Tenant Partnerships – The Road to a Sustainable Future
How W. P. Carey is navigating net lease challenges to boost property quality and achieve shared sustainability goals
As Climate Week NYC approaches, the spotlight on sustainability is brighter than ever. For companies across industries, the annual event underscores the urgent need to address climate change. The real estate sector, estimated to be responsible for nearly 40% of global carbon emissions, plays a critical role in advancing this worldwide effort.
At W. P. Carey, we recognize our potential to drive meaningful impact in the fight against climate change through our extensive portfolio of over 1,200 net lease properties. While the net lease model means our tenants have full operational control of their properties, we are committed to collaborating with them to achieve shared sustainability goals and enhance the quality of our properties. Here’s how:
Gaining insights through data
Collecting detailed energy data remains a core focus for us. Collaborating with our tenants to install IoT smart meter systems provides both us and our tenants access to high-quality utility data for their leased properties. This data can be utilized to assess energy usage for regulatory compliance as well as voluntary reporting. It also enables us to calculate the carbon footprint of our portfolio and identify opportunities to implement energy-saving measures at our properties.
In 2023, we began a smart meter installation program with our European tenants, making the process more efficient for both W. P. Carey and our tenants while also reducing the risk of data errors.
Renewable energy opportunities
Renewable energy can reduce building operating costs and lower carbon emissions. One of the most accessible sources of renewable energy is solar power, which can be harnessed through the installation of solar panels.
Particularly given the roof space that our industrial and warehouse assets provide, we believe we have a large addressable market for solar. Through W. P. Carey’s CareySolar® program, tenants have the opportunity to take advantage of rooftop and carport solar installations at their leased properties through a broad array of structures. These include:
- Landlord-operated
- Landlord-financed
- Tenant projects
- Rooftop leases
W. P. Carey collaborates with each tenant to understand their current energy usage and determine the ideal solar solution for their unique property.
In 2023, W. P. Carey extended the lease term with an existing tenant for their 265,000-square-foot industrial facility in Illinois. Simultaneously, we signed a 15-year power purchase agreement where we plan to build a 1,350-kilowatt roof mounted solar system that would offset 740 metric tons of CO2 annually. We will manage and fund the construction of the system and sell the power generated by the system to the tenant.
Building energy retrofits
Implementing sustainable features to improve energy efficiency has a huge impact on a property’s life-cycle emissions. W. P. Carey can do this through property-specific energy retrofits.
An example of an energy retrofit is the installation of LED lighting. LED lights are 80% to 90% more energy efficient than other light bulbs and do not contain any environmentally hazardous materials. Additionally, LEDs last up to 25 times longer than traditional incandescent bulbs.
In 2023, W. P. Carey completed a full LED retrofit at our 1.5 million-square-foot warehouse in University Park, Illinois. The LED project is expected to result in a 35% reduction in lighting electricity usage and 41% reduction in utility and maintenance bills at the property. Following the completion of the retrofit, we leased the property to Samsung for a term of 10.5 years.
Green-building certifications
Green-building certifications such as LEED and BREEAM can provide many benefits for both landlords and tenants. Achieving a green-building certification means that a property meets certain sustainability requirements across a variety of categories including energy, air quality and water usage. Certified buildings are typically more energy and cost efficient and create healthier work environments for employees.
In addition to being more environmentally friendly, green-certified buildings can offer tax benefits. Many states offer tax incentives for green building projects, based on either energy savings or reaching a certain level of certification. Real estate studies have also shown that green buildings sell and lease faster than traditional buildings, and garner higher rents and lease rates.
At W. P. Carey, we’re committed to achieving green-building certifications where we can, and our portfolio includes 6.6 million square feet of green-certified buildings as of June 30, 2024. In 2024, our state-of-the-art food research facility in the Netherlands received a BREEAM Outstanding certification, the highest level of BREEAM certification for buildings worldwide.
Conclusion
Reducing the carbon footprint of a net lease portfolio is an enormous challenge, but by bolstering tenant engagement and systematically identifying sustainability opportunities, progress is possible. Sustainable real estate is beneficial to the planet, attractive to tenants and improves the value of our broader portfolio, making it a win-win-win for all.
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Here Comes the Sun!
