MaRS spoke with industry experts to learn more about green leases in Canada’s commercial building sector.
Change can be slow. Painfully and prohibitively slow. Complex systems, multiple actors and conflicting interests each contribute to a messy canvas that hinders real progress and enables the continued existence of the status quo. According to the Interaction Institute for Social Change, “Undoing and shifting years of practices, layers of institutional structures and fixed mindsets does not happen over-night. Furthermore, it takes time to build alignment among key players.”
This predicament is especially true of the buildings sector. The thing about buildings is – they’re built to last. The lifetime of an average commercial building can reach 70-75 years, and the vast majority of Canada’s built environment in 2030 is already standing. Despite increasing opportunities to invest in clean technology, Canada’s existing infrastructure is, quite literally, a
barrier to reducing emissions. Globally, buildings cause as much as 30% of GHG emissions and consume 40% of available energy. Commercial buildings alone account for 13% of Canada’s carbon emissions. And because buildings last, so do the impacts. To achieve Canada’s climate targets, the sector must adopt change.
Operations and occupants’ use of space are responsible for more than 80% of a building’s carbon footprint, and provide enormous opportunity for improvement. Retrofits, fuel switching, and simple modifications to daily practice can substantially increase a buildings’ energy efficiency. The Canada Green Building Council actually estimates that available technology and current recommendations could reduce the country’s total emissions by 44% below the 2005 baseline, more than meeting Canada’s commitment to reduce by 30% before 2030. The sector is highly capable of achieving this goal, but it needs a push.
Enter Green Leases
Green leases were introduced to “make it more likely that [green] projects would go forward,” explains Gray Taylor, a Toronto-based climate lawyer. At the core, they are a tool for increased cooperation between landlord and tenant, an innovative approach to commercial leasing that addresses the building’s environmental impact.
There is no easy definition of what makes a lease ‘green’. Green lease provisions can be found throughout a lease document, or they can be tacked on in an addendum. They can include comprehensive rules governing everything from energy use, water, and waste management to submetering, data sharing, and enforcement. Alternatively, they can address only one specific issue like how tenants and landlords should share the costs of energy retrofits, as seen in New York’s Energy Aligned Clause. But at the very least, REALPAC CEO Michael Brooks told us that green leases should include: (1) an energy management plan, (2) shared objectives, and (3) disclosure between parties. “It’s the one document where you can articulate shared environmental goals for buildings of all types.”
Brooks wrote the first model green lease in North America nearly ten years ago, inspired by activity in Australia. It was a top priority for him. “Leases last 5-10 years,” he points out. “You only get an opportunity when a tenant moves out or upon lease renewal. With that kind of timeline, I knew I had to do it first.”
Where Are They Now?
The REALPAC model green lease introduced an opportunity that, after almost a decade, is slowly gaining traction in Canada’s commercial building sector. TD Bank and Oxford Properties are among the companies leading the way to greener leases. Both have been recognized by BOMA’s Green Lease Leaders program, in 2014 and 2015 respectively.
“It’s a differentiator for Oxford,” says Darryl Neate, Oxford Properties’ Director of Sustainability. As customers have learned more about what it means to them, their team and their buildings, they have grown more comfortable. “If you’re going to be a green company,” he says, “a green lease should be your template.”
Today, all Oxford standard leases feature three major parts: (1) sustainability targets, (2) Oxford’s commitment as a landlord, and (3) the opportunities for the customer/tenant to help. “The switch to green leases has been an interesting exercise, and holds us publically accountable to behaviours that were already part of our DNA,” Neate reflects.
Green leases could reduce energy consumption in US office buildings by 22%, saving more than $3 billion a year.
As a tenant, TD incorporates an environmental management plan in many of its leases. Jacquelynn Henke, Director of Sustainability & Innovation at TD, stresses the importance of the document. “That’s how you talk to the landlord . . . the landlord is a partner in success. If we can help the landlord succeed, then we [as tenants] can succeed in our goals.” Henke told us that TD started to roll out green lease provisions in Canadian corporate offices, eventually branching out across North America. As of 2015, TD has succeeded in adding green lease provisions to 34 leases representing approximately 3.9 million square feet, or 16% of their portfolio.
A Catalyst for Change
The impact of green leases can be hard to measure though. An Institute of Market Transformation report suggests that green leases could reduce energy consumption in US office buildings by 22%, saving more than $3 billion a year. The US Department of Energy estimates that savings could be as high as $5 billion. But during our discussion, Michael Brooks questioned the ability to attribute change directly to the green lease. While tenant engagement is critical to increasing energy efficiency, the green lease is just one tool. More often than not, it’s used in conjunction with other sustainability initiatives.
Moreover, the green lease is not an end unto itself. The experts agreed that it’s a mechanism to facilitate sustainable decision-making. It’s a catalyst for change. Henke states, “It’s a vehicle to have a conversation between tenant and landlord that can benefit both sides and, in doing so, benefit the environment.” Even if green provisions are included as “aspirational goals” rather than mandatory covenants, Brooks feels that it’s a powerful instrument. He says: “To find its way into a legal document, both parties have to accept the words. Obligations will typically follow.”
Industry leaders have put Michael Brooks’ vision into practice, but there’s still more to be done. Gray Taylor believes that, “Modern leases will be green. Everybody’s lease will have these provisions because everyone wants the same thing. We all want to live in a good world and we all have to be in buildings.”
For more information about MaRS Advanced Energy Centre’s work in building energy efficiency, contact Shawn Peterson at email@example.com.