Sustainable Building Trends in Commercial Leases

As we embark on a new year, the growing need for sustainability will be a key point of consideration in the commercial leasehold market. We will see a continuing shift towards sustainability considerations taking centre stage in government regulations, as well as in the drafting of commercial leases.

In larger cities and regional hubs like London and Cambridge, landlords are committing to net-zero goals, which in turn is impacting their tenants. To this end, sustainability clauses are now commonly being drafted in commercial leases as a way for landlords to manage or control their tenants’ use of the property.

New Trends in Commercial Leases

Green Lease Clauses

With an increasing number of landlords committing to ensuring sustainability in their properties, we have already seen a significant increase in leases containing provisions which attempt to codify this aim. These provisions establish a responsibility on landlords and tenants in a number of areas, such as:

– Energy usage

– Refuse management

– Water usage

With this in mind, tenants should be aware that a growing number of leases are placing commitments on landlords and tenants to use energy-efficient lighting, conduct regular energy performance reviews, and recycle waste effectively.

With the emergence of these clauses in commercial leases across the UK, it is no surprise that there are also provisions which require tenants to review and report on their environmental performance.

Obligations For Energy Efficiency

Over the last decade, the government has introduced regulations which attempt to ensure that properties being leased across the UK are as energy-efficient as possible.

In 2015, the government introduced the Minimum Energy Efficiency Standards (MEES). This set of regulations has now been updated on a number of occasions, and as of April 2025, they will apply to all tenancies across England and Wales. MEES prohibits landlords from letting properties with an Energy Performance Certificate rating below “E” (subject to some limited exceptions). By 2030, it is envisaged that this threshold will rise to “B”. As a result of this, landlords will be required to invest in building upgrades and tenants will be encouraged to adopt energy-efficient practices in their usage of properties. Whilst this may seem onerous on the face of it, it is hoped that investment and changes in practice will lead to lower energy costs as well as environmental benefits.

Integration of Renewable Energy

In order to keep up with the government’s sustainability objectives, we are now seeing a growing number of commercial leases provide for the use of renewable energy sources. This trend has seen the inclusion of bespoke clauses being drafted into leases from the outset. This can include a commitment on tenants to consider the impact of their energy usage on the property and, to some extremes, source energy from green suppliers. Additionally, a growing number of landlords are now adopting a relaxed view on reinstatement provisions where tenants are adding solar panels to a property. These measures could arguably reduce a business’s carbon footprints, as well as attract like-minded landlords and tenants who can come together to focus on an environmentally conscious goal. They should help both parties achieve their environmental, social, and governance targets.

Sharing Sustainability Costs

In any commercial tenancy, the yearly service charge a tenant will be obligated to contribute towards will be a key consideration as to whether they enter into a lease. It will be of no surprise that landlords are seeking to recover the costs of sustainability initiatives through the service charge, in order to share the burden of these with tenants. As such, it is important for tenants to consider what their landlord will be charging through their yearly service charge from the outset of the lease.

Why is sustainability being considered by landlords and tenants?

There are a number of benefits that can be seen from sustainability-focused leases being more commonplace across the UK property market. The general consensus is that this shift will allow the commercial property sector to contribute to the UK’s broader sustainability targets.

Moreover, alongside the tangible benefits for landlords in ensuring that their property is leased with an emphasis on sustainable energy performance, there could also be marketability benefits. From a tenant’s perspective, operating in more sustainable, energy-efficient premises may lead to a reduction in operational costs as well as align with an organisation’s Environmental, Social, and Governance goals. This is particularly important for listed companies and will increasingly affect all businesses.

The shift in sustainability considerations in commercial leases emphasises a growing number of regulatory requirements put on landlords by the government. These requirements demonstrate some of the practical ways in which landlords and tenants can contribute to the country’s efficiency targets.

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