How Green Is Transforming Lease Partnerships in San Francisco
by Robin Bass, LEED AP
by Robin Bass, LEED AP
In the summer of 2009, the City and County of San Francisco, with support from its Department of the Environment, formed the Existing Commercial Buildings Task Force, which comprises building owner representatives, real estate professionals, facility managers, and building consultants. Mayor Gavin Newsom convened the group to continue to build upon the momentum generated by the Green Building Task Force for New Construction, which developed the City's priority permitting process for buildings submitted for LEED certification. Recognizing that new construction represents a small part of the overall building inventory in San Francisco, addressing the stock of existing buildings is a critical first step in reducing the city's carbon footprint. The task force's assignment was to recommend strategies and solutions for training, information tools, incentives and cost effective requirements as a first step in establishing a baseline energy usage for commercial buildings. In its fall 2009 final report, the task force has developed a strategy that supports San Francisco's goal of reducing total energy use in existing commercial buildings 50% by the year 2030.
Summary of the ECB Task Force's Proposal
The report's seven proposals will reduce energy use in existing buildings and stimulate the energy efficiency services sector by systematically identifying and eliminating the factors that limit local energy efficiency through the following measures:
The report's seven proposals will reduce energy use in existing buildings and stimulate the energy efficiency services sector by systematically identifying and eliminating the factors that limit local energy efficiency through the following measures:
- Identify savings in every commercial building by requiring businesses to conduct an energy audit every 5 years for business license renewal. The energy audit will include identifying and listing applicable efficiency measures. This will ensure that building owners, managers, and tenants know exactly how much energy and money they can save through efficiency measures.
- Disclose energy performance information by requiring building owners and managers to share energy data with the City. This data will be published to inform stakeholders. Monitoring and reporting provides a "miles per gallon" metric that enables tenants and buyers to identify efficient buildings.
- Resolve "split incentives" that exist between tenants and landlords around industry standard lease language by providing a “Green Tenant Toolkit” and making sub-metering of tenant spaces a priority. Landlords and tenants will mutually benefit from reduced utility costs and sustainable operations.
- Make incentives accessible through development of a Web-based tool that finds all incentives, rebates, and available financing for energy efficiency projects. This will help offset the costs of energy efficiency improvements and streamline payment of incentives.
- Educate, train, mentor, and market energy efficiency through promotion of programs, facilitating mentorship and partnering with institutions to enhance workforce capacity and engage stakeholders to improve energy efficiency.
- Lead by example in public facilities by benchmarking and disclosing energy performance of City-owned and operated buildings. The City's leadership will inspire others to act.
- Provide financing through the launching of the SF Clean Energy
What Is the Impact?
Currently, there is little information available that indicates how commercial buildings are performing and how they can be improved to increase performance. As of January 1, 2010, the State of California will require, through AB 1103, that building owners disclose the energy use intensity and available ENERGYSTAR rating for all nonresidential real estate transactions. For San Francisco, the ECB Task Force proposes that disclosure occur for all nonresidential buildings, whether or not they are subject to a sale or lease transaction. In addition, energy performance summary data will be disclosed to the City and made accessible to the public. What this means for current and prospective tenants is that a specific building's energy use becomes a lease consideration just like a building amenity.
With resources becoming more finite, benchmarking will provide the necessary information in order to gradually meet targets for carbon reduction by the 2030 deadline. As the ECB Task Force timeline suggests (reference graphic), building owners and operators will not only need to be aggressive in acquiring information about energy usage but also in pursuing suitable methods for improvement. The focus of efficiency upgrades should be on the "low-hanging fruit"—the ones with the biggest impact for the smallest investment. No one is expecting to see a wind farm on the roof of an office building!
Currently, there is little information available that indicates how commercial buildings are performing and how they can be improved to increase performance. As of January 1, 2010, the State of California will require, through AB 1103, that building owners disclose the energy use intensity and available ENERGYSTAR rating for all nonresidential real estate transactions. For San Francisco, the ECB Task Force proposes that disclosure occur for all nonresidential buildings, whether or not they are subject to a sale or lease transaction. In addition, energy performance summary data will be disclosed to the City and made accessible to the public. What this means for current and prospective tenants is that a specific building's energy use becomes a lease consideration just like a building amenity.
