Back in June, developer Allan Malbranck and his wife Anita opened a new 2-story, 12,800-square-foot office and retail building located at 1735 Corydon Avenue in Winnipeg. The couple believes their property is the first in the Canadian province of Manitoba that requires potential tenants to sign a lease binding them to operate their respective spaces in a sustainable manner. Although details on the parameters of the specific document being used by Mr. Malbranck are unclear, it appears that the project is the first in North America to actually require all tenants in a multi-tenant commercial office and retail building to sign a green lease. Among other provisions, tenants at 1735 Corydon Avenue are required to deposit waste in landlord-provided recycling bins, install efficient light bulbs and office equipment, use environment-friendly cleaning supplies, and fit out their spaces according to guidelines that demand environment-friendly flooring, cabinets, and building materials. There is not much more of substance in either of the newspaper articles from last month which reported the first tenant to sign with Mr. Malbranck, but I do think the story is important to note for a number of reasons, including the lack of any other North American landlords who have reportedly implemented similar requirements to date.
First, although Michael Brooks of REALpac (who participated in last month’s green leasing panel at the Urban Green Expo here in New York City) is quoted in one of the articles, it is not clear that Mr. Malbranck’s lease is derived from any of the forms which were discussed during that panel, including REALpac’s, the Model Green Lease, or the BOMA Green Lease Guide. As Mr. Brooks notes, “it’s impossible to say how many commercial buildings in Canada are using green leases because no one, including REALpac, tracks that at the moment.” It’s certainly a relatively small number, but as an increasing number of landlords attempt to implement green leasing practices, questions about the uniformity of green lease provisions could become an issue. I’m also intrigued about the idea of tracking green leases and whether any other organizations have attempted to do so (none have, to my knowledge).
In terms of other landlords applying similar blanket green lease requirements across available space in their buildings, I thought it was interesting to note that Mr. Malbranck admits that “a number of leasing agents and prospective tenants have inquired about the space, but backed off when they found out about the green leases. ‘They didn’t come right out and say it, but you got the sense it was an issue with them.’” However, the lone tenant that has signed up to date with Mr. Malbranck was attracted by the green lease concept; the owner of Lux for Sprouts, a children’s clothing and toy store, states that she specifically selected 4100 square feet of space on the first floor based on (1) the image that occupancy in a green building should create for her company; and (2) her belief that green buildings make it easier to attract and retain employees. Here, I would suggest again the importance for landlords to closely scrutinize broad, aspirational representations in green leases about green building benefits or performance, particularly if such representations are overstated or ultimately unrealized by tenants.
I was also reminded of Mr. Brooks’ remarks on our panel about enforcement of green lease provisions; although the articles reporting on 1735 Corydon Avenue did not get into this level of detail, I do think it’s worth repeating what Mr. Brooks noted about green leasing practices in Australia (where he had met a landlord whose form lease included a variety of green provisions which- if breached- entitled it to terminate the lease and evict the offending tenant). If more landlords apply mandatory blanket green leases, it will be curious to see what types of specific enforcement mechanisms (if any) are included in those documents. Given that Mr. Malbranck has only signed up a single tenant, I would be surprised if he ultimately exercised any right to terminate based on the breach of any green lease provisions, but the fact that potential tenants have balked at his requirements may suggest that such enforcement mechanisms are included in the scope of his green lease.
Finally, I also think that 1735 Corydon Avenue suggests it’s not unreasonable to consider the possibility that, eventually, the LEED system (or some other third-party green building rating system) will require owners to exclusively negotiate and execute green leases in order to earn certification, whether as an individual credit, for example, under LEED’s New Construction or Core and Shell rating systems, or perhaps even as a mandatory Minimum Program Requirement that serves as a prerequisite to formal LEED certification. For example, USGBC recently released its Green Office Guide: Integrating LEED Into Your Leasing Process and, although I have yet to review it, it’s clear that USGBC is beginning to pay closer attention to the intersection of green leasing and LEED.
We’ll try to flesh out more details about 1735 Corydon Avenue and follow up here at GRELJ as appropriate.
- Green Leases Give Building Manitoba First (Winnipeg Sun)
- Green Leases Seen as Wave of Future (Winnipeg Free Press)