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JCRE
19,1
Practices, drivers and barriers of
implementing green leases:
lessons from South Australia
36 Raufdeen Rameezdeen
School of Natural and Built Environment, University of South Australia,
Received 7 April 2016 Adelaide, Australia
Revised 31 August 2016
Accepted 26 September 2016
Jian Zuo
School of Architecture and Built Environment, University of South Australia,
Adelaide, Australia, and
Jack Stevens
School of Natural and Built Environment, University of South Australia,
Adelaide, Australia

Abstract
Purpose – This paper aims to investigate the practices, drivers and barriers which influence the
implementation of green leases in South Australia. Despite some efforts on legal aspects of green leases, only
a few studies have examined these aspects from an operational perspective. In addition, very little empirical
evidence was presented in previous studies to show how green leases work in real-life settings.
Design/methodology/approach – Data were collected using semi-structured interviews with landlord
and tenant representatives who have considerable experience in green leases. These interviewees were
selected via a purposive sampling technique that identified buildings which use green leases in South
Australia. The concept of interface management (IM) was used to operationalize this research.
Findings – The green leases were found to be mainly initiated by tenants while government involvement,
economic and environmental benefits are the main drivers in South Australia. Drivers such as staff retention,
well-being and corporate social responsibility are found to be more relevant to tenants. Lack of awareness and
transaction costs are the main barriers to the implementation of green leases.
Research limitations/implications – This study focuses on the South Australian context and mainly
covers dark green leases. There are implications for the government’s continued involvement and the
promotion of lighter shades of green leases to overcome operational issues and barriers identified in this study.
Originality/value – This study contributes to the body of knowledge on the subject of green lease
implementation from an operational perspective. In addition, the study introduces a conceptual framework via
IM that could be used in future research endeavours.
Keywords South Australia, Commercial property, Tenancy, Barriers of implementation,
Green lease, Interface management
Paper type Research paper

Introduction
As sustainable building developments become popular in Australia and around the world,
schemes are being developed to harness the properties of these buildings. One of such
Journal of Corporate Real Estate schemes is “Green Lease” which is implemented during the occupation stage of a building. A
Vol. 19 No. 1, 2017
pp. 36-52 green lease is different from a standard lease in that it incorporates environmental best
© Emerald Publishing Limited
1463-001X
practices to reduce a building’s negative environmental impacts (Roussac and Bright, 2012).
DOI 10.1108/JCRE-04-2016-0018 Included in the lease is a framework where the tenant and landlord can achieve and maintain
energy efficiency and other sustainability goals throughout the lease term (Airst and Airst, Implementing
2010). These green leases generally aimed at commercial building owners and tenants while green leases
the state and federal governments in Australia influence its uptake through policy,
regulation, incentive programmes and leadership by example (Burroughs, 2011). Apart from
benefiting the environment, green leases can also result in significant cost savings to the
landlord and tenant (Bonde, 2012). It enhances the performance of the building and improves
the relationship between the landlord and tenant (Christensen and Duncan, 2010). This is
achieved as the building uses less energy and resources which ultimately reduces operating 37
costs (Roussac and Bright, 2012).
Green leasing is a relatively new concept which became popular in Sydney and gradually
spread throughout Australia (Oberle and Sloboda, 2010; Christensen and Duncan, 2010). It is
starting to take off internationally (CMS e-guides, 2011; Bright and Dixie, 2014). Although
the concept has been studied in detail from a legal perspective, very little research work has
been conducted from an operational viewpoint. Empirical research is lacking on issues that
landlords and tenants have to face during its operation. Similarly, very few studies have
attempted to explore critical factors that facilitate or impede its implementation. It is
imperative to examine these concepts beyond the legal perspectives to achieve sustainability
goals during a building’s operation. To address these gaps in the current body of knowledge,
this study investigates the issues surrounding green leasing practices in South Australia.
This study also intends to identify drivers and barriers of its implementation. The aim was
to collect empirical evidence that enhances current green leasing practices for both landlords
and tenants.
The study mainly focuses on “Dark Green” leases promulgated by the Australian Federal
Government under the Energy Efficiency in Government Operations scheme. Dark green
leases are well established in the Australian property context, and government tenants use
this model because it is compulsory beyond a certain threshold (Roussac and Bright, 2012).
There are lighter shades of green leases in other countries (refer to Hinnells et al., 2008 for the
definition of various models) which are beyond the scope of this study. Within such scope,
the results have implications for South Australia and other Australian states to enhance the
understanding of green leases and be used as a platform to develop appropriate techniques
to implement it. In addition, a better understanding of green leases and its practicalities
enables tenants and landlords to channel their energies across the issues, drivers and
barriers needing the most attention. As a result, the implementation of green leases is more
likely to be successful.

