Are tenants the next wave of sustainability influencers?
Occupiers are flexing their muscles to push landlords to meet green initiatives
A large financial institution recently unveiled plans for a new global headquarters building in New York City. When completed, it will be the area’s largest all-electric tower to cut operational emissions to net zero. In addition, it will be fully powered by renewable energy sourced from a New York State hydroelectric plant.
To ensure the building continues to perform sustainably, intelligent technology will predict and respond to energy needs, solar shades, and water storage and reuse system to cut usage by 40%. Developers also reused 97% of the building materials from demolishing the company’s former headquarters – exceeding the 75% requirement of the leading green building standard.
The sustainable design practices are just one example of how everyone from mega-corporations to smaller building tenants is flexing their muscles to ensure the space they occupy is as green as possible.
As sustainability regulations loom and pressure from consumers, employees, and investors mount, occupiers are stepping into a new role: Influencer.
Unlike Cristiano Ronaldo and his workout pics or The Home Edit’s Joanna Teplin and Clea Shearer and their rainbow-themed organization tips, commercial real estate influencers aren’t mobilizing followers or boosting traffic—they’re leveraging their clout through leases to get building owners to step up regarding sustainability practices.
Green lease clauses have been growing in popularity in major global cities – more than a third of occupiers already use them, according to JLL’s Decarbonizing the Built Environment report – but North America has lagged behind the trend.
However, Monique Vutla, JLL’s Sr. Director for Sustainability Strategy Products, says we are beginning to see North American occupiers take note.
“When a company touts’ sustainability as an enterprise priority but fails to transform and pull it through into the spaces they occupy – whether that be office, industrial, or retail locations – it sends a conflicting and disconnected message to consumers and employees. These are the spaces where they connect with your brand” and that, Vutla adds, “is a significant corporate risk.”
Because of this, she says, a significant shift is happening where tenants are no longer suggesting landlords think green but demanding it.
Vutla saw this first-hand in her previous job with a large athletic shoe and apparel company. As companies examine their global footprints, they realize that in order to achieve their goals and strategies for sustainability they have to work upstream pushing landlords farther in their sustainability efforts through lease negotiations, which began as early as the site selection process.
Vutla says Tenants are looking to landlords to create greater visibility and influence over decarbonization and waste reduction across their portfolios. Tenants are asking landlord’s to source renewable energy, create access to tenant specific energy and waste data, and accelerate plans for building electrification, increased energy efficiency, and zero waste.
The same maturity curve seen during the digital transformation is now expected around sustainability, Vutla says.
“We are into the phase where sustainability is innovative, cool and considered premium and elite,” she says.
Beyond pending regulations, including the SEC requirement for public companies to disclose their annual greenhouse gas (GHG) emissions, sustainability efforts are impacting a company’s access to capital and ability to attract talent.
For example, say a company wants to set up a new distribution hub and needs $100 million in capital. Vutla says investors, increasingly, are asking about sustainability commitments and requesting climate-related disclosures to evaluate the viability of their investment.
Also, when attracting talent, Vutla says the future workforce is coming out of college focused on sustainability.
“Talent is looking at your commitment to sustainability and your ability to make progress as a proxy for the viability of your business,” Vutla says. “They think, ‘If you don’t understand how to adapt for the future, and harness the business opportunities in this transformation, you are probably going to be irrelevant very quickly, and I should think about working for someone else who is embracing that change.’”