What Does 'Green' Really Do for CRE Tenants?
Q: I’ve been trying to assess the benefits of “going green.” Some other tenants I’ve talked to have made green changes, both minor and major, with varying results in cost savings. I’m worried that after all of the effort I would put into going green, the difference would be negligible. I know that it could help my image to be able to say that I’m “green,” but how much would going green actually benefit me?
A: Commercial tenants that are not directly responsible for their rental space’s energy and upkeep often assume that the benefits of their efforts to be environmentally conscious are difficult to quantify at best, and negligible at worst. Like you, many tenants have asked themselves over the past few years whether it’s worth trying to capitalize on the caché that goes along with going green.
Hard-core proof that an environmentally conscious reputation will help a business’s bottom line is hard to come by. Nevertheless, several studies have shown that many consumers make a concerted effort to patronize operations that are known for being environmentally friendly, and are even willing to pay more for environmentally friendly products in some cases. This at least implies that a green reputation can help to keep a business in the black.
The key issue is actually what type of tenant you are. Certain types of tenants will benefit from going green more than others. And don’t be fooled into thinking that a major investment in greening your space is necessary to see some savings. There are actually no-cost and low-cost steps you can take to go green.
Are You a ‘Triple-Net’ Tenant?
Compared to commercial tenants, property owners and developers are more likely to enjoy the easily measurable financial benefits that can come from employing practices that are environmentally conscious. Both owners and developers can reap substantial savings by purchasing or constructing buildings with “green architecture.” Such buildings are designed to save space, filter and re-use waste water and air, harness more natural light and minimize shading, employ higher-performing glass, and use recycled wood and other products for the flooring.
Commercial tenants can enjoy some benefits too, however, particularly if they enter into what’s known as a “triple-net” lease—that is, a lease that requires the tenant to pay for its own expenses. That’s compared to the typical commercial lease, which makes the owner responsible for the tenant’s practical needs and allows the owner to pass those expenses on to the tenant.
Commercial tenants sometimes prefer triple-net leases because triple-net leases give tenants the freedom to use the vendors or suppliers of their choice. Consequently, triple-net leases often provide for lower rents. Typically, heat, air conditioning, repairs, maintenance, landscaping, elevator work, and plumbing are a triple-net tenant’s responsibility. In other words, the triple-net tenant pays for its own energy.
Low-Cost Road to Savings
You don’t need to spend much to realize some sort of savings. For triple-net tenants, reining in the business’s energy use is the first place to start, and the more efficient you are, the lower the energy bill will be. That’s why green measures that are intended to save energy are beneficial in particular.
If you’re responsible for paying for your energy use, the first green action you should take is assessing your heat and air conditioning needs and determining whether they could use an adjustment. For example, shoppers dressed in winter clothing appropriate for the temperature outside often find commercial spaces too warm, and you could stand to lower your heat. Conversely, retail stores and office buildings often are too cold for comfort in the summer. Adjusting your heating and cooling system so that it accomplishes the comfort level you need for the least amount of money is a way to start greening your space and costs you essentially nothing up front.
If you have some money in your budget, small investments in green measures can pay off too, without costing much. Installing touchless washroom appliances, like faucets, in your space allows you and your maintenance staff to adjust the temperature of the water. As with the leased space’s heating and cooling, adjusting the water temperature becomes a balancing act between user comfort and acceptable energy costs.