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| 2 minutes read

Sustainable Real Estate: Key Strategies for Landlords, Tenants, and Developers

A recent guide published by City A.M. stresses the importance of sustainability in the commercial real estate market and provides top tips for landlords, tenants and developers on how to influence the environmental performance of their properties. 

Landlords should be primarily focusing on measuring and monitoring the carbon emissions that their buildings are producing whilst prioritising necessary works which would reduce such emissions. They should also be aiming at working closely with occupational tenants to monitor and reduce their emissions and at the same time keep an open mind when considering the additional costs to be incurred in relation to changes which should be made to their properties some of which could be recovered via the service costs. The landlords’ steps ought to target the long-term viability of their buildings in order to maintain or even increase the value of their investment. 

On the other hand, tenants are advised to measure, monitor and engage with their landlords to reduce their carbon emissions form their occupational premises by setting clear targets and working towards a net zero result. Tenants are encouraged to share their aims and proposed changes to their premises with their landlords which would lead to more sustainable results. They should work closely with them to ensure fit-out works and alterations have at their core sustainability and the improvement of the buildings’ environmental performance throughout the duration of their occupation. 

Further, the guide recommends that developers should focus on the use of sustainable resources within their developments, take into account the need for green areas within their development scheme and guarantee facilities in new buildings which would assist landlord and occupiers to reduce their carbon emissions by facilitating waste control and management, recycling and efficient water and energy consumption. 

Although the latest government update suggests that landlords still have some time before the energy performance requirements for commercial properties are updated, a review of the energy standards is awaited before 2030. A requirement to achieve a minimum B rating on Energy Performance Certificate (EPC), would result to the imposition of additional legal obligations onto landlord and potentially tenants. 

It therefore comes as no surprise that new leases are now seen to include, by default, ‘green’ clauses which focus on the close monitoring and measuring of carbon emissions and their reduction throughout the term leases and also call for the collaboration of the contracted parties through data sharing, whilst seeking to promote and improve the environmental performance of buildings. 

‘Green’ clauses often go as far as imposing minimum EPC rating requirements and introducing limitations to works which could potentially adversely affect the energy performance rating of premises. Conversely, tenants are now seen to be pushing for a new approach on dilapidations and reinstatement obligations having recycling and reuse of materials at the forefront.  

What is certain is that parties should consider sustainability and environmental performance an integral limb of their commercial decisions. 

Impact real estate: how to influence sustainability

Tags

real estate, sustainable real estate, green clauses, epc ratings, esg in real estate, esg