Green leases
Traditional leases are not in a position to accommodate environmental best practices in
tenanted spaces of a building (Roussac and Bright, 2012; Kaplow, 2008). A number of reasons
have been identified for the above limitation while split incentives between the landlord and
tenant were considered to be the main impediment (Bonde, 2012; Roussac and Bright, 2012).
It occurs when parties to a lease have diverse incentives because of the set-up of the
agreement between them (Bonde, 2012). In a net lease, landlords will not have the incentive to
engage in environmental upgrades of capital assets as the benefits will be reaped by tenants.
On the other hand, tenants will not have the incentive to save energy because the landlord
pays the electricity bill in a gross lease. Green leases came into existence in various forms to
improve environmental performance and energy efficiency and are becoming increasingly
popular in the commercial property world (Roussac and Bright, 2012). Efficient use of energy
in tenanted properties is one of the main benefits of a green lease that could well be a major
driver of its implementation (Bonde, 2012). In this regard, green leases need to solve the split
JCRE incentive dilemma that often plague the property industry. According to Janda et al. (2016),
19,1 the Sydney Better Building Partnership clauses are able to address the split incentive
dilemma. Such issues could also be addressed via the Green Lease Schedule (GLS)-based
dark green leases, for example, separate metering, sharing of data and energy monitoring.
Though there is no standard definition, it is well recognized that intensities of green
clauses vary from “Dark Green” to “Light Green” (Janda et al., 2016; Sayce et al., 2009;
38 Langley and Hopkinson, 2009). Commenting on green clauses used by Sydney’s office
spaces, Janda et al. (2016) highlighted that they mainly relate to corporation, management
and recycling, information sharing, environmental sustainability, waste reduction and to a
lesser extent securing a National Australian Built Environment Rating System (NABERS)
rating. Similarly, Bright and Dixie (2014) classified green clauses that exist in the UK under
a number of categories and provided a general definition of a green clause. The contents of
these green clauses and the extent of legal commitment shown by parties decide whether the
lease belongs to the darker or lighter shades. Darker versions express binding legal
commitments, whereas lighter shades express non-binding aspirational intent. Therefore,
the former category set standards for environmental performance, specifies monitoring and
measurement methods and evaluates compliance regularly. Remedies for non-compliance
are dealt with by means of formal arrangements, and disputes are resolved formally.
Although green leases have become more complex, their uptake is sporadic and are found
to be specific to limited sub-sectors and geographical locations. Reviewing five case studies
across the UK and Australia, Janda et al. (2016) found that the uptake occurs mainly in prime
office spaces within the central business district (CBDs) of major cities, whereas the usage is
very low in retail and sub-prime office spaces (Janda et al., 2016). In addition, it is mainly used
by large organizations having sustainability goals as well as those that are subject to
regulatory compliance obligations (Dixon et al., 2009). Hinnells et al. (2008) predicts that it
will be hard for small organizations to adopt green leases. For Kaplow (2008) and Bright and
Dixie (2014), green leases are mainly meant for green buildings. They do not see a huge
potential for green leases outside the green building context. In addition, it is led by the
landlord and is considered as a landlord’s environmental management tool (Janda et al.,
2016). The exception is Australia where government tenants are leading the initiative
through the GLS that was introduced by the Federal Government in 2006 (Woodford, 2007;
Hinnells et al., 2008). The government, in fact, mandated the use of a GLS for tenanted space
over 2000 m2 by any agency under the Energy Efficiency in Government Operations Policy
(Woodford, 2007). According to Woodford (2007), more than 95 per cent of the Australian
Government’s greenhouse gas emissions are because of energy usage. GLS’s main objective
is to enhance energy efficiency and help meet GHG emission reduction targets.
Environmental leadership including corporate social responsibility (CSR) is becoming a
noted trend among property developers in Australia (Newell, 2008). That also includes
landlords, tenants and property professionals who are involved in properties during their
occupation (Bonde, 2012; Roussac and Bright, 2012). The external push for environmental
stewardship in Australia is apparent through the setting of minimum environmental
standards for buildings, rating tools for its operations [NABERS, Green Star and Australian
Building Greenhouse Rating (ABGR)], disclosure requirements of energy efficiency,
voluntary green star ratings, etc., where the government is taking a leading role (NCC, 2016;
Janda et al., 2016; Australian Government, 2015; Green Building Council Australia, 2014).
These externally led developments are proving to be successful in creating a climate for
private initiatives to emerge (Wallace, 2015; Sayce et al., 2009).
Green leases form the inter-organizational environmental governance (private–private)
between the landlord and tenant (Janda et al., 2016). The lease serves a regulatory role that
establishes operational practices, collaboration between parties, encourages communication Implementing
and the sharing of information (Janda et al., 2016). According to Christensen and Duncan green leases
(2010), green leases reflect not only changes in the wording in a traditional lease to achieve
energy efficiency but also changes in the relationship between the landlord and tenant. Sayce
et al. (2009) highlighted the importance of the interface between these two parties and
investigated the ways in which this relationship is affected by their sustainability goals.
Hinnells et al. (2008) provided the basis on which traditional leases could be turned into green
leases establishing the landlord–tenant relationship. As interfaces between the two parties 39
become the focus of a green lease, the concept of “Interface Management” (IM) was used to
operationalize this research, as explained below.

Interface management
The term interface management became popular in project management literature through
the systems approach where an organization is viewed as a system of interdependent
sub-systems (McCarney and Gibb, 2012; Chua and Godinot, 2006). Accordingly, IM is defined
in this study as “the management of communication, coordination, and responsibility across
a common boundary between two organizations” (adapted from Chan et al., 2005, p. 646).
Chan et al. (2005) specify the basic elements of an interface as the “boundary” and the
“interdependencies” across it. Leases serve a regulatory role in the governance of the
landlord–tenant relationship through communication, sharing of information and
responsibility to achieve agreed targets (Janda et al., 2016). The landlord and tenant are
independent organizations with an agreed operational procedure to achieve these targets.
Therefore, the IM framework is integral to examining their relationships.
Interfaces between two organizations have been examined in various ways. According to
Chan et al. (2005), these taxonomies of interfaces can be summarized as shown in Table I.
Green lease typically demonstrates a contractual, physical and organizational interface
between the landlord and tenant suggesting the first category that is used by Pavitt and Gibb
(2003) is the most relevant to this study. According to Pavitt and Gibb (2003), contractual
interface comprises the relationships that govern the rights and obligations of the landlord
and tenant. Infrastructure that facilitates the performance of environmental obligations in a
green lease is considered to be the physical interface between the tenant and landlord. There

