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High-Performance Leasing Resources
Resources for Developing High-Performance Leases
Are you in the process of signing a commercial real estate lease in San José? Does your business have sustainability goals and want to make sure that your lease is promoting high-performance buildings and energy efficiency?If so, you should consider high-performance leases. Also known as green leases, high-performance leases help building owners and tenants work together to save money, conserve resources, and support efficient operation. According to a 2015 Institute for Market Transformation (IMT) study, high-performance leasing can save the U.S. office market $3.3 billion annually and reduce a commercial building's utility bills up to 22%.
Building owners, tenants, brokers, and the commercial real estate industry can use this resource page to develop, negotiate, and implement high-performance leases to increase sustainability in leased buildings and decrease spending.
What is a high-performance lease?
High-performance leasing (also known as green, energy-aligned, or energy-efficient leasing) helps landlords and tenants work together to save money, conserve resources, and allow the efficient operation of buildings. Questions addressed in a high-performance lease may include:- What are the environmental measures to be taken to meet energy efficiency and sustainability goals? For example, indoor temperature regulation, water use, and materials used to maintain the property.
- How will the tenants and landlords cooperate to meet these measures?
- How are the costs and benefits shared between the landlord and the tenants?
- Which party is responsible for monitoring compliance with these measures?
- What will happen if the parties fail to meet the targets?
When is the next high-performance leasing training?
- Hear from the U.S. Department of Energy and IMT’s Green Lease Leaders program and receive help to identify your high-performance lease opportunities. View upcoming energy trainings.
Where can I learn more and find resources such as high-performance leasing template language?
- See the FAQs below to learn about the benefits of high-performance leases. You can also find high-performance leasing template language and site selection checklists. Many of the examples will need to be edited and amended to fit each individual building or property, but these resources are a great way to build your own custom lease language.
How can I be recognized as a high-performance or green lease leader?
- Apply online to be recognized as a leader in high-performance leasing. Green Lease Leaders™ is a national program by the U.S. Department of Energy and IMT that recognizes forward-thinking companies and real estate practitioners who break down barriers to high-performance buildings by incorporating energy efficiency and sustainability targets into leases.
Frequently Asked Questions (FAQs)
What issues can a high-performance lease address and resolve?Why are high-performance leases beneficial?
How can a high-performance lease help my bottom line?
I’m ready to start a high-performance lease. Are there samples of high-performance lease language or site selection checklists available?
I’m in the retail industry. Is there high-performance lease language available for me?
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I’m a small business. Does high-performance leasing apply to me?
I’m not sure if my lease is high-performance. How can I analyze my lease for high-performance lease opportunities?
Can I switch to a high-performance lease if I’m in the middle of a lease term?
I’ve heard that high-performance leases make the leasing process longer. What are strategies to overcome this?
I’m ready to be recognized as a Green Lease Leader. What do I need to do?
What issues can a high-performance lease address and resolve?
There are four main categories for high-performance lease language:- Pass-through Clauses: Language that allows the landlord’s capital improvement costs to be shared with tenants.
- Operational Clauses: Language that mandates practices for the tenant space to operate more efficiently and sustainably.
- Sustainable Purchasing: Language that outlines allowable materials in tenant and common area space. Criteria may include requirements for ENERGY STAR products, construction materials with recycled content, or green cleaning supplies.
- Reporting: These clauses encourage sharing data about tenant space and building-wide utilities in an effort to measure energy use and manage benchmarking goals.
Why are high-performance leases beneficial?
High-performance leases are not generally stand-alone documents separate from a normal commercial real estate lease. Rather, a high-performance lease is a regular commercial lease with additional language to address both landlord and tenant sustainability goals. The language in the lease can improve the environmental sustainability of commercial properties in several ways. High-performance leases can reduce operating costs, help comply with energy benchmarking, and achieve green building certifications such as Leadership in Energy and Environmental Design (LEED). With a high-performance lease, both landlord and tenant have incentives to invest in long-term, energy-efficient solutions.Source: Institute for Market Transformation - Making Efficiency Work for You
How can a high-performance lease help my bottom line?
A growing number of commercial real estate companies, tenants, and brokers are using a high-performance lease as a collaborative blueprint to increase building energy performance and save money. The Institute for Market Transformation (IMT) estimates that such leases can reduce utility bills by up to $0.51 per square foot and reduce energy consumption in an office building by up to 22 percent.Source: Institute for Market Transformation - Making Efficiency Work for You
I’m ready to start a high-performance lease. Are there samples of lease language or site selection checklists available?
There are many examples of high-performance lease language and checklists to help you in site selection. Many of the examples will need to be edited and amended to fit each individual building or property’s needs and specifications, but they are a great resource for building custom language. Below are some free resources and examples to help you get started. If you need additional assistance, contact energy@sanjoseca.govSample High-Performance Lease Language
High-Performance Lease Language Examples by the Institute for Market Transformation (IMT)- Organized by category and technology type (i.e. HVAC, submetering, fit out and building requirements, etc.), this resource provides high-performance lease language examples from academic, government and NGO sources.
