Whether you like them or not, electric vehicles are poised to be a big part of our future. The industry is growing, driven by legislation at all levels of government aimed at using less fossil fuels and more alternative energy. Last year, EVs made up 10 percent of all cars sold, a record high. In California, all new cars sold in 2035 and after are required to be zero-emission vehicles like EVs. With so much growth expected in the industry, building owners and city officials are planning ahead by adding charging stations in order to accommodate future demand. For office landlords, the importance of EV charging facilities is finding its way into leases too, as many occupiers are now looking to include language about charging stations in their leases.
The demand for EV infrastructure is high not just in the U.S. but around the world. More than 40 percent of companies in North America, Europe, the Middle East, and Africa are seeking to include EV charging stations in future leases, according to JLL. Adding language around charging stations can help both landlords and occupiers meet ESG goals and support green building certifications. This is just another example of what’s known as green leases. These kinds of leases, while not entirely new, are becoming increasingly popular. More green leases could have a huge impact on the office market, with the potential to save up to $3.3 billion in annual costs, according to a report from the Institute for Market Transformation. In addition to EV charging stations, other kinds of green lease clauses could include agreements between the tenant and landlords around things like energy efficiency, water conservation, and the design and construction of an office space.
As the market for EVs continues its rapid growth, demand for EV charging stations in office buildings is growing too. Paulina Torres is a researcher at JLL who recently authored a report on green leasing. In her research, she’s seen office tenants looking for