Commercial lease language provides energy efficiency incentives
NYC takes the lead in creating groundbreaking language that allows owners and tenants to share the costs and benefits of energy upgrades.
New York Mayor Michael Bloomberg participated in the signing of the first commercial office space lease that incorporates language to incentivize energy efficient improvements. The lease, signed by World Trade Center developer Silverstein Properties and tenant law firm WilmerHale, is a product of collaboration between the Natural Resources Defense Council Green Lease Forum, the Mayor’s Office of Long-Term Planning Sustainability, and real estate, energy efficiency, and law experts.
“This agreement between Silverstein Properties and the law firm WilmerHale breaks new ground in the field of energy conservation, and we expect it will be a pioneering model for commercial leases,” said Bloomberg. “This is part of our broad campaign to increase the energy efficiency of large buildings all across the city. When it is fully realized, this ‘Greener, Greater Buildings Plan’ – the first of its kind in our nation – will be the equivalent of making a city the size of Oakland, Calif., completely carbon-neutral.”
Under traditional leases, building owners are responsible for the upfront cost of energy efficiency improvements. Tenants, however, are the immediate beneficiaries of those upgrades, in the form of reduced energy costs. Because owners do not share in the benefit, they have little incentive to invest in energy upgrades.
Current commercial office space leases allow for tenants to share the costs incurred by owners for capital improvements, but it is seldom used because the time horizon for recouping the costs is too long. The lease announced today counts savings over the length of a projected payback period, instead of the useful life of the improvements, shortening the amount of time it takes for the owner to recoup the money from savings, thus making it more likely the owner and tenant will make capital improvements.
New York City’s commercial office space leases are negotiated by the Department of Citywide Administrative Services (DCAS). DCAS will add the green lease language to all new lease negotiations.
“Green lease agreements will give our private owners an incentive to make their buildings more efficient – and city agencies will share in the energy savings,” said DCAS Commissioner Edna Wells Handy. “We look forward to working with the private sector to achieve our PlaNYC goal of reducing city government’s greenhouse gas emissions 30% by 2017. The green lease helps us achieve that goal.”
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