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Revamp green leases to drive decarbonisation, says JLL

22nd March 2023

Real estate needs a new model for green leases, JLL claims.

In its Green Leasing 2.0: Bridging the owner-occupier divide report, the broker said integrating an extended vision for decarbonisation through the full life cycle of a lease, with an emphasis on collaboration and communication, will help both occupiers and owners meet sustainability goals.

JLL research found 42% of investors and 34% of occupiers already implement green clauses in their current leases, and implementation is set to double with an additional 37% of investors and 40% of occupiers planning to enact green lease clauses by 2025. 

However, Guy Grainger, global head of sustainability services and ESG at JLL, said: “Amid the current energy crisis and with increased pressure to meet sustainability goals, collaboration between the owner and occupier at an asset level to incorporate energy efficient solutions is critical. Existing leases, both green and non-green, do not allow this and a new model is needed with increased transparency and data sharing.”

The US market could reap $3.3 billion in annual cost savings if every leased office building implemented green leases, the Institute for Market Transformation (IMT) estimates.

JLL suggests a number of priorities for the industry to develop “green leasing 2.0”. These include:

  • Education – leases are complex legal agreements, and individuals will be reluctant to agree to certain terms without clear understanding and reward
  • Engagement – ongoing collaboration between owners and occupiers is required through the life of the lease, using clauses which formalise contact
  • Shared equity – green leases must be equitable, including cooperation and cost-sharing clauses between owners and occupiers. Transparency and data-sharing supports this

“JLL has embarked on a transformative approach to integrate sustainability into our corporate real estate strategy,” said Grainger. “Green leases are an important tool to help us meet our ESG goals with the added bonus of driving efficiency. Our office fit-outs use 15% less energy than a standard code design for example, representing annual cost savings of more than $2 million across our portfolio.” 

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