8 Insights on Green Leases

In Cleveland, A partnership between the Institute for Market Transformation (IMT) and the Council of Smaller Enterprises(COSE) is working to break down the barriers holding back energy efficiency in commercial buildings, especially when it comes to the lease. 

Through education and technical assistance on smarter lease negotiations, COSE and IMT have hosted workshops to help building owners and tenants reach their triple bottom line and work together to make their spaces more energy efficient.
This partnership builds off of efficiency programs currently underway in Cleveland, including COSE’s Nonresidential Energy Assessment Program, the Cleveland 2030 District, and Sustainable Cleveland 2019.

Here are 8 Green Lease Insights:


  1. How are Green Leases Different? Traditional leases designate responsibility for landlord and tenant, but rarely account for energy efficiency. Green leases facilitate information sharing and encourage landlord and tenant to work together on the efficient use of energy and other resources. A building owner usually has little incentive to fix or replace poor performing systems if he can’t pass the cost of the improvements through to his tenant. In the meantime, the tenant may have high utility costs because of poor performing systems. In a green lease, capital improvements that reduce operating expenses can be passed through to a tenant in a way that is cost neutral or saves money for a tenant. A win-win situation.
  2. The Savings are Big! Green leases can cut energy consumption by 22% in leased buildings according to a reportreleased today by the Institute for Market Transformation. This reduction in energy use could add up to about $3.3 billion in annual savings nationally.
  3. The Split Incentive: No, it isn’t the same as a split infinitive and the grammar police won’t arrest you! Traditionally, building energy efficiency has been blocked by a “split incentive” issue. If the tenants pay the energy bills, the landlord has little incentive to invest in efficient equipment. At the same time, the tenant does not own the energy-using systems of the building, and, thus, has no incentive (or ability) to invest in efficiency upgrades. The result: neither party takes the initiative to make improvements, limiting the uptake of energy-efficiency solutions.
  4. Get a FREE Energy Audit: Businesses can get FREE energy audit from the Council of Smaller Enterprises. An energy audit could help you understand how much you might benefit from a Green Lease.
  5. Buildings that are Green Pay in 2 Ways/ the 3-30-300 rule: There is a “3-30-300” rule of thumb that organizations typically spend approximately $3 per square foot per year for utilities, $30 for rent and $300 for payroll. Maximize savings from greening a workplace by combining efficiency improvements that save in energy costs, but also boost productivity due to employee health and comfort. A 2% energy efficiency improvement would result in savings of $.06 per square foot but a 2% improvement in productivity would result in $6 per square foot through increased employee performance. A good rule of thumb is that a 10% utility savings = a 1% productivity boost.
  6. Landlords can Make Transparency a Priority by sub metering for lights and plug loads, sharing whole building utility data with tenants and by providing information on planned an upcoming improvements to the building.
  7. Power Strips to the Rescue! 33% of energy use in most commercial buildings is plug and process loads. This means simple technology like smart power strips and computer settings can make a big difference in tenant utility bills.
  8. Learn More at the Green Lease Library and contact COSE for questions and technical assistance for green leases.


Check the handy infographic below!



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