Green Building Certifications
03 January 2024
In the current climate, “green” buildings are taking the market by storm. Why? Corporate occupiers are seeking light, airy, green, flexible working spaces to retain, and attract, employees. ESG goals are at the top of most businesses’ agendas and where better than the office to showcase the “E” in ESG.
For landlords, green building certifications are a useful tool to demonstrate a property’s green credentials and attract environmentally conscious tenants. For tenants, certifications are a useful comparator for shortlisted properties. However, with no universal certification, navigating and understanding the impact of these certifications can be tricky.
At a non-investor level there are a number of internationally recognised certifications which are being provided to prospective tenants. The most widely used are:
1. BREEAM: The Building Research Establishment Environmental Assessment Method: A leading global green building rating system which evaluates a building’s specifications, design, construction and use against the following categories: Management, Water, Energy, Transport, Health & Wellbeing, Resources, Resilience, Land Use & Ecology, Pollution, Materials, Waste and Innovation. The BREEAM ratings range from Acceptable (In-Use scheme only), to Pass, Good, Very Good, Excellent and Outstanding. Although BREEAM is considered to be one of the most rigorous certifications, it does not require data to be provided by inhouse building teams. Instead, accredited assessors collect the data for assessment.
2. LEED: Leadership in Energy and Environmental Design: Run by the nonprofit U.S. Green Building Council (USGBC), LEED is similar to BREEAM in many ways. It assesses a building’s environmental impact from design and construction through to operation and maintenance. It is considered simpler than BREEAM and the data is provided by the building’s own design team to be assessed by USGBC. Unlike BREEAM, thresholds are based on percentages and awarded a Silver, Gold or Platinum certification.
3. NABERS UK: An adaptation of the highly successful rating programme NABERS that operates in Australia. NABERS provides a rating from one to six stars for an office building’s energy efficiency. There are two product offerings available in the UK: (i) Design for Performance for the construction of new buildings; and (ii) NABERS Energy, which measures the energy efficiency of existing buildings. NABERS UK is provided by the British Research Establishment (BRE), the product owner of BREEAM.
4. WELL Certification: The WELL Building Standard was founded in 2014 by the US-based International WELL Building Institute (IWBI). It focuses on “wellbeing” first, and assesses buildings against categories such as air, water, nourishment, light, fitness, comfort and mind. This certification is relevant for corporate occupiers with employee wellbeing at the top of their priority list.
5. FITWELL: Similar to WELL, and largely based in the US, this certification promotes healthy buildings and uses a 12–16 week review process to generate a one, two or three star rating which is valid for three years.
Given the significant role the built environment is going to play in tackling climate change over the next 10 years, as demonstrated recently at COP28, it is likely that landlords will be seeking to improve the environmental performance of their buildings. Corporate occupiers will be required to navigate these waters more and more frequently and should keep in mind the following:
- Most agents will raise environmental queries with each other at heads of terms stage, especially if the building is certified. If the building is certified, the landlord may require tenants to adhere to documents which are supplemental to the lease, such as environmental improvement plans, green transport plans or waste management handbooks. Ask landlords to provide copies of these supplemental documents and review before exchange/completion.
- Alongside green provisions in the lease, some landlords will propose that the tenant enters into a Memorandum of Understanding (a non-legally binding agreement which sets out the mutual intentions of both parties) in relation to sharing data on energy usage, using sustainable materials for alterations, and reducing waste. Although the Memorandum is not legally binding, you should bring to the landlord’s attention any obligations which your business may not be able to meet.
- Landlords may also be required to carry out maintenance, repairs, or improvements to ensure they continue to meet their certification standard. Careful consideration is required as to where liability for these costs may fall.
- Balance the importance of ESG goals and potential utilities savings against the cost of additional service charge items which may be required to maintain smart green buildings.
As we enter into a new year, this trend towards green buildings is not only continuing, but growing. If you would like to discuss environmental obligations at your current premises or any future premises, please do get in touch.