Corporate Responsibility

Why landlord-tenant collaboration is the key to more sustainable shopping centers

Posted by: Will Teichman Will Teichman
on February 7, 2014

Reprinted by permission of SCT, a publication of ICSC.

Those who have worked on the front lines of sustainability over the past several years have seen it evolve from an emerging idea to a permanent reality for the industry. Rising investor expectations, new municipal requirements, shifting consumer preferences, and the economic necessities of the Great Recession have all contributed to this change. More than a compliance obligation, sustainability is an opportunity for shopping center owners and retailers to rethink their operations. This includes developing a better understanding of the direct environmental impact of their businesses, as well as the impact their suppliers and customers have. The great news for many of us is that sustainable improvements can be good for business, in terms of both short-term financial performance and the long-term health and vitality of an enterprise.

We have implemented a series of sustainability measures over the past few years at Kimco. Our focus started in those areas where we have the greatest control. We streamlined the management of common areas by raising the energy efficiency of parking lot systems, for instance, and we have improved back-office sustainability. We have also supplied solar-generated power and waste management services to our tenants.

Looking to the future, it is clear that unlocking many of the remaining sustainability opportunities within shopping centers will require greater collaboration between landlords and tenants. Shopping centers, unlike offices or other types of commercial buildings, have a greater division of control and responsibility between landlords and tenants when it comes to the build-out of spaces and the ongoing management of building interiors and exteriors. Lease structures reflect historical preferences of retail landlords and tenants, including who is responsible for building improvements and ongoing utility costs. But these terms evolved during an era when sustainability was not yet a priority for either side.

Today landlords and tenants are under increasing pressure to effectively manage operating expenses, such as utility costs, and to meet various new requirements. Landlords, for instance, must adhere to green building standards and mandatory energy disclosure laws. As expectations and norms adjust, so will the ways that we divide or share responsibilities.

The world will not change overnight, but signs indicate that progress is being made. ICSC has teamed up with the Retail Industry Leaders Association to facilitate a dialogue between large landlords and tenants on these issues. Several important pilots have emerged from this effort, including an innovative mall recycling program and an effort to pursue energy efficiency within small-shop retail spaces. This year the Department of Energy’s Better Buildings Alliance will launch a green leasing program that will recognize landlords, tenants, and brokers who are advancing lease-based solutions to common sustainability roadblocks.

Big challenges rarely have easy solutions, and sustainability is no different. As business partners whose successes are inextricably linked, landlords and tenants must work together to solve sustainability challenges and unlock related opportunities.

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