Advice provided by: Geoffrey Kasselman, SIOR, LEED AP, Op2mize

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Neil asks: We are negotiating the purchase of a (historically) single tenant 55,000 sf property in a historically strong middle America market. The building is vacant... We want to attract a tenant that has a strong sustainability goal and structure a lease which passes on certain benefits to the tenant as a result of our sustainable capital improvements... etc. Do you have any suggestions for attracting these types of tenants and what investments are best to consider when developing our proforma... Thank you in advance.

Answer: Hi Neil, thank you for your question. The answer is it depends on your intended investment hold period, and local competitive pressures. If you have a shorter-term investment horizon you may be limited to certain “low hanging fruit” type of initiatives. Conversely, if you will be owning the property for quite some time, your range of options and the associated payback period increases significantly.

The other primary consideration is price point – what properties will you be competing with and will your offered lease rate be below, at, or above competitive market rates? If you intend to secure above market rates, what is your value proposition, especially in the face of a turbulent economy when most users are loathe to pay “extra” as they strive to save money and/or survive?

As a starting point, your marketing program should have a sustainable orientation, perhaps one that is paperless or nearly so. You should also establish green building guidelines for your tenant(s) to observe while occupying the property. Many larger creditworthy tenants will come with their own guidelines, resulting in a common purpose.

Next, your lease document should have both a sustainability orientation and process which encourages and/or rewards EFT rent payments and proactive energy management by the tenant. In terms of the physical property, a combination of lighting retrofits, HVAC updates/upgrades, plumbing/water savings, recycled materials and building automation and controls should be considered, as these are the areas of “critical mass” from which to garner the most sustainable benefit.

From there you could consider the payback associated with renewable energy strategies (i.e. rooftop solar arrays) and LEED EBOM certification. There are other designations worth qualifying for such as Green Globes and Energy Star, among others.

Depending on whose responsibility it is to manage the day-to-day operations of the facility, educating the staff in the best practices of energy management and the use of green cleaning materials and supplies could also pay dividends. While there are other comprehensive strategies and tactics to consider, and without knowing more specifics about the property you are pursuing, some combination of the above items should help you achieve your investment and sustainability objectives.

Best of luck!