Originally published on March 15, 2022, by Marta Schantz and Audi Banny for UrbanLand Magazine.

Building owners and tenants are often characterized by a “split incentive” which hinders joint efforts toward energy-efficient buildings. Why should one party pay for an improvement when the other stands to benefit? The split incentive occurs when the party who pays the upfront costs of an efficiency improvement is different from the one who benefits from future energy savings. This is oftentimes the case in standard commercial leases, which lay out how energy costs are divided between tenants and owners in ways that discourage energy savings.  

Both parties – owners and tenants – play a vital role in embedding sustainability into the built environment and ultimately have common ground that can be leveraged to achieve shared goals. This guide previews The Urban Land Institute’s (ULI) Tenant Energy Optimization Program (TEOP) and the Institute for Market Transformation (IMT) and the U.S. Department of Energy’s (DOE) Green Lease Leaders program, highlighting their actionable steps for landlord-tenant collaboration in advancing sustainability in leased spaces.   

• Green Lease Leaders is a national recognition and education program honoring landlords, tenants, and partnering real estate practitioners that incorporate green leasing to drive high-performance and healthy buildings. Those so honored encompass a range of businesses in the commercial, retail, industrial, information technology, and multifamily sectors. 
• The Tenant Energy Optimization Program (TEOP) process walks tenants and their teams through a 10-step process that helps leased spaces achieve deep energy and financial savings. From pre-lease, through design and construction, to post-occupancy, following the TEOP 10 steps ensures that energy efficiency is cost-effectively included from the beginning to end of a fit-out process.