Green Leasing: An Effective Tenant/Landlord Strategy for Energy Efficiency by A Better City
- This report provides model high-performance lease language that has been used by tenants and landlords in the U.S., Canada, and the U.K, as well as two success stories.
Green Lease Library
- This centralized site for commercial green leasing resources provides sample language, case studies, and guidance on high-performance leasing.
Green Lease Guide: A Guide for Landlords and Tenants to Collaborate on Energy Efficiency and Sustainable Practices by Building Owners and Managers Association (BOMA) International
- A full green lease model developed by BOMA, available for a small fee.
Green Lease Leaders by the U.S. Department of Energy and IMT
- A recognition program that honors landlords, tenants, and brokers for leadership in green leasing best practices.
See how the Tower Companies built a successful green lease with real lease language that gets efficiency results:
Site Selection Checklist
Green Sheet by the Business Council on Climate Change- Enables real estate professionals to integrate sustainability directly into their process for site selection, corporate sustainability reporting, and targeting capital or operating improvements.
Additional Resources
- 7 Questions to Ask Your Building Owner When Considering a Green Lease by Megan Porter, PG&E
- Small Office Build-Out Tips by Better Buildings Alliance
- Large Office Build-Out Tips by Better Buildings Alliance offers guidance on how your property teams, leasing agents, and brokers can communicate the value of considering energy efficiency during tenant improvements.
I’m in the retail industry. Is there high-performance lease language available for me?
The Retail Industry Leaders Association created this “Retail Green Lease Primer” to help retail landlords and tenants get started on high-performance or green leasing. The Institute for Market Transformation also created this resource to identify first steps and sample language for retailers.I’m a small business. Does high-performance leasing apply to me?
Yes, small businesses are leaders in high-performance leasing. This NEO Realty Group Green Lease Case Study demonstrates that anyone in any location can achieve energy efficiency goals for both landlord and tenant stakeholders. Watch this video to see how small businesses in Cleveland are stepping up as green lease leaders in their community:If you’re interested in learning more, please contact energy@sanjoseca.gov.
I’m not sure if my lease is high-performance. How can I analyze my lease for high-performance lease opportunities?
Find opportunities in your lease in just 5 minutes by using this Lease Audit Tool from the U.S. Department of Energy and Institute for Market Transformation. If you need additional assistance, contact energy@sanjoseca.gov.Can I switch to a high-performance lease if I’m in the middle of a lease term?
Yes. Although it’s better to start with a new lease, you can still do a high-performance lease in the middle of a lease term. Restructuring existing leases for greater energy efficiency can be a tough job. Here are some ways to make it easier:- Adjusting Rules and Regulations: Inserting high-performance operation language into the Rules and Regulations of a lease is the first step towards an agreement that lowers utility costs. It allows the development of simple low or no-cost solutions for tenants and landlords. Landlords can often simply insert these changes in Rules and Regulations to modify the lease.
- Amendments: Amendments can be used to address select alterations to the lease. This strategy commonly requires legal coordination from both landlord and tenant. The approach can be used to implement a capital improvement or sharing of utilities while clearly outlining how both parties benefit from the improvement. It’s important to note that amendments shield the remainder of the lease items from additional negotiations, as an amendment is generally a stand-alone document limited to a few pages.
Source: Institute for Market Transformation - Making Efficiency Work for You
I’ve heard that high-performance leases make the leasing process longer. What are strategies to overcome this?
High-performance leases are worth the time because they create win-win agreements for building owners and tenants. Use these discussion opportunities to green your lease.FOR LANDLORDS:
- Extended Lease Term: Agree to extend the tenant’s lease so that the tenant can recoup all or a larger portion of savings after an initial payback period.
- Financial Savings: Emphasize overall operating savings such as lower utility expenses (in the case of triple-net leases) wellness, comfort, and productivity savings to the tenant.
- Be Transparent: Let the tenant know of planned improvements that are beneficial to the tenant.
FOR TENANTS:
- Agree to a Longer Lease Term: By signing a longer lease, the landlord may be more willing to renegotiate the lease to prevent vacancy. Additionally, such suggestion helps the landlord save on transaction costs associated with replacing tenants and less waste will result from additional tenant build-outs.
- Communicate Cooperatively: Share with the landlord what you are willing to pay. Aim for a win-win resolution for both parties.
- Benefits to the Landlord: Emphasize what the landlord stands to gain when investing in energy efficiency. Mention lower operating costs, higher net operating incomes (NOI) and a higher valued building.
- Rebates and Tax Incentives: Research rebates and tax incentives from your local utilities and contractors. These rebates and incentives may help tenant and landlord overcome cost hurdles.