An Excuse in the Crosshairs

You probably know the drill. Spend money on any number of energy efficiency upgrades and you’ll make it back through reduced operating costs for the life of the retrofit. That’s not to mention improved occupant comfort, an increase in jobs to do the retrofits, reduced greenhouse gas emissions and other benefits.

A no-brainer, right? Well, there’s been a long-standing excuse for not doing upgrades in a lot of commercial buildings, and admittedly it’s a good one. Under a commonly used modified gross lease, building owners pay the upfront costs of energy improvements on base building systems, while the tenants reap the cost savings from reduced energy consumption.  Because of this “misaligned incentive,” building owners resist investing in energy upgrades.

So the Mayor’s Office of Long-Term Planning and Sustainability brought together a task force to develop new commercial lease language that allows tenants and owners to share in both the costs and benefits of energy efficiency improvements.  Part of the City’s broader sustainability program, PlaNYC, the language is called the PlaNYC Energy Aligned Clause, and it makes good sense. Problem solved! Well, almost. Actually, not enough people in the commercial real estate industry know enough about it yet, but we’re not going to let that stop us.

At the request of the Mayor’s Office, Urban Green is working hard to get this information out to as many people as possible, with support from the City of New York, the Environmental Defense Fund, the Natural Resources Defense Council,  the New York State Energy Research and Development Authority, and the Real Estate Board of New York.

Going forward, I’ll personally execute the outreach program as Special Consultant with Urban Green. I’ll present the concept to targeted audiences and spearhead a handful of supporting objectives such as introducing the use of the Clause as a pilot credit for LEED certification.

The Energy Aligned Clause is a solid solution, and I’m only too happy to be talking it up. On Thursday March 15th at Knoll, Urban Green Council kicked off the outreach with a Salon on green leasing. The take-away? Using this language makes good business sense.

Get involved. Reach out to us. And watch the uptake as the oft-used “misaligned incentive” excuse goes by the wayside!

About the authors

Paul Reale