Real estate, one of the largest contributors to carbon emissions, accounts for approximately 37% of the world's greenhouse gas emissions. This makes it a critical sector in the global effort to combat climate change. Fortunately, there are many solutions available to help reduce the carbon footprint of real estate, and one of the most impactful is solar power. This article discusses key benefits of installing solar panels for CRE occupiers. Save on the Cost of Power Solar panels allow buildings to generate their own electricity, reducing the amount of power tenants need to purchase from the grid. This is particularly beneficial for commercial real estate, where energy costs can be a significant expense for tenants. By installing solar panels, tenants can reduce energy bills, freeing up resources to reinvest in their businesses or operations. In addition, they can potentially earn revenue by selling excess power back to the grid through net metering programs. Hedge Against Utility Rate Increases The cost of energy varies and can rise unexpectedly due to factors like fuel costs or infrastructure maintenance. As a result, occupiers who rely solely on the traditional grid electricity for their power are subject to rate increases that can impact their operating costs. Based on data from the U.S. Energy Information Administration, electricity costs in the U.S. have increased by 2.28% on an annual basis from 2005-2020 and 7.08% since 2020. Through solar energy, companies can protect themselves against unplanned rate increases and stabilize their energy expenses. Solar panels can also reduce over-reliance on the grid during peak periods when the electricity demand is high compared to the supply. Moreover, solar panel systems have a long lifespan and require minimal maintenance. It means tenants can continue to benefit from the fixed cost of solar energy for many years, even as traditional grid electricity rates continue to rise. Reduce Carbon Emissions and Support Corporate Sustainability Goals Traditional energy sources, such as fossil fuels, produce greenhouse gas emissions that contribute to climate change. On the other hand, solar panels generate electricity using the sun, a renewable energy source that does not produce harmful emissions. Occupiers who install solar panels can minimize their carbon footprint and contribute to the wider goal of reducing greenhouse gas emissions. It can also help them achieve their corporate sustainability goals and align with the expectations of their stakeholders, including investors, customers and employees. Receive Renewable Energy Certificates (State Dependent) Tenants who install solar panels on their building can also receive Renewable Energy Certificates, or RECs, to offset carbon emissions. One REC is issued for every MWh of electricity generated and delivered to the grid by a renewable energy resource. The use of renewable energy, verified with RECs, ensures a company’s electricity is provided from renewable sources that produce low- or zero-emissions, thereby reducing the tenant’s market-based scope 2 emissions. Start Enjoying the Benefits of Solar with W. P. Carey Installing solar is one of the best things companies can do to shrink the carbon emissions of their buildings. If they lease their real estate, leveraging their landlord relationship is a great way to explore options for solar installation. W. P. Carey, a leading real estate investor with over 1,400 properties, recently launched its CareySolar program, a solution providing eligible tenants the opportunity to take advantage of rooftop and carport solar installations on their leased properties with no upfront investment. By embracing opportunities like this, companies can save money, reduce their carbon emissions and help the environment. Contact W. P. Carey today to learn more!
The Benefits of LED Lighting for Commercial Real Estate Tenants
As environmental concerns become prominent in today’s market and green initiatives drive corporate decisions for investors and consumers, businesses are focused on reducing their carbon footprint. Commercial real estate is one of the largest contributors of greenhouse gas emissions today due to the fuel-generated electricity each asset requires. A misconception about green initiatives is that completing sustainability projects is a complicated process which require extensive capital investment from tenants. However, there are many cost-efficient ways to significantly reduce the carbon footprint of commercial buildings. One solution that can make a substantial difference is the installation of efficient LED lighting systems. The simple upgrade from outdated lighting systems to LED can provide the tenant with operational savings, optimized lighting performance and reduction of its carbon footprint. What makes LED lighting more efficient than other lighting? LED lights use a process called electroluminescence to operate at a far greater efficiency than traditional lighting technologies. LEDs are 80% to 90% more energy-efficient, shine at a cooler temperature and do not contain the environmentally hazardous materials that incandescent lights do. Not to mention, LEDs last longer than any traditional commercial lighting solution. Incandescent lights create illumination by heating a small wire filament. They get extremely hot, losing most of their energy to heat. Halogen and fluorescent lights are more efficient than incandescent bulbs yet costly to obtain. Let's dive deeper into the many benefits of LED lighting, including their long lifespan, financial savings and reduced environmental impact. 1) Long Lifespan LEDs should last for almost 14 years in a building which uses lighting for approximately 10 hours each day. In contrast, the longest lasting fluorescent bulbs will last for about 4 years. This improved lifespan reduces the amount of maintenance work needed to maintain adequate light in a workspace. The average incandescent bulb lasts approximately 1,000 hours without power surges or manufacturing flaws, whereas commercial installations of halogen or fluorescent lighting may last between 2,000 hours to 15,000 hours. The average LED bulb is rated for 50,000 hours of use, multiplying the lifespan of the longest-lasting fluorescent bulbs. 2) Financial Savings LEDs are also the most energy-efficient of commercial lighting options. By switching to LEDs, tenants could see as much as 90% improvement in their overall energy savings, which translate directly into financial savings. Between the savings on monthly utility bills and reduction in maintenance costs, LED lights can bring impactful reductions to a tenant’s operating expenses. 3) Reduced Environmental Impact Due to their low energy consumption, LEDs contribute the least amount of carbon dioxide into the atmosphere of all lighting sources. For example, use of a simple incandescent bulb results in 4,500 pounds of CO2 annually, while LED bulbs contribute only 451 pounds of CO2 per year. LED lights also give off very little heat compared to other types of lighting. Therefore, switching to LEDs can help reduce a building’s temperature and limit the power load on its mechanical systems. LEDs are safe to handle and install which eliminates the risks of burns and potential bulb explosions. Start Enjoying the Benefits of LED Lighting with W. P. Carey Installing LED lighting is one of the best solutions for companies looking to improve the sustainability of their buildings. Those leasing commercial space may be able to leverage their relationship with the landlord to explore LED installations. W. P. Carey is a leading real estate investor with a portfolio of over 1,400 properties and recently launched a suite of sustainability offerings for tenants, including LED lighting installations. With no upfront cost to tenants, W. P. Carey will manage the design, development and implementation of LED upgrades at its portfolio properties. A more sustainable and energy-efficient commercial property is a win-win for both the tenant and the building owner. By embracing opportunities such as LED lighting installations, tenants can save money, reduce carbon emissions and fulfill their sustainability goals. Check out a recent case study featuring an LED lighting transformation or contact W. P. Carey today to learn more!
