More and more environmentally conscious millennials are entering the workforce just as the consequences of global warming are becoming all too real. As a result, we’re seeing commercial real estate tenants requesting more than just a great view, plenty of natural light, and a kitchen; tenants want to know that the spaces they inhabit are eco-friendly as well.
Building owners are taking note of these new demands and adjusting their approach accordingly. Green building projects account for over 20% of all new U.S construction and building owners are predicted to spend $960 billion on sustainability projects for existing buildings between now and 2023.
According to research done by the U.S. Green Building Council, tenants are willing to pay more for space in ENERGY STAR and LEED certified buildings, which has caused owners to report an increase in building value of over 10% in green-focused building projects compared to traditional building projects.
With these numbers only continuing to rise, it’s important for forward-thinking brokers to prepare to better meet the needs of an increasingly eco-conscious clientele.
The reasons behind the trend
The first step in preparing is to understand why so many tenants are thinking green.
According to Jon Jenkins, a broker with Ecospace, a sustainability-focused brokerage firm based in Denver, the increased demand for green spaces is very much a result of the millennial mindset taking over workplaces.
"Nowadays, company leaders want their employees to feel heard. That means if a number of people in the office feel passionately about sustainability, their preferences will be made a priority."
And it’s no wonder so many employees are demanding sustainability from their workplace. Green buildings dramatically reduce utility usage—LEED-certified buildings are expected to help save $1.2 billion in energy costs and $149.5 million in water costs by the year 2018. Additionally, employees working in these buildings report being more productive and engaged in their work.
Jenkins also notes that employees at companies who value sustainability get to experience pride in knowing the entire company is striving to do some good.
He adds, "We spend a large portion of our lives in our office, so there's a major opportunity to have an impact by focusing on sustainability there."
With tenants on the hunt for sustainability and landlords scrambling to fulfill this demand, brokers might think they will have an easy go of finding green spaces for clients, but according to Jenkins, availability remains the single biggest obstacle to serving these clients.
“Often people will approach us who really want a sustainability-focused office, but their other requirements—such as location or price—get in the way.”
Tricks and resources for brokers to keep up their sleeves
Luckily, Jenkins insists, there is always something a broker can do to modify a space to be more sustainable and pleasing to the client.
First and foremost, brokers should be helping clients negotiate green lease language into leases and renewals. While a client may not be able walk into a space and start making demands for green upgrades, they can make requests for gradual improvements. The green lease library is a great resource for brokers looking to brush up on language surrounding available lease provisions.
Jenkins advises that clients should consider requesting that future upgrades be made with a sustainable approach. Features such as energy efficient lighting, water conserving fixtures and toilets and even the use of sustainable building materials can be worked into the lease.
Of course, some landlords will be hesitant to finance these upgrades knowing that the tenant will be the one receiving cost savings. That's why it's important for brokers to brush up on their knowledge of federal grant programs such as one recently created in Colorado called C-Pace. This program allows building owners to finance sustainability projects with a tax assessment that is then passed through to the tenant, who in turn sees their utility bills go down. These "win-win" programs are cropping up all over the United States, making it much easier for businesses and building owners to implement sustainability initiatives in partnership.
Jenkins’ final advice is for brokers to leverage case studies within their organization of clients who have been successful in finding sustainable space, and to get comfortable with being resourceful. He notes, "There's a lot you can do as a broker to help your clients achieve greater sustainability. Your job is to provide them with resources and background knowledge and to show them they can negotiate with more than just the cost of rent."