LEED: Retail Gets with the Program

Building Green is on the rise, but in the retail sector it trails behind. Despite representing a significant segment of the building industry, retail construction constitutes only 1.5% of the projects registered with the U.S. Green Building Council (USGBC) for green building status.

Fortunately for environmentally concerned retailers, a new program that will be fully launched in 2008 called "LEED for Retail" looks to change the landscape of retail design with green criteria developed specifically for the industry. It promises to assist retailers in joining the industry's movement toward sustainability.

LEED for Retail, currently in a pilot phase, is a green building rating system that is the newest evolution of Leadership in Energy and Environmental Design (LEED). LEED, of course, is the voluntary green building rating system created by the USGBC to evaluate the sustainable features of buildings. LEED was originally designed for only commercial and industrial buildings, but since its inception has been extended to include other programs such as commercial interiors, core and shell and existing building operations and maintenance.

Like all LEED programs, LEED for Retail is a point-based rating system that considers location, water use, energy use, building materials, resource consumption and indoor environmental quality. LEED for Retail, however, intends to meet the specific needs of retail design and construction, providing tailored language and additional options to achieve points to make it easier for retailers to achieve LEED certification.

More than simply refining its rating system, LEED for Retail is the USGBC's response to the growing trend of retail "going green." In addition to the moral and practical necessities of being environmentally responsible, there are a number of other factors driving this shift toward sustainability in retail. One factor is that consumers are demanding green and retailers are recognizing the public relations value.

Many retailers now believe that customers wish to patronize green businesses, and that if they can make authentic claims as green retailers they will have an advantage over competitors. As a result, many retailers are developing green strategies that include everything from offering discounts to shoppers who bring their own bags to using dry popcorn packing material that can be reused as bird feed.

The biggest reason for the increased interest in green is that retailers are beginning to see the significant cost-savings potential in operating green buildings, while realizing that sustainable design does not have to be prohibitively expensive. As a result, many prominent retailers such as Target, Home Depot and Whole Foods are building green. In New Jersey, the most notable green retail developer is PNC Bank, which has 11 LEED-certified branches in New Jersey and plans to build 90 more in the eastern U.S.

PNC and its consultant, Gensler, have created methods by which a green prototype design could guide the building of all the new branches. This prototype is expected to be a key element in the success of LEED for Retail because it removes a major impediment to retailers filing for LEED credentials in roll-out portfolios. With a prototype design certified by the USGBC, a retailer could eliminate the time and expense in filing documentation for each store.

Further, PNC maintains their prototype design reduces construction time and construction costs are less than what competitors pay for their branches. PNC, with major retailers such as Starbucks, provided the USGBC with input in this regard so that a volume-building review process can be implemented in LEED for Retail. This is sure to have an exponential impact on the number of green retail buildings and spread increased awareness of green design.

LEED for Retail applies to more than owner-occupied facilities. According to the USGBC, the program also contemplates landlords obtaining certifications on their buildings and tenants seeking certifications on fit-outs. These dynamics raise interesting legal issues with regard to landlord/tenant relationships in green building.For example, when calculating the rent on a green leasehold, the parties must take into account a variety of factors including the substantial utility savings and increased worker productivity due to improved indoor air quality, better lighting, temperature control and access to daylight and views. And based on findings during the pilot program, it is expected that there will also be increased sales from satisfied shoppers in LEED retail spaces. As such, parties must negotiate leases that equitably allocate cost-savings and the benefits of being green.

Indeed, new lease provisions must be drafted for green rentals because of the unique character of the real estate. Accordingly, acceptance by the landlord of tenants' performance of LEED for Retail in a lease is essential for tenant fit-out projects. The landlord's support and understanding of the program are critical and concurrence in the agreement is necessary on everything from building policies to facility operations.

Likewise, landlords that wish to LEED-certify their core and shell development and leave the decision for the interior spaces up to the tenants should carefully consider how each tenancy could affect certification. Therefore, in addition to a comprehensive lease, landlords should prepare handbooks to educate tenants about the benefits of LEED certifications. These handbooks would encourage tenants to pursue LEED for Retail and provide suggestions and resources for maintaining the green philosophy of the project.

Sustainability is being embraced by the building industry. Clearly, retailers cannot afford to be left behind. This market transformation is taking place in retail and LEED is leading the way.