Tenants, Landlords, and Decarbonisation Responsibility

The UK office sector is changing – from a hybrid office to a workforce that’s invested in saving the environment, it’s never been more important for the commercial landlord to decarbonise. According to the UN Environment Programme’s 2020 study, the building sector accounts for 38% of all energy-related carbon emissions.

However, built environment emissions aren’t isolated to construction. They encompass all aspects of buildings – the way they are used, and the improvements that can be made to reduce their carbon impact. These two aspects, behavioural and building fabric, combine to create an entirely different equation – when it comes to commercial landlords and tenants, where does decarbonisation responsibility lie?

The Decarbonisation Equation

The landlord and tenant relationship makes decarbonisation challenging. It’s easy to see how neither party would consider decarbonisation their own responsibility – the landlord, as the owner of the building, may not want to take the measures required to improve facilities to decarbonise, especially in the face of falling corporate rents.

By the same token, the tenant may feel that it’s not their responsibility to undertake facility improvements that result in decarbonisation, leaving corporate landlords and tenants in awkward game of climate change chicken – unwilling to budge whilst conditions worsen.

At GEP Environmental, our team speaks to businesses in the same situation all the time – the landlord uncomfortable with making changes, and the tenant desperate to make changes, neither wishing to invest as they feel this activity isn’t their responsibility. While there is no clear-cut solution to this problem, we’d argue that one of the simplest ways to empower organisations at both ends of the spectrum is to consider the activity in question and identify the areas for greatest impact.

Decarbonisation and the Commercial Landlord

While each commercial lease is different (and we’d encourage all corporate landlords and tenants to check these leases regularly), most commercial landlords would expect to be responsible for the following activities:

• Management of gas, fire and electrical safety
• Protection from asbestos
• Keeping the premises in a good state of repair
• Ensuring that the property has a minimum energy rating of ‘E’

Within this definition, a commercial landlord could certainly be considered responsible for any physical decarbonisation activity. This would include energy efficiency audits, the installation of more efficient heating and cooling technology, and staying abreast of pertinent environmental legislation to keep the building compliant.

While increasing an organisation’s environmental consciousness positively impacts a building’s carbon footprint, there are additional benefits to prioritising decarbonisation – so much so that recent research from JLL found that ‘green leases’ could replace conventional leases by as early as 2025. According to the study, ‘green leases’, or leases that focus on reducing overall consumption, prove popular for landlords. In fact, 72% of landlords sign a ‘green lease’ to save costs by improving energy efficiency, while 60% use the lease to accelerate net zero carbon goals. The report also cited the below reasons for landlords wishing to utilise a ‘green lease’:

• Meet society’s expectations for good corporate behaviour (55%)
• Improve operational efficiencies and decrease operational costs (53%)
• Meet customer expectations (50%)
• Support employee health and wellbeing (48%)
• Enhance brand reputation (47%)

Decarbonisation and the Commercial Tenant

While it may be the commercial landlord’s responsibility to carry out the works that we’ve discussed above, that doesn’t mean that the commercial tenant cannot participate in decarbonisation efforts. On the contrary, we’d argue that the commercial tenant’s responsibilities are just as important. A landlord can install the most energy-efficient heating and cooling system available, but it will do no good if the tenant does not alter their own behaviour to use the system more effectively – made even more important because 50% to 65% of a building’s energy is used by tenants according to JLL. Commercial tenants can help assist in decarbonisation in the following ways:

• Taking ownership of behavioural change: decarbonisation of buildings is only half of the battle when it comes to creating change. Behavioural change is just as important, and this is where the responsibility of the tenant lies. Tenants should take an active role in decarbonising the business by replacing lights with LED bulbs, checking that local heating and cooling settings are appropriate, ensuring that unnecessary equipment is turned off when the office is closed, and taking an active look at employee activity when it comes to decarbonisation. Employees should also be made energy aware so any issues, such as draughts or overheating, are reported and fed back to the landlord to action in a timely manner. Tenants should also ensure that offices are configured to allow heating and cooling systems to work effectively. Many of the clients the GEP Environmental team has worked with over the past few years have focused on office redesign and simply moving the furniture can have a significant positive impact on carbon emissions.
• Speaking to a landlord about potential decarbonisation activity: landlords don’t want to run inefficient buildings – they cost more money to heat and cool than an energy-efficient building, and broadly speaking, commercial landlords are just as aware of the impacts of climate change as their tenants and want to find a solution that ensures longevity for both businesses. Recently, we worked with two clients to do just this – we were engaged by the landlord of the building to conduct an energy efficiency audit, and when the tenants understood why our engineers were on-site, they asked us to speak to their employees about other ways to decarbonise. These two phases of activity are critical for success and allowed the organisations to tackle building and behavioural decarbonisation in one.
• Patience during delays due to decarbonisation activity: decarbonisation activity, especially when it involves improvement to building fabric, space management or installation of renewable generation, can cause some delays and changes to the services that a commercial tenant might expect. However, as a sustainable business, a commercial tenant should extend a level of patience to their landlord for this activity (especially if it’s been conducted at their request).

Decarbonisation is a critical part of our future, and landlords and tenants alike each have a role to play in the process. For more information about decarbonisation and the role your business could play, get in touch today.