Since as early as 1990, sustainability benchmarks have been around to calculate, analyse and assess the long term sustainability of a building, a group of buildings, or even an entire international portfolio. It’s only since 2005, 15 years on, when the acronym ESG (Environmental, Social and Corporate Governance) had finally been coined, that sustainable portfolios became synonymous with intelligent and financially savvy investment decisions. Particularly, when made on a large scale.
The challenge – tenants own their data
A gross lease, percentage lease, net lease, FRI lease or double or triple net leases..? 3 years, 5 years, 20 years..? The landscape of commercial leasing, particularly in the UK, is a minefield of complex and often extraordinarily taxing demands made from both the landlords and the tenants perspectives. The expectation and pressure of ESG reporting and sustainable developments rises day by day. Landlords of today are expected to understand more and more about their own portfolios and how they adhere to the increasingly recognised sustainability benchmarks. And these sustainability benchmarks, which are growing on both a national and international scale, require energy data.
Accessing landlord owned meters, sensors and other “data sources”, with the right services and organisations involved, isn’t much of a challenge. The real difficulty comes into play when tenants become involved. Simply because: they own their energy data. They are entitled to dictate what happens with that data, who can see it and how it is utilised. This is how it should be. However, this also means that with no incentive in place, no mutually beneficial “carrot” as it were, why would they bother allowing a landlord access to their information?
The solution – make sustainability mutually beneficial
How do we make data collection for sustainability reporting work smoother? There’s probably a different answer for both tenants and landlords, so let’s consider both.
From a tenant’s perspective, they want to keep their life simple, right? They have their own business to run, and yes, trimming down the energy bill by 30 or 40% would be great, but that is probably at the bottom of their priority list, and landlords need to be more understanding of this. Respect for your tenants should be a given, so landlords need to give a clear explanation of the reasoning behind their desire to gather tenants’ energy data. With the right engagement and employment of the right service, one that offers an incentive to the tenant as well as the landlord, this can be a mutually beneficial task to undertake! Contrary to popular belief, this could actually strengthen the relationship between tenant and landlord if it’s done correctly.
Now from a landlord’s perspective. Best case scenario is to scrap your existing lease and re-write your shiny new 2021 “Green Lease”, ensuring a clause that states a tenants obligation to provide you with HH energy data anywhere available. But that’s beyond unlikely. No one really expects your tenant of 8 years, almost midway through their 20 year lease, to drop everything and consider a new agreement just “because you want them to”. My advice: incentivise them financially! They are there to make money and run a successful business, so maybe you have to give them a few percent to agree to a new lease and allow their data to flow freely from energy source to analysis. The long term gains not only fill up your pockets, but they also make a huge impact on the planet. Not only do you get your 5-star GRESB rating, but you also get to make a environmentally responsible move towards reducing carbon emissions and increase the value across your entire portfolio. This will be massively worth it in the long run, I promise.
How to make it work together
Landlords want sustainability data, tenants don’t have to give it up. The key to resolving this, long term, is a mutually beneficial agreement for both parties. We all need to work together to make sustainability data flow more freely and there’s no reason everyone can’t be better off for it in the end.
To landlords: think ahead and respect your tenants worlds. Find a reason to make it worthwhile for them too, because sometimes you need to spend some money to make money.
To tenants: don’t forget that you can benefit from this too! Push your landlords to be responsible data handlers and make sure that they are doing everything they can, to operate as sustainably as possible. Let them use your energy data, but make sure it’s in your best interest.
My day to day job revolves around this issue and has for some time now. I would love to hear from both tenants and landlords about it. Please give me your input, agree or disagree. If you’re a tenant being approached by a landlord that wants this to happen and you have questions, call me. If you’re a landlord and you want to solve this issue, call me. I’m here to make energy data collection more understandable, so that tenants and landlords can work together and so that everyone can benefit from it.
UK Country Manager