Reference Interfaces

Pavitt and Gibb (2003) and McCarney and Gibb (2012) Physical
Contractual
Organizational
Archibald (2003) Product
Project
Healey (2010) Time
Geographic
Technical
Social
Stuckenbruck (1983) Personal
Organizational
Systems
Morris (1983) Static
Dynamic
Chua and Godinot (2006) Internal Table I.
External Interface categories
JCRE are a large number of dimensions to the physical interface of a green lease. For example, GLS
19,1 requires a 4.5-star ABGR energy performance as well as separate metering for energy usage
monitoring. Generally, a property contains leased and base building spaces, the latter being
maintained by the landlord. Landlord responsibilities such as building management
systems, lifts, car park, communication, fire services, workplace health and safety, capital
works and minor works also will be a part of the agreed performance standards. Similarly, a
40 property could contain green-leased as well as non-green-leased spaces in a multi-tenanted
facility. The interactions among these physical spaces with regard to a building’s
environmental performance will also be part of the physical interface.
Tenant responsibilities such as maintenance, staff level equipment, lighting controls,
computer rooms, blinds, cleaning, storage and waste will also form a part of the agreed
performance standards. Management of changes to fit-outs and plants that have an impact
on energy efficiency performance is another component of the physical interface. When all
these dimensions are put together, the landlord and tenant become responsible for operations
of their respective obligations to achieve agreed outcomes. The organizational interface is the
people side of the green lease equation. It consists of interactions between the persons
representing the parties in fulfilling the lease obligations. The relevant stakeholders and
their responsibilities including the role of tenant and landlords’ energy representatives are
crucial for the functioning of this interface.
The environmental management plan (EMP), building management committee (BMC)
and dispute resolution mechanism are the functional apparatus that connects these three
interfaces into an operational structure as shown in Figure 1. An EMP sets out the
environmental standards that are targeted including the performance criteria for various
obligations. EMP establishes the link between the physical and contractual interfaces of a
green lease enabling both parties to commit to these standards. Standards related to utilities,
furnishings, cleaning products and practices are some of the items included in an EMP
(Oberle and Sloboda, 2010). GLS require a BMC to act as the link between the physical and
organizational interfaces of a green lease with agreed procedures for regular monitoring of
environmental obligations. GLS specify certain reporting requirements by the building
management staff for the BMC to review performance. Some of these reports include: tenant
and building owner fault reports; maintenance reports; building inspection reports; and
monthly building services testing. GLS also require a formal dispute resolution mechanism
as a means of linking the contractual and organizational interfaces of a green lease. It

Physical Interface

Environmental Environmental
Management Management
Plan Commiee
Interface Management
of Green Lease

Figure 1.
Conceptual framework Contractual Interface
Dispute Resoluon Organizaonal Interface
of IM pertaining to a Mechanism
green lease
includes remedial actions for non-compliance and clauses dealing with dispute resolution. A Implementing
dispute will first be reviewed by the BMC, and if the parties do not agree, then an expert will green leases
be appointed. The expert’s decision will be binding (Woodford, 2007).
Chua and Godinot (2006) provided a framework to manage these interfaces using five
strategies as shown in Figure 2. Based on this framework, a clear definition of the interfaces at the
beginning of the lease with precise technical terms will help its implementation. Visibility refers to
transparency across the boundary so that dependencies across the interfaces can be smoothly
coordinated. Communication is the very essence of an IM system and is vital if the green lease is 41
to be fully integrated. Communication in general occurs through quarterly meetings or other
established mechanisms. Monitoring of performance is a pre-requisite of the control strategy
which is mainly implemented through the BMC. Remedial actions and a dispute resolution
mechanism are essential to deal with interface issues. Therefore, a green lease should generate
data, enhance communication and visibility across the boundary, control interfaces and have a
dispute resolution mechanism in place to resolve differences.

Research method
This study approached the research topic by applying a qualitative method of inquiry. The aim
was to identify practices, drivers and barriers of green leasing in South Australia. Because of the
relatively limited adoption of green buildings in South Australia, a qualitative method was more
appropriate and enabled the collection of perceptions and experiences of those involved in green
leases through an exploratory approach (Du Toit and Mouton, 2013). For example, out of the 1,318
currently existing certified Green Star buildings, only 100 are located in South Australia [Green
Building Council Australia (GBCA), 2016]. Of these, 57 were five-star and eight were six-star
rated. Buildings which have been using green leases in South Australia were identified, and the
landlord and tenant representatives, leasing companies and property/facility managers of these
buildings were invited to participate in an interview survey. The intermediaries identified above
play a critical role in bringing the landlords and tenants together, and their inputs in this study
were very useful (Roussac and Bright, 2012; Bonde, 2012).
The first interviewee provided the reference for the next and so on, enabling a
snowballing effect to take place. This ensured that the interviewee had experience in green

