The Washington, D.C.-based Institute for Market Transformation, in partnership with the Council of Smaller Enterprises (COSE), Cleveland, is launching a project in the city of Cleveland to help commercial buildings save money and energy by connecting landlords and tenants around energy efficiency—particularly when it comes to the lease.
IMT and COSE will work together to deploy the leasing project at the intersection of building-efficiency programs currently underway in Cleveland, including COSE’s Nonresidential Energy Assessment Program and comprehensive energy services suite, the Cleveland 2030 District, the Mayor’s Office of Sustainability and Sustainable Cleveland 2019. IMT and COSE will work with participating owners and tenants on smart commercial lease solutions that equally align the costs and benefits of energy-efficiency investments between the two parties.
“In our initial exposure to Cleveland we’ve met an extraordinary number of owners and tenants who care about energy efficiency, and we’re excited to partner with COSE to provide the tools that will help turn that interest into action,” says Adam Sledd, IMT’s director of Commercial Real Estate Engagement.
IMT’s green leasing strategies dovetail with the holistic energy program that is currently provided by COSE’s Nonresidential Energy Assessment Program to commercial and nonprofit customers. COSE, one of the largest metropolitan chambers of commerce in the country and Ohio’s largest small business support organization, is partnering with more than 25 local chambers of commerce to deliver a comprehensive energy program to small businesses. COSE’s dedicated energy team develops and manages these types of programs and delivers corresponding education and consultative support on the benefits of reducing energy costs for small businesses.
“What makes this project so exciting for us is watching the business community in Cleveland become a national leader on this issue,” adds Nicole Stika, COSE’s senior director of Energy Services. “Through education and technical assistance on smarter lease negotiations, COSE and IMT will help owners and tenants reach their triple bottom line and work together to make their spaces healthier, more comfortable and energy efficient.”
A well-known barrier to energy efficiency in buildings is the “split incentive”: If the tenants pay the energy bills, the landlord has little incentive to invest in efficient equipment, but, at the same time, the tenant does not own the lighting, heating, cooling and ventilation systems, and, therefore, has no incentive (or ability) to invest in efficiency upgrades. The result is neither party takes the initiative to perform energy-saving improvements. In commercial rental properties, this “split incentive” and general lack of tenant-engagement strategies frequently limits the uptake of energy-efficiency solutions.
For programs, such as the COSE Nonresidential Energy Assessment Program, landlords and tenants must collaborate for an assessment to lead to energy-efficiency improvements. This can be accomplished through green leases. When inserted into existing lease forms, green leasing terms realign incentives, facilitate information sharing, and encourage landlord and tenant to work together on the efficient use of energy and other resources.