After Cop26, we’ve been thinking about climate change in our industry. One of the most notable changes has been the introduction of the so-called green leases.
As we all reflect on the Cop26 gathering and what it did and didn’t manage to achieve, we’ve been thinking about our own industry and where it plays a part in tackling climate change. One of the most notable changes from this perspective in recent years has been the introduction of so-called green leases.
The idea of making sure commercial tenants and landlords work together to ensure a building has as little environmental impact as possible is a sound concept. We believe that, by building stronger relationships between landlords and tenants, so much more is possible.
However, some green clauses and terms are potentially driving out commercial tenants who can no longer afford their leases, and this is concerning, from an ethical and sustainability perspective. So in this blog, we’re asking: what happens when green leases become unsustainable?
What are green leases?
Green leases are understood, in the commercial property industry, to be those that include green clauses that help to protect and enhance the way a building performs from an environmental and social perspective. They have come about as a result of increasing government pressure on the construction industry and on landlords, to meet minimum energy efficiency standards (MEES).
MEES are necessary in light of research showing that buildings are a major contributor to climate change and energy consumption. For example, this report found that around 17% of UK greenhouse gas emissions came from buildings in 2019.
If a building is not up to scratch when it comes to MEES, landlords could be prevented from leasing them until measures are taken to improve its performance. In addition to these more desperate situations, green leases are also introduced to:
• Improve a tenant or landlord’s green or social responsibility credentials
• To reduce costs and energy efficiency
• To comply with corporate social responsibility policies
• To help landlords comply with statutory requirements
It’s not difficult to see, then, why green leases are popular. Especially with landlords who have to operate buildings that are struggling to reach the standards expected. Green clauses can improve their green performance and help to reduce their buildings’ impact on the environment.
So what’s the problem from a tenant’s perspective?
We’ve noticed some large commercial landlords have started using quite heavy-handed tactics to introduce green leases to their commercial tenants, en-masse. Tenants are being asked to invest in green leases at a time when many are struggling to afford their existing leases.
The business owners we work with tell us that money is tight and conditions are still challenging. We would argue that using aggressive moves to try to force these tenants into fixed, unaffordable green leases is counter-productive, unethical, and unsustainable.
At Cedar Dean, we are great believers in sustainability. We very much believe in conserving tomorrow, but we can’t ignore today. If businesses are being driven out of their premises due to unaffordable green leases, something’s not right.
More support to help businesses reach greener heights
We know how important fighting climate change is and we agree that commercial tenants can play a major part in bringing down the impact that buildings have on the environment. However, if we want businesses to be able to operate their buildings efficiently and responsible, we need leases to be affordable. We also need more support to help them reduce energy consumption, waste, and emissions.
More support like tax benefits and grants for businesses that want to invest in sustainability and energy efficiency is a good place to start. Schemes like Low Carbon Workspaces are fantastic, but the cash available is limited and this scheme is only available across a handful of counties.
Green leases that make greener tenancies affordable only to a handful of businesses are not the solution. We should be careful to protect the industry from a situation where leases are greener but are completely untenable for those who need a tenancy.
The Cedar Dean position…
We believe in supporting relationships between landlords and tenants. Doing so will enable them to cooperate, with the support of the government, to bring down the impact commercial buildings have on the environment. The key to this is ensuring that leases are affordable for tenants of all types, not just major national chains. Green leases are definitely part of the solution, but they must remain affordable for current and future commercial tenants.
Let’s champion those who make measurable improvements to reduce their environmental impact while supporting businesses to improve their green credentials without having to become martyrs to the cause.
