Behind-the-Scenes: Why Fort Collins Adopted Green Leases
June 29, 2020
Local governments have a critical role to play in reducing greenhouse gases, particularly those related to emissions from buildings. While much of their impact is tied to policy, local governments also play an influential role as landlords and tenants. In that capacity, an increasing number of localities are leveraging green leases to address sustainability goals while lowering costs for all parties.
This month, IMT and the U.S. Department of Energy named the City of Fort Collins, Colorado as a Green Lease Leader, recognizing its efforts to transform its leases into tools to improve building performance and reduce emissions. We recently spoke with Kirk Longstein, Energy Services Project Manager, and Keith Hanson, Real Estate Services Manager, for insights into why the city uses green leases.
How did you initially make the decision to pursue green leasing?
For one, it makes environmental, financial, and practical sense to strive to use efficient and sustainable equipment and materials whenever possible. If older items can be replaced with more efficient and longer-lasting items that will save money for both landlord and tenant in the short or long term, and have less of an impact on the environment, then that is a win-win for everyone. Basically, it wasn’t a lot of additional effort to revise the City’s lease template to include the “green” guidelines for both landlord and tenant to follow; so, the real question is, why would you not do it?
Green leasing aligns with the city’s benchmarking effort because of the focus on data transparency and collaboration. We have existing municipal sustainability goals and new construction standards, but we need to address existing buildings to really make progress towards the City’s goals. Green leasing sets the stage to allow for changes across the building portfolio over time and without needing capital improvements right away.
What is the longer-term vision for what these leases could help the city achieve?
The city can become a role model for property management and property ownership. It isn’t limited to just rentals—all residential, commercial, and industrial property owners can benefit from having a mentor to look to for guidance, and to understand the related obstacles and accomplishments.
The city can become a role model for property management and property ownership.
So often is government criticized for demanding more from its citizens than it is willing to do itself, that this type of talk-the-talk, walk-the-walk leadership can be an inspiration, and result in voluntary change happening rather than forceful, regulatory change.
How are green leases relevant right now, in the context of the pandemic?
The pandemic provides an example of an economic state in which lower costs help across the board. The longer buildings remain occupied, the faster a recovery can take place.
That’s right. We’re moving into a time when lease negotiations are more common and there is significant price sensitivity. Owners and landlords are worried about losing tenants and this type of program can help retain tenants because it addresses affordability through lower utility bills.
How does the city structure green leases?
We didn’t want to overwhelm new potential tenants, so we invested efforts into a standard green lease template as part of the general addendum. This allowed us to keep our existing, approved lease language in place while setting up the new framework. We’re also specifically targeting these leases to renewing customers right now, because a trusted relationship already exists in those cases.
How are you thinking about cost recovery and how are green leases helpful?
Ft. Collins has gone with the model that the tenant can make upgrades as long as they get approval from the city. Other cost recovery models, like cost-sharing, are possible but this method seems the most straightforward from the City’s budgeting process. For example, if there is a tenant that wants to reduce operating costs by adding solar panels. The city will provide an engineering review and assume the disposal costs of the panels in 20 years. In return, if the tenant leaves, the panels revert to the city. The green lease facilitates this improvement by removing legal barriers and stating up front that the city is open to that conversation. It sets that precedent that when you’re ready to have the conversation, we are too.
How can green leasing scale up?
People are intimidated by the topic of leases. It feels like a unique skillset to navigate legal requirements and also sustainability. It’s critical to identify a champion who can push green leases forward, and explain their relevance to broader goals. The messaging should be about how the city is benefitting the community by providing sustainable leasing options, especially in the current context of pandemic recovery.