Green Lease Introduction

Topic Progress:

Over the past several years, the “green” revolution has come to the real estate market. For all real estate market segments, a major topic of discussion has been about green leases and how landlords and tenants can collectively maximize financial gains through sustainable real estate development. The U.S. General Services Administration lease protocol “Green Lease Policies and Procedures for Lease Acquisition” requires prospective landlords to deliver a structure that satisfies certain sustainability or green standards. Further, various governmental and private entities are providing grants of money or tax credits as an incentive to incorporate environmentally sustainable features into new and existing buildings. With pressure coming from governmental authorities, tenants, capital markets, and other real estate players, the “green development” has gone mainstream. Owners of real property are constructing new buildings with sustainable features and making changes to existing buildings to include sustainable features.

The push for more environmentally friendly real estate development is due to a variety of reasons, including, among other things, the threat of global warming, the concept of limiting growth to a compact urban forum, the increase in mixed use developments, government policies encouraging transit-oriented development, increased attention to the use of local resources for development, concerns about the depletion of natural resources, concerns about reducing the carbon foot print of a building (both in construction and in operation) and a general concern about how real estate development affects the environment. In addition, as the demand for more sustainable development has increased from users and tenants, the real estate industry has taken new approaches to the design and construction process to include more environmental friendly construction processes and materials.

Although these environmental friendly approaches may cost more than traditional development methods, the construction of sustainable buildings creates immediate benefits through a more efficient use of real estate and through a material reduction in a building’s operating expenses through greater energy efficiency, reduced water usage, reduced storm water run off and related costs savings. Thus, the combination of significant operating efficiencies plus the premium that the real estate investment market has placed on “green” buildings appears to have justified the decision by real property owners to invest in the development of “green” buildings and in upgrading existing buildings.