creation of new, typically green stock; having a high proportion of leased space, compared to owner-occupier stock in the market; and a drive among companies to reduce energy consumption. Initiatives such as Singapore’s new environmental benchmarking scheme, called Green Mark 2015, are also putting sustainability in the spotlight.

“Green leases are a great way for building owners and tenants to improve the performance of the asset particularly through non-technical and low cost measures such as engagement, education, monitoring and measurement, says West. “This enables improved performance and outcomes for all assets, including obsolete assets.”

A recent JLL report, Green Leasing, found JLL clients had identified energy savings of between 3 percent and 10 percent from sustainability measures built into leases.

They also have an important role to play in setting goals and keeping plans on track to meet targets. A 2013 study across 51 of the Australian Government’s Green Lease Schedules (GLS) managed by JLL within the government’s property portfolio found that when the GLS contained Energy Management Plans (EMP) they had a much great chance of reaching environmental performance targets.

An EMP is a joint action plan for the building and premises to achieve a required environmental rating. It outlines the roles and responsibilities of both parties, with recommendations to improve performance. The study overwhelmingly found a direct correlation between participants in EMP and successful achievement of 4.5 star NABERS ratings (an Australian property environmental performance rating system).

West also points out that green leases are also an effective way for owners to place environmental performance requirements on a tenant, when managed effectively.

“With the support of the building owner and effective strategy and implementation, green leases provide a considered route to improved environmental performance,” she concludes.