Responses to
Interface Visibility Communicaon Control
Interface
Definion
Issues

• Establish the BMC • Commitment of • Awareness and • Separate metering • Idenfy risks that
structure, tenant and educaon of for tenant light and may impact on the
authority levels, landlord. energy saving power and central ABGR rang and
responsibility and • A mutual measures among services. ensure EMP
reporng obligaon to stakeholders. • Analysis and addresses each
structure. achieve and • Training for key management of risk.
• Determine the maintain the stakeholders. energy data. • Remedial acon for
role of the tenant relevant ABGR or • BMC meeng • Management of non-compliance.
and landlords’ equivalent minutes. changes to fit out • Dispute resoluon
energy performance • EMP and plant that clauses.
representaves in standard. performance impact on energy
energy • Energy data reports. efficiency
management. reports. performance.
• Establish KPI’s and Figure 2.
targets. Strategies to activate a
dark green lease from
Source: Strategies adapted from Woodford (2007) an IM perspective
JCRE leasing and was willing to participate in the study. However, this led to a small sample size
19,1 consisting of only eight interviews, four each representing the landlord and tenant
perspectives. Despite this limitation, deploying self-selected interviews yield valuable
results due to people willing to express their opinions and feelings about the research
questions (Seidman, 2006). As highlighted by Mason (2010), the size of the sample in
qualitative research becomes irrelevant because of the fact that the value of the study is
42 based on the quality of data. An equal number of interviewees representing the landlord and
tenant was very helpful in obtaining the opinions from both sides of the interface. Except
two, all other interviewees possess more than ten years of experience in the corporate real
estate sector with three belonging to an environmental role, three leasing and tenancies and
two asset services. Because the landlord and tenant representatives form what is called the
“middle actors” in the property market, their observations and opinions are very valuable for
evaluating the current practices as well as drivers and barriers of green leasing. Therefore,
the purposive sampling method was suitable and justified in selecting the interviewees,
whose profiles are shown in Table II.
The interviews were semi-structured, which allowed the participants to communicate
their opinions on green leasing freely and for the study to receive a well-rounded response as
suggested by Mitra and Wee Kwan Tan (2012). All interviews were conducted face-to-face in
the respondents’ workplace and were arranged through a pre-notification phone call. All
interview sessions lasted from approximately 45 min to 1 h and were audio recorded and
analysed using code-based content analysis. A coding procedure recommended by Bazeley
(2013) was used which involved three stages: developing codes, sorting nodes into tree of
nodes and constructing abstract codes. The interview questions were based on the
conceptual framework shown in Figures 1 and 2 on green lease IM and its strategies of
implementation. Interviewees were asked to provide their opinions based on professional
judgement with regard to the practices of green leases in South Australia on physical,
contractual and organizational interfaces. Views on interdependencies of these interfaces
representing environmental management plan, environmental management committee and
dispute resolution mechanism were also elicited from the interviewees. In these discussions,
the interviewees were encouraged to disclose the drivers and barriers of green lease
implementation. The next few questions were crafted based on the strategies and possible
issues, as highlighted in Figure 2, while probing the drivers and barriers emanating from
them. Furthermore, the interviewees were directly asked to comment on drivers and barriers
of green lease implementation in South Australia. The answers provided a wealth of
information with reference to practices, drivers and barriers of green lease implementation in
South Australia which are reported in the following section.

Results and discussion

Practices
Interface boundaries. The performance surrounding the three interfaces in the proposed IM
model was examined to understand the issues related to IM of green leases.
Interviewees commented on the physical interface of the green lease they have come
across as being very clear. They indicated that sub-metering was made available by the
landlord to monitor performance. Similar observations were made by researchers for
other countries, for example, Hinnells et al. (2008, p. 542) identified the changes in
metering obligations to be a positive move in the UK to “enable tenants to be more aware
of actual energy consumption and variations over time”. Interviewees agreed that
fit-outs can be ideally done in an integrated fashion with the agreement of both parties
because they cannot interfere with the landlord’s NABERS ratings. Fit-outs and their
Code Perspective Gender Description
Implementing
green leases
A Landlord Male The interviewee is a senior asset services operative of an
international commercial real estate company having a
branch office in Adelaide which provides specialist
services for South Australian clients. With about 15
years of experience, Interviewee A has been working
with green leases for a considerable period 43
B Landlord Female Interviewee B is working for an international real estate
agency having a branch office in Adelaide. With 12 years
of experience in the sector, the interviewee has extensive
involvement in green leases as a sustainability manager
C Landlord Male Interviewee C is working for an international real estate
consultancy company having its branch office in
Adelaide covering the South Australian region. The
interviewee possesses about 25 years of experience in the
commercial real estate sector working with many green
leases in recent times as the director of sustainability
D Landlord Female Interviewee D works for an international investment
management firm specializing in real estate with a
branch office in Adelaide. The interviewee is a director of
the office leasing team and has previously worked for the
South Australian Government having more than 13
years of experience in the leasing sector. Interviewee D
brings in a wealth of green leasing experience to this
study
E Tenant Female Interviewee E is an environmental advisor having five
years of experience in the same role working for an
international commercial real estate firm having a
branch office in Adelaide. The interviewee has worked
with many green leases in the past
F Tenant Male Interviewee F is a manager working for the South
Australian Government looking after government
tenancies and having about 11 years of experience in a
similar role. Interviewee F has extensive experience
dealing with green leases from a tenant perspective
G Tenant Male Interviewee F is a client manager for many government
agencies having tenanted space with private landlords.
The interviewee has worked in this role for about four
years and dealt with green leases lately
H Tenant Male Interviewee H is a senior asset planner of a leading
government agency having 27 years of experience with
four years in the current role. This interviewee brings in
a wealth of experience dealing with green lease for the Table II.
agency Profile of interviewees

