Let's go green?

As companies across the region strive to keep their heads above water, one unique selling point for landlords looking to attract tenants on the move may be to opt for a greener building.

That's the opinion of commercial property legal specialist, Sara Shepherd.  Sara, a partner with solicitors Higgs & Sons, says that recent findings from a national survey back up the trend of businesses going green..

"A recent survey by the CBI and GVA Grimley shows considerable interest from businesses in occupying 'green' buildings and suggests that over 60 per cent of businesses would be prepared to pay higher rents to do so," said Sara.

"Rents may be higher due to increased development and investment costs for landlords, but energy savings should more than compensate tenants for higher rentals."

So what will the green leases of the future look like?  Sara says that the majority of landlords will have an environmental policy for their multi-let green buildings, with which tenants will be expected to comply.  She said: "The environmental policy will need to be a 'living' document to reflect the fact that environmental best practice may change over the term of a lease.  It will cover targets for reduced energy and water use and for increased recycling."

Future green leases are also expected to cover:

• tenants fit out plans to comply with the green policy for the building with landlords having the ability to refuse consent for alterations if they do not do so
• service charge splits to be based not just on square footage but also on the success of tenants in meeting energy efficiency targets
• ability for landlord to monitor tenants compliance with the environmental policy for the building
• co-operation from the landlord to assist tenants in meeting green targets, ranging from provision of cycle racks, to carrying out modifications to the building to improve energy efficiency, to ensuring most efficient operation of plant and machinery
• regular environmental audits of the building

Sara believes that a considerable commitment of time and money from both tenants and landlords will be needed to make green leases work and be financially attractive to both parties.  She said: "There are certainly benefits for tenants, with  lower outgoings.  The benefits for landlords will be higher rentals and an increase in capital value due to added value from the green credentials of the building."

In the short term, Sara believes that it is still unclear whether landlords and tenants will want to make the commitment to greener leases immediately: "There's certainly a greater cost for both in the short term and green leases may create a two tier market for green and non-green properties.  In time though green leases may become the norm"

To find out more or for specialist commercial property advice contact Higgs & Sons' Commercial Property department on 01384 342100.

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