Green building is defined as a building incorporating design, construction and operational practices that significantly reduce or eliminate the negative impact of development on the environment (Green Building Council of South Africa, 2016).
Such a building must be energy efficient, resource efficient and environmentally responsible. The objective of green building concept is to develop buildings which use the natural resources to the minimal at the time of construction as well as operation. Green buildings emphasize on the resource usage efficiency and press upon- Reduce, Reuse and Recycle (The-objective-of-green-building…2003).
Green leasing, also known as energy-aligned, energy-efficient, or high-performance leasing, is the practice of realigning the financial incentives of sustainability or energy measures in lease documents. A green lease is essentially a standard lease that has “rehabilitated” certain clauses to better align financial incentives and sustainability goals between a landlord and a tenant (Feierman, 2015). Common commercial leasing practices often suffer from what is known as the principal-agent problem, which is when one party (the agent) performs tasks on behalf of another party (the principal), but the agent does not act with the principal’s best interests in mind. For many commercial landlords and tenants, cost structures laid out in the lease lead to the principal-agent problem and discourage landlords and tenants from investing in a more-efficient building (Feierman 2015). Realigning cost structures through a green lease allows both building owners and tenants to save money, conserve resources, and ensure the efficient operation of building
Green buildings save owners of buildings money by reducing the energy and water use as well as by lowering operational and maintenance costs in the long run. The energy savings in green buildings usually exceeds the cost premium experienced in the design and construction, within a reasonable payback period. The additional premium for a green building must therefore be justified by two main factors, namely reduced operating and maintenance costs and productivity and health benefits. Green building is already widely adopted globally, with strong growth expected in most countries, but most particularly in the developing world. In terms of the adoption of green buildings in the real estate sector, legislation remains the most important driver. It can be concluded that the integration of green and sustainable practices is a good financial investment, with reduced maintenance requirements and reduced operational costs. Green buildings also can be justified from a property management perspective, with green buildings attracting more tenants and ensuring higher productivity for tenants thereby reducing vacancies and tenant turnover.