impact on energy efficiency has been cited by past researchers as a barrier of

implementing green leases (Hinnells et al., 2008; Langley et al., 2008). Therefore, the
suggested approach is a win–win solution to both the tenants and landlords. Most
interviewees observed green leases did have a positive impact on occupants’
environmental behaviour in relation to the base building as well as non-green leased
spaces of a multi-tenanted facility. For example, landlord interviewee (A) commenting
on this highlighted, “So, it’s really developing that relationship and working together to
not only benefit the tenant, but the base building in that we can reduce our own energy
JCRE consumption”. Landlord interviewee B gave an example of this impact on non-green
19,1 leased tenants in their building:
[…] […] But I’ve also had some non-green lease tenants that haven’t got a green lease but want to
work on their energy efficiency. And that’s been really advantageous, because they don’t have a
lease that’s forcing them to do it, they’re choosing to do it themselves.

44 This spill-over effect is encouraging and seems to enhance the popularity of green leases.
The contractual interface of a green lease is construed by interviewees as ambiguous due
to there being different perceptions about what happens if one party does not comply with its
obligations. A landlord interviewee (C) explains this vagueness through his experience:
A green lease tries to promote a partnership. You try and achieve certain objectives such as
maintaining a NABERS rating. Generally they use the words “best endeavours” to try and achieve
those. There are some that I have been involved with which have penalties if you don’t achieve those
KPI’s.
The general view held by both the tenant and landlord interviewees is that this vagueness
creates a great level of uncertainty about how the contractual interface actually works.
The organizational interface of a green lease seems to work very well with all interviewees
agreeing on the effectiveness of data monitoring and sharing, EMP, BMC and the continuous
communications through meetings and other channels. For example, one tenant interviewee
(E) stated that “the data sharing is a big thing”. The organizational interface is critical for the
success of a green lease as past research has highlighted that it comprises in addition to
landlord and tenant, actors who are not part of the lease. According to Roussac and Bright
(2012), landlords often outsource facilities management and building operation functions
that results in a network of contractors and sub-contractors who are so remote to the lease
interface. Similarly, occupiers of the building are also remote from the lease interface that
they are not aware of the terms and conditions agreed upon by the landlord and tenant.
However, as observed by interviewees, dark green leases make the organizational interface
very clear and workable through an apparatus that links the other two interfaces very well.
Overall, interviewees confirmed the structure of the three interfaces to be operating well
in a green lease. The only concern was with the contractual interface where the effectiveness
of the safeguards preventing non-compliance of performance was queried.
Implementation strategies. The implementation of green leases was examined using the
five strategies discussed earlier (Figure 2). Interviewees agreed that green leases were driven
by tenants rather than landlords in South Australia, which is the general perception of others
such as Sayce et al. (2009), Roussac and Bright (2012) and Hinnells et al. (2008) for
Australia-based dark green leases. However, it is contrary to the findings of Janda et al. (2016)
where landlords seem to be in the vanguard of green lease implementation. The tenant-led,
compliant-based Australian model is not very conducive as landlords do not have the same
enthusiasm, and this could lead to IM issues unless the interface definitions, visibility and
controls are clearly explained from the outset. According to Janda et al. (2016), voluntary
involvement in an environmental programme similar to green lease is affected by external
factors such as regulation, economic and social as well as internal factors to an organization
that include management style, organizational culture and organizational structure.
Accordingly, large organizations having sustainability-friendly cultures, and the ones
affected by regulations are likely to subscribe to green leases.
Interviewees were highly satisfied with the interface definitions of the green leases they
have worked with. For example, a landlord interviewee (D) clearly spells out that “the ones
that I’ve seen that are done properly, and the ones that are really only done properly are the
commonwealth uses”. The relationship across the boundary was also found to be very
effective for most green leases, as observed by majority of interviewees. For example, one Implementing
tenant interviewee (E) had a very positive outlook on the relationship by admitting: green leases
I’m very biased because I need the data and I want to see the committees put in place. I would say
that it does give a common goal to reach, there’s a lot of pats on the backs and high fives. So, it can
be quite beneficial.
Interviewees highlighted the importance of visibility across the boundary to foster a long-term
relationship. A tenant interviewee (E) commented on the experience: 45
Building a relationship with the landlord and you tend to build environmental savings long term
[…] […] […].You’ve got that transparency between what the tenants are doing and what the
landlords are doing and how that will impact each other […] […].
Enhanced visibility inspires tenants and building operators to think beyond the green lease
and help improve the entire building’s energy efficiency. A landlord interviewee (A)
commented on the additional benefits to the landlord:
I guess that the major advantage is that if you’ve got staff in the building in the tenancies that are
thinking about energy efficiency, they also identify when they see things like the base building
lights on for longer than required out of hours. They might identify with places where you can cut
back your energy usage for the base building side as well as their own tenancy.
Literature shows visibility playing an important role, for example, in the UK to promote
energy efficiency through Energy Performance Certificates and Display Energy Certificates
which potentially creates a market for efficiency (Hinnells et al., 2008).
Communication is another factor all interviewees agreed on as being one of the most
important ingredients for a successful landlord–tenant relationship. All agreed that
communication in their respective green leases and the ones they have previously worked
was flawless. A landlord interviewee (C) put this very succinctly:
Any communication is good communication. If they’re both striving for the same sort of goal it is
positive. So, generally they are pretty good. I haven’t had any bad experience put it that way.
According to Langley et al. (2008), communication is three-way: the landlord and tenant
should exchange information regularly, whereas tenant–tenant communication in a
multi-tenanted property is also crucial. It also recognizes the role of facilities managers and
occupiers of the building and the need for communication among all these stakeholders.
All interviewees agreed on the need for proper control to make the relationships work. A
landlord interviewee (A) explained this control function using his own building:
The strategies are looking at firstly monitoring all the energy usage in the building and trying to find
areas where you can reduce those energy efficiencies […] […]. So, if they ever had a month where the
energy usage spiked they would try to explain where it was and to make sure that spike didn’t
continue on.
The majority of interviewees agreed that the control function is conducted by the BMC.
Those meetings were held regularly, mostly on a quarterly basis, ensuring collaboration
between the tenant and landlord to implement energy saving measures. The spill-over effects
of a such collaboration in achieving energy efficiency of the base building are also
noteworthy. For example, a landlord interviewee (A) commented on collaboration:
It also helped the building in reducing the overall energy usage. Because if they’re trying to reduce
their energy it has a good effect on the building in that we don’t tend to use as much energy in base
building as well.
JCRE The mechanism in place to respond to interface issues is very useful to settle disagreements
19,1 and to deal with non-compliance. However, this function is seldom used by the interviewees.
For example, a landlord interviewee (B) summarized: “We didn’t have any disputes in those
green leases. But I could see there could be issues if there was a dispute”. However,
interviewees disagreed on how tough the penalty clauses should be. Some interviewees seem
to be in favour of tough penalties, for example, as highlighted by one of the tenant
46 interviewees (G):
A penalty clause works if the building owner doesn’t achieve the 5 star NABERS energy, for
example, the next year the rent review will reduce from 3 per cent to 1.5 per cent, so that way it
encourages the building owner to meet the standard.
However, others seem to prefer milder options, thus encouraging mutual cooperation. A
tenant interviewee (H) explains their practice as an example:
There is no financial penalty on either party […] […]. So it’s done on a basis that we both want to
achieve the same final result. But there is a process built into the lease to say if we are not achieving
the result, then we get together identify the reasons why and then come up with an action plan.
The Sydney offices’ case study conducted by Janda et al. (2016) highlights a similar finding
that parties are hesitant to risk dispute resolution. It also emphasizes the importance of
having “good faith” obligations as even the legally binding agreements are difficult to
enforce. The GLS does not allow a formal process to be followed in case of dispute escalation
(Woodford, 2007). GLS allows an initial Remedial Notice and a subsequent appointment of an
expert to determine the issue (Woodford, 2007).
Past research has highlighted the importance of some of the above strategies for the
success of green leases. For example, Langley et al. (2008) studied 35 commercial tenants
operating from five buildings in the UK to identify issues in their current leasing practices
that inhibit energy efficiency. Lack of defined obligations and responsibilities, ineffective
communication and payment structures that inhibit tenants from conducting improvements
were the main reasons cited for those five buildings for not operating efficiently.

