Tenants are increasingly building-out their leased premises with Green improvements even where the core and shell of the building is not employing Green strategies.

In point of fact, the LEED for Commercial Interiors standard (LEED CI) expressly provides for such a situation by permitting commercial interior (actually all non residential interior) premises to be LEED certified, even when the building shell is not LEED certified.

The roll-out on April 27, 2009 of LEED for Retail Commercial Interiors, recognizing the unique nature of retail design and addressing the specific needs of retail tenant spaces, will only accelerate the build-out of leased premises with Green improvements.

And that all LEED CI projects registered after June 26, 2009 must utilize the updated LEED 2009 standards (.. which standards are arguably more burdensome emphasizing energy reduction and deemphasizing indoor air quality), a surge is expected in new interior premises registered before that date.

With more than 60 billion square feet of already constructed building stock in this country, Greening the leased interior premises within those 4.5 million existing commercial buildings can be significant. New construction alone will have limited impact on the built environment, when it is estimated that less than 20,000 new commercial buildings will be built in the entire country this year. Given the large number of existing buildings versus new Green buildings being erected, particularly in this period of continued economic uncertainty, it is all but certain that Greening tenant premises within existing buildings will drive the Green building industry in 2009.

While in most instances there is no requirement that a Green building owner or tenant obtain a certification that the premises is indeed Green, third party certifications may be required to qualify for government tax credits and the like, or in the limited number of jurisdictions that mandate a certification that a building or renovation is Green (notably in Maryland, Baltimore City, Howard County, and Montgomery County). Moreover, many large corporations and governments are only leasing Green premises.

Third party environmental certification programs also have emerged as a guide for Green building, aiding owners, operators and others by providing a framework, if not literally an actual checklist for Green building efforts, including documenting sustainable performance and costs.

There are several private and non-profit Green building certification programs in the marketplace, including Green Globes, BREEAM, and LEED. The U.S. Green Building Council’s Leadership In Energy and Environmental Design (LEED) program is by far the most widely accepted not-for-profit Green building certification program in the United States, and, as such, this article will continue to look at these issues using the terminology utilized in the LEED rating system.

LEED is a point-based system where buildings earn credits for satisfying specific Green building criteria. The number of points determines the level of certification. Points are available in four progressive levels from Certified, Silver, through Gold, and Platinum.

LEED rating systems exist in specific categories. The LEED for New Construction (LEED NC) rating system is the cornerstone of the LEED program and sets standards for high performance commercial and institutional new construction and major renovation projects, including office buildings, high-rise residential buildings, government buildings, recreational facilities, manufacturing plants, and laboratories.

LEED for Core & Shell (LEED CS) is a Green building rating system for builders, merchant developers, and new building owners who want to construct a building for rent to others, often a building with more than one tenant, which will have a sustainable design and the resultant reduced operating costs and increased asset value for the core and shell. LEED CS is designed to be complementary to the LEED CI rating system. LEED CS is intentionally neutral regarding requirements for tenant build out. A LEED CS rating can be attained without making any requirements of a tenant. A tenant can choose to pursue or not pursue a LEED CI rating with no impact on the building’s LEED CS rating.

However, if an owner chooses to make specific lease requirements part of its tenant lease, and those requirements meet the criteria of a particular credit in the LEED CS rating, the shell building owner may be able to receive a point for this credit even if the actual work is not part of the owner’s core and shell construction but rather, will be implemented as part of the tenant build-out.

LEED for Schools has gained wide acceptance. LEED for Retail New Construction is being rolled out and LEED for Healthcare remains in pilot soon to be released.

The LEED for Existing Buildings: Operations & Maintenance (LEED EB: O&M) rating system has owners of existing buildings measure operations, improvements, and maintenance with the goal of maximizing operational efficiency while minimizing environmental impacts. That LEED EB: O&M is for an entire building makes it not ideal for many multi-tenant buildings.

LEED CI is the Green bull’s–eye for tenants, including in multi-tenant buildings, and given both the sheer number of tenant spaces and the flexibility that the LEED CI rating affords, it is a huge opportunity for Greening buildings. It is a system for certifying high performance tenant spaces that are less costly to operate and maintain; healthy, productive places to work; and have a reduced environmental footprint. LEED CI empowers tenants without control over the whole building to make sustainable choices in their build out and operations. Significantly, as described above, a tenant (or landlord) can obtain a LEED CI rating in a non-LEED building.

By way of creative example, a tenant that is a branch facility of a European company leased a significant space in a flex space building in suburban Baltimore (a building shell type that could not readily obtain LEED certification), required the landlord to build out the space and obtain LEED CI certification, thereby avoiding the European country’s CO2 tax.

Another common example in the application of LEED CI is that the length of a lease term is now a Green issue suggesting longer leases in an effort to conserve resources, reduce waste, and reduce the environmental impacts of changes in tenants as they relate to materials, manufacturing, and transport. A tenant that commits to remain in the same leased premises “for not less than 10 years” is a 1 point credit toward LEED CI certification (where a 5-year term with a 5-year renewal option will not capture the credit).

As of the date of writing this article USGBC reports only 2 LEED CI spaces have been Certified in Maryland although 37 premises have been Registered seeking Certification, with over half of those having been Registered within the last 6 months. LEED CI Registration is skyrocketing.

And the imminent release of LEED CI for Commercial Interiors, buttressed by the impending move to LEED 2009 will create a surge in projects being Registered.

Additionally, it can be anticipated that given the very large number of nonresidential tenants (within existing buildings) across the country, the largest number of applications for LEED certification throughout the remainder of 2009, among all LEED rating systems, will be requests for LEED CI rating of tenant spaces.

If we can assist you evaluating a LEED CI project, including whether to register before June 26, 2009, or Green building generally, do not hesitate to contact Stuart Kaplow.