Issue link: https://resources.tangoanalytics.com/i/1525857
INTRODUCTION With occupier activity accounting for up to 100% of emissions outside the office sector and demand for low-carbon workspaces set to outpace supply by 75% by 2030, green leases are not just a competitive edge— they're essential. Building owners without an occupier engagement strategy don't have a decarbonization strategy, making green leases a strategic necessity for driving sustainability and staying ahead in the evolving real estate market. In 2024, the real estate ecosystem faces a significant level of risk when it comes to addressing the wider demand for sustainability-focused operations in the market. Unpredictable energy costs and insurance rates, emerging climate disclosure requirements, and physical climate impacts are all shaping the growing expectation for environmentally responsible and climate- aligned buildings for tenants and owners alike. Building owners and tenants may also feel the pressure from growing sustainability expectations among their customers, employees, and shareholders. A 2023 study done by JLL, shows that demand for high- quality, low-carbon workspaces is set to outstrip supply by 75% across major U.S. markets by 2030. To remain competitive and mitigate risk, green leases have emerged as a strategic tool for landlords and tenants to align their sustainability goals and eliminate the data-sharing dilemma for reporting. For those unfamiliar, a green lease incorporates clauses that foster collaboration between landlords and tenants on energy efficiency and environmental performance. These clauses range from general commitments to specific, enforceable obligations, ensuring shared responsibility for reducing a building's carbon footprint. Depending on the lease agreement, tenants may be influencing up to 80% of a building's energy use, and green leasing is an actionable tool that holds everyone accountable, allowing both owners and tenants to gather the data they need for emerging disclosure laws, and to reduce climate impact at the whole building level. As the industry evolves, green leases are becoming essential. With many commercial spaces due for lease renewals, the opportunity for landlords and tenants to collaborate on sustainability has never been greater. In the U.S. alone, 1.2 billion square feet (111 million square meters) of office space and 2.5 billion square feet (232 million square meters) of industrial space will be experiencing a lease expiration before 2030. For landlords, offering green leases in the future will not only attract tenants but also enhance property value and competitiveness in a market increasingly driven by sustainability. Green leases are not just about meeting external pressures—they are about proactively shaping a sustainable and resilient future in real estate.