Drivers
Below are the four factors that were highlighted by interviewees to be the most significant in
driving green leases in South Australia.
Proactive government involvement. Interviewees contended that the involvement of
government as a regulator, facilitator and an important tenant in the market is a major driver
of green leases in South Australia. Interviewees were unanimous that green leases in South
Australia were mainly driven by tenants, the majority of these being government agencies.
One tenant interviewee (E) summarizes this observation:
Since its emergence it has definitely been driven by tenants, but more and more, over the last year
I’ve started to see landlords come to us and suggest that they want a green lease.
A landlord interviewee (D) confirming this observation highlights the reason why landlords
are not volunteering for green leases:
Generally they’re pushed by tenants, so it’s not something that a landlord would really volunteer to
do, some do, but for the most part they don’t volunteer to be part of.
Interviewees were very clear on the motivation to use green leases for tenants being the
government mandate, whereas for the landlord, it meant securing a long-term tenant. Similar
examples were cited in the literature, for example, the use of building regulations to drive
energy efficiency and carbon reduction is likely to happen in the UK for commercial new Implementing
build towards zero carbon by 2019 (Hinnells et al., 2008). green leases
Economic and environmental benefits. All interviewees agreed that the economic and
environmental benefits are driving green leases in South Australia. Tenant interviewees
were generally in agreement, as shown in the following statements: “there is a significant
reduction in energy costs” (Interviewee F); and “there’s a huge savings in outgoings”
(Interviewee G). One tenant (E), when asked if green clauses help with energy savings,
asserted that it does “one-hundred per cent”. The landlord interviewees provided more 47
complex views. For example, according to Interviewee C, “there is that hidden cost of
administration of the whole thing” – going on to say it diminishes the potential savings made
from energy efficiency. Overall, it is clear that there are savings to be made in energy costs
resulting from the clauses implemented by green leasing, and they are one of the main
drivers of its implementation. However, it is possible that this benefit may also be attributed
solely, or in part, to the impressive green ratings of the buildings themselves. There are
examples from past studies that show the economic and environmental benefits to be driving
green leases in other countries. A study by Langley et al. (2008) in the UK found that
improved energy and environmental performance is the main driver for adopting green
leases.
Tenant employee well-being and retention. All tenant interviewees indicated that green
leasing is related to an enhancement in the well-being and satisfaction of staff through the
maintenance of the green features, and it is a significant driver for increasing engagement in
a green lease. For example, according to Interviewee E, “those more energy efficient or
environmentally friendly properties if operated at their highest potential tend to have higher
retention rates and those key indicators of happier employees”. These observations were
repeated by all tenant interviewees. Note that there are some limitations regarding the results
for this driver. For instance, it is possible that other variables have an impact on whether
staff experienced increased well-being and happiness including the improved green star
rating or NABERS rating rather than the green leasing itself. The factors influencing staff
happiness are quite broad and varied. For example, one interviewee (Interviewee F) stated:
There were a lot of other influences that affected happiness and well-being. A lot of the people had
come from places where they had their own enclosed offices and then they went to open plan work
stations, which is a completely different style. So a lot of people didn’t like it that much.
Although there are arguments over the impact of green buildings on occupier performance
and well-being, past research has predicted that tenants would be willing to pay a premium
for high environmental performance. According to Hinnells et al. (2008) at least it could affect
the speed of let. Therefore, landlords cannot turn their back to the obvious benefits of
maintaining a building green.
Environmental leadership and corporate social responsibility. Another important driver
for implementing a green lease is tenants’ policy of environmental leadership and CSR.
Similar to well-being and staff retention, these sentiments were raised mainly by tenant
interviewees, for example, Interviewee G:
[…] […] . Government took on the policy of being more sustainable and our Premier certainly is very
driven in this area and is keen on seeing Adelaide being the first carbon neutral city, so for us that’s
fantastic. We all embrace it and the leasing team want to go down this path.
Although CSR is gaining momentum in the property market in Australia, many
developments could be found in other parts of the world, for example, Hinnells et al. (2008)
highlighted the change of mood among landlords and tenants with CSR being incorporated
in the United Kingdom’s Companies Act of 2006.
JCRE It is interesting to note a very high level of agreement among interviewees on these
19,1 drivers, empirically establishing their relevance to the South Australian context. Despite
issues with tenant-led green leasing in South Australia, the involvement of the government
was praised by interviewees as an example of bold leadership and trend setting. The study
by Hinnells et al. (2008) confirms this observation and concluded that the government could
play a major role in promoting green leases. Similarly, economic and environmental benefits
48 were highlighted by Bonde (2012) as a major driver of green leasing practices in Sweden. The
other drivers – staff well-being, retention and CSR – are very specific to tenants. According
to Kaplow (2008, p. 396), Fortune 500 companies in the USA have embraced corporate green
practices because they represent marketing and public relations opportunities and improved
employee recruitment, retention and productivity.

Barriers
Interviewees identified four barriers that are crucial in the implementation of green leases in
South Australia. These are explained in more detail below.
Lack of awareness. Misunderstanding and lack of awareness was expressed by all
interviewees irrespective of the divide as constituting a major barrier to the introduction of
green lease, particularly to a landlord. For example, one tenant interviewee (F) highlighted
this issue:
Lack of knowledge, like when you have Mum and Dad landlords, a lot of them get scared away from
green leases because they don’t know what they are and they don’t know what it means to them.
They don’t really appreciate the problem and the impacts it will have on them.
A landlord interviewee (A) expressed the opinion citing the main reason: “Because they
believe it’s going to cost them money and cause them issues, because they probably don’t
fully understand what a Green Lease is and what it does.”
Transaction cost. It appears that transaction costs of implementing a green lease are
hindering its widespread use. This concern was commonly articulated by all landlord and
tenant interviewees. However, interviewees’ perceptions on this factor varied significantly.
For example, a tenant interviewee (H) highlighted a strong sentiment relating to the current
economic situation of the state:
On the tenants’ side it is cost. If the market changes, like you have in Adelaide at the moment, bit of
a downturn, companies lay off workers, then the green may not be something which is up there in
importance.
Landlords were also worried about the transaction cost inhibiting the use of green leases. For
example, in the words of Interviewee C:
It does add on to cost. There’s quite a bit of administration to manage that lease. ⬍Interviewee
explains the process and the costs involved⬎ It does add cost to the whole process, so that’s why you
probably get people steering away from the green lease and that’s from both sides, tenant and
landlord.
Obligations and penalties. Having stricter obligations and resultant penalties were
highlighted by landlord interviewees as another barrier of introducing green leases among
landlords. Interviewee C very succinctly conveys the feelings of landlords as follows:
“Landlords would want as little obligation as possible”. Although this barrier is very
significant among landlords, it was not highlighted by tenant interviewees.
Differences in expectations. Very similar to the above barrier, this correlates with the
perceptions of the majority of landlord interviewees; as green leases are pushed by tenants,
it is not something that a landlord would really volunteer to do. Some do, but for the most
part, they do not volunteer to be part of it because all it does is place an obligation on them to Implementing
perform, and often there are penalties involved if they do not. For example, according to one green leases
landlord interviewee (D): “What is in it for the landlord other than securing a tenant?”.
Sharing the same sentiment, a tenant interviewee (H) observed: “Landlords are interested in
money, that’s what they are there for at the end of the day”, and the interviewee went on to
state, “they have to sell space, so if green sells space, then they will go down the green road”.
In summary, lack of awareness on green leases was the most critical barrier in 49
implementing green leases in South Australia according to the interviewees. According to
Roussac and Bright (2012), the content and structure of the agreement need to be understood
by the parties as well as other stakeholders. The landlords’ reluctance to embrace obligations
and heavy penalty is a symptom that landlords treat green leases differently from their
tenants. Tenants normally treat property as an operational asset, whereas a landlord sees it
as a physical asset (Janda et al., 2016). If there is no improvement to the bottom line, a landlord
will not be interested in the workings of the interfaces of a green lease. This shows the
limitations of dark green leases that have been pushed by the Australian Government
tenants which lack business appeal for widespread adoption, especially among landlords.

Conclusions
The purpose of this research was to investigate the practices, drivers and barriers of
implementing green leases in South Australia. Using the IM framework, the study
investigated the interfaces and operational strategies of green leases using semi-structured
interviews among tenant and landlord representatives. Except for the contractual interface,
the other two, namely, the physical and organizational interfaces, were found to operate very
successfully. Contractual interface was fraught with vagueness surrounding the remedy for
non-compliance of performance as landlords were hesitant to risk dispute resolution. The
study showed the value of interface definition, visibility, communication, control and dispute
resolution procedures for effective management of a green lease. The green leases in South
Australia were mainly driven by tenants with landlords and tenants having different
expectations. Lack of awareness and transaction costs were the main barriers identified by
the interviewees. The study also showed that the IM framework is suitable to analyse a green
lease from an operational perspective.
This study has many implications. Government involvement is highly appreciated by the
interviewees, and it should continue to play a critical role as a regulator, facilitator and user
of green leases. Because of numerous benefits and the push for mandatory disclosure
provisions by the government, green buildings are becoming a norm rather than a trend in
Australia. According to Green Building Council Australia (GBCA) (2013), the demand for
green commercial spaces continues to increase throughout Australia. However, some of
these buildings are not maintained as green buildings subsequent to commissioning. For
example, a 4.5 star ABGR-rated building was found to be operating at a 1.5-star level during
its occupation (Woodford, 2007). GBCA’s recent move to introduce a new certification for
operational performance highlights the importance of continuous maintenance of a green
building throughout its entire lifespan. Green Star-Performance v1.1 was released in April
2016 with credits awarded across nine impact categories, these being: management, indoor
environment quality, energy, transport, water, materials, land use and ecology, emissions
and innovation. Although green leases could play a major role in facilitating most of the
above categories, this operational standard unfortunately does not recognize the role of green
leases explicitly. Such recognition could certainly motivate green building owners to
implement green leases.
JCRE Government should also continue to lead as a user of green leases through the mandatory
19,1 provisions discussed in this paper. However, in addition to the current GLS-based dark green
lease, lighter shades should be introduced by the government. We see a high potential for lighter
shades for tenancies which are less than 2000 m2 and less than 2 years of duration. The spill-over
effects from GLS-based government tenants to the rest of the building were highlighted by
interviewees as an added benefit of hosting a green lease. The operators of base spaces, other
50 non-green lease tenants and occupiers could get motivated to be more environmentally conscious
by observing the green lease space. Green lease provides that initial push required to create an
environmentally conscious atmosphere among users and operators of a building irrespective of
whether they are part of a green lease or not. In the long run, there could be voluntary
participation from private sector entities if and when they see the benefits of a green lease first
hand. For such voluntary adoption to materialize, lighter shades of green leases should become
commonplace in the leasing sector. Lighter shades would also likely appeal to landlords,
small-scale organizations and non-prime office sub-sectors that are yet to embrace green leases.
From a transaction cost perspective, lighter shades would be more cost-effective and would
appeal to the private sector tenants and landlords.
Interviewees confirmed that preference for and against tough penalties was one of the
main contentions and an important impediment to landlords’ initiating green leases.
Nevertheless, tough penalty clauses were often being watered down to “best endeavours” in
real practice, and not knowing the meaning and the way this would be interpreted
subsequent to a non-performance creates uncertainly among stakeholders. One of the major
differences between dark and lighter shades is that the latter does not emphasize formal
compliance using overly strict dispute clauses. Such “good faith” agreements are likely to
attract landlords who are not willing to lock themselves into formal arrangements.
Although government intervention and spill-over effects are quite useful in promoting green
leases, interviewees have clearly demonstrated that they are not widespread in South Australia.
Interviewees asserted that there is a clear lack of awareness about green leases in the real estate
community. To foster a culture of environmental consciousness, training programmes could raise
awareness of the entire industry so that it is transformed from a state of “unaware” to “aware and
active”. Lack of awareness could also be overcome by active promotion of green leases among
various intermediaries in the real estate industry and through education.
For researchers, these findings provide further avenues for investigating the interactive
effects among the three interfaces using additional empirical research and qualitative
modelling techniques. In particular, given the conflicting concerns raised by the interviewees
on the role of the dispute resolution mechanism, one of the possible avenues is to examine the
impacts of lighter shades of green leases on the landlord–tenant relationship. Although
transaction cost was identified as a barrier, very little information is available on its details
and the magnitude. Therefore, further research is needed to explore the intricacies of
transaction costs related to a green lease. The IM framework is an ideal tool to venture into
such investigations as it provides a conceptual foundation encompassing all facets of a green
lease. Based on the implications drawn, the findings of this study have the potential to
influence policy and thus to increase the likelihood of green lease adoption by tenants and
landlords.

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Corresponding author
Raufdeen Rameezdeen can be contacted at: [email protected]

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