Co-authors
Diana Lee, Institute for Market Transformation
Monte Hilleman, Sustainable Investment Group
Isabel Langlois-Romero, National Laboratory of the Rockies
Lauren Adams, National Laboratory of the Rockies
Abstract
Emerging building performance programs, rising energy costs, and increased weather variability all raise risk for buildings and create new value propositions for energy efficiency technologies and building resilience strategies. High-performance leasing can dramatically improve building energy performance by (1) establishing shared goals for property owners and tenants and (2) strengthening communication and coordination on capital investments.
In this study, we will outline the value of high-performance lease language, the financial opportunities available when a high-performance lease is in place and how those two pieces enable cash flow savings, enhanced building performance, reduced operating costs, and improved building valuation. The analysis leverages real project case studies from various property types and reviews existing terms, conditions, and capital stacks of high-performance and traditional leases. These case studies will compare two scenarios: one with a traditional lease and conventional financing capital stack and a second where the property has a high-performance lease in place and an updated capital stack. This analysis will use indicators like utility cost-sharing, indoor air quality standards, and capital investment responsibilities to demonstrate performance-based and investment benefits which address split incentive challenges. We aim to demonstrate how high-performance leases support more reliable and effective investment models by linking lease terms and conditions to capital stack composition, acknowledging cash flow impacts of shared operating expenses, and potentially reducing tenant’s total cost of occupancy. The paper’s findings will build on previous cost valuation for high-performance leases and offer a practical pathway in scaling building energy efficiency and reliability.