Going Green for Earth Day
Real estate is one of the biggest CO2 emitters, with buildings accounting for 30-34% of global energy consumption. This makes it a critical sector in the global effort to reduce carbon emissions and combat climate change. Fortunately, there are many solutions available to help reduce the carbon footprint of real estate, while also reducing energy costs, improving building safety and boosting operational efficiency. With Earth Day around the corner, this article discusses several of the most impactful changes companies can implement to make their buildings more sustainable. Install Solar Panels One of the most effective sustainable upgrades for commercial facilities is the installation of solar panels to a roof or carport. Solar panels provide a clean source of energy and can help companies save on their cost of power. Additionally, companies may be able to receive renewable energy credits for offsetting carbon emissions depending on their location of operation. Companies who install solar panels can minimize their carbon footprint and contribute to the wider goal of reducing greenhouse gas emissions. It can also help them achieve their corporate sustainability goals and align with the growing interest in ESG broadly among stakeholders, including investors, customers and employees. Upgrade to LED Lighting A simple step that companies can take to improve a building's sustainability is switching to light-emitting diode (LED) bulbs. LEDs produce light up to 90% more efficiently than other types of light bulbs, which can significantly reduce energy consumption. Additionally, LEDs do not need to be replaced as often as incandescent or fluorescent bulbs, lasting as long as 14 years in a building which uses lighting for approximately 10 hours each day. LED lightbulbs are a more sustainable option not only due to their efficiency and longevity, but also because they do not have the environmentally hazardous materials incandescent bulbs contain (including argon and xenon gases). LED lights also give off very little heat compared to other types of lighting, therefore helping reduce a building’s temperature and limiting the power load on its mechanical systems. The payback period for an LED retrofit is shorter than many other sustainable upgrades, making it a great starting point for companies looking to make their buildings more efficient. Invest in Water Recycling Climate change has caused water scarcity to become an increasing issue of concern. As a result, water recycling has emerged as a viable option to provide a sustainable source of water in commercial facilities. A leading option for reducing water waste and preserving this vital resource is to recycle greywater. Greywater refers to lightly used water from sources such as sinks, showers and washing machines. Instead of directing this water into the sewer system, facilities can instead treat it and repurpose it for non-potable uses such as toilet flushing and irrigation. Instead of wasting freshwater, recycled water can be used when potable water is not needed. By harnessing the latest technology, water recycling has the potential to revolutionize the way we manage water waste and conserve this precious resource. As water scarcity becomes an increasingly pressing issue, water recycling will be an important step companies can take to make their buildings more sustainable. Utilize IoT Sensors As businesses leverage technology to help them operate more sustainably, integrating Internet of Things (IoT) technology has proven valuable in helping companies manage building efficiency on a daily basis. In particular, IoT sensors can collect data and bridge the gap between the digital and the physical world, helping companies gather information on things like energy consumption, temperature, air quality and occupancy levels. For instance, IoT sensor data can help promote sustainability by helping companies monitor energy consumption and manage power usage. IoT sensors can also be vital in helping continuously monitor particulate matter (PM) concentrations and other chemicals, gasses and contaminants in the air, allowing companies to take measures to improve occupational safety and reduce greenhouse gas emissions. Lease Your Real Estate? Partner With Your Landlord! Implementing sustainability initiatives can make a huge difference in reducing a building’s carbon footprint. Companies that lease their real estate may think implementing these changes isn’t possible, but that may not be the case. Leveraging their landlord relationship is a great way to explore options for sustainable building improvements. W. P. Carey is a leading real estate investor with a portfolio of over 1,400 properties, and recently launched a suite of sustainability and efficiency offerings for its tenants. With no upfront costs, W. P. Carey can help tenants manage the implementation of sustainability projects such as solar, LED lighting and smart metering, which can save money, reduce carbon emissions and benefit the environment. Contact W. P. Carey today to learn more!