With resources becoming more finite, benchmarking will provide the necessary information in order to gradually meet targets for carbon reduction by the 2030 deadline. As the ECB Task Force timeline suggests (reference graphic), building owners and operators will not only need to be aggressive in acquiring information about energy usage but also in pursuing suitable methods for improvement. The focus of efficiency upgrades should be on the "low-hanging fruit"—the ones with the biggest impact for the smallest investment. No one is expecting to see a wind farm on the roof of an office building!
Change in the Form of New Relationships
From an energy efficiency standpoint, the tenant/landlord relationship is not a mutual one. Many times the "split incentive" in rent structures overcomes any motivators on either side of the table to make a positive change in the efficiency of the building. Using "green" lease language will redirect the relationship and allow both parties to work together as co-owners of the building for the term of the lease to make the building perform better. Tenants benefit from having lower utility bills and more control over what has traditionally been a fixed cost rolled into their rent. Landlords will profit from having an equitable financial partner to help offset the costs of building system upgrades that will ultimately increase the building's property value.
Later in 2010, the ECB Task Force will form a committee to develop the City's Green Tenant Toolkit—a document which will educate involved parties about lease language, facility features, and operational practices that align the interest of tenants and landlords to build, maintain, and operate their spaces more sustainably. The Toolkit will include recommendations for best practices, a model green lease, and a checklist to identify green features of spaces for lease.
Increased Efficiency Requires Investment
As the ECB Task Force was researching available incentives and rebates, the committee identified more than 300 existing programs that will subsidize upgrade costs. Finding the rebates and streamlining the process to get the funding into the hands of owners and tenants has traditionally been a hurdle. The development of a "rebate finder" web tool will help inform those that stand to benefit the most from the programs already in place and will also help promote new programs that come online as a result of the task force's outreach and promotion. With these resources coming online, and with the City's mandate to be the leader for all of these proposals, there will be an increasing body of case studies, success stories, and "lessons learned." Dissemination of this information to the commercial real estate stakeholders closes the circle and allows the task force to modify the process as needed.
From an energy efficiency standpoint, the tenant/landlord relationship is not a mutual one. Many times the "split incentive" in rent structures overcomes any motivators on either side of the table to make a positive change in the efficiency of the building. Using "green" lease language will redirect the relationship and allow both parties to work together as co-owners of the building for the term of the lease to make the building perform better. Tenants benefit from having lower utility bills and more control over what has traditionally been a fixed cost rolled into their rent. Landlords will profit from having an equitable financial partner to help offset the costs of building system upgrades that will ultimately increase the building's property value.
Later in 2010, the ECB Task Force will form a committee to develop the City's Green Tenant Toolkit—a document which will educate involved parties about lease language, facility features, and operational practices that align the interest of tenants and landlords to build, maintain, and operate their spaces more sustainably. The Toolkit will include recommendations for best practices, a model green lease, and a checklist to identify green features of spaces for lease.
Increased Efficiency Requires Investment
As the ECB Task Force was researching available incentives and rebates, the committee identified more than 300 existing programs that will subsidize upgrade costs. Finding the rebates and streamlining the process to get the funding into the hands of owners and tenants has traditionally been a hurdle. The development of a "rebate finder" web tool will help inform those that stand to benefit the most from the programs already in place and will also help promote new programs that come online as a result of the task force's outreach and promotion. With these resources coming online, and with the City's mandate to be the leader for all of these proposals, there will be an increasing body of case studies, success stories, and "lessons learned." Dissemination of this information to the commercial real estate stakeholders closes the circle and allows the task force to modify the process as needed.
Robin Bass, LEED AP is a Senior Associate of Huntsman Architectural Group and served as an ECB Task Force member.
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