Leases are the unsung heroes of decarbonization…

Me: leading the audience in a round of, "Leases are the unsung heroes of decarbonization" at the Living Future 25 Conference in Portland.

💡 Apparently I said something smart, so I'll say it again here:  it is arguably more risky to keep using outdated lease templates because "it's always been done this way" when the regulatory and market context that is running in the background has completely changed and continues to change. Maintaining the status quo is not managing risk, it's putting your head in the sand. It's lazy and creating risk for owners and tenants. There is a better way - leases are a key part.

Key themes from our discussion:
✅ There is a general lack of knowledge of the impacts of BPS on building operations and what needs to change to support compliance.
✅ There are timing challenges to all of this: the law changes at one pace, company policies change at another, and lease terms vary widely. We need to create some alignment.
✅ There is a need to engage and educate the broker community regarding the impact of regulatory issues like BPS and the importance of leases as a supportive tool. We get it, the market is nearly impossible and we all want deals to close, but we also want to maintain the long term value of sustainability and ensure regulatory compliance.
✅ Data, data, data. We need more of it to ensure BPS compliance, and tenants need guidance and budgets to keep projects on track. Tenants also need building scale data to ensure owners are operating the building/core/shell consistent with goals.
✅ Leases get to the enforceability issue or question re: building operations. Ex. if a building should be smoke-free, how do you know and ensure your tenants are not smoking / vaping in that space, and (perhaps more specifically, and important for certification) what specific recourse do you have if they are?

This is a mind shift moment: the real estate industry needs to move from an adversarial owner / tenant relationship to one focused on collaboration towards shared climate goals.  And an acknowledgement that climate goals are real business drivers.

We also confirmed that owners and tenant largely want the same basic things in "green" leases:
📋 Energy targets and information sharing
📋 Limits on / control around waste / reuse in fit-outs or TIs
📋 Collaboration re: ESG and other corporate sustainability data points
📋 Reasonable, transparent cost and incentive sharing for penalties and capital improvements**

Because when asked by your stakeholders, insurers, lenders, etc. how you enforce important, regulatory things like an energy budget, "just vibes" isn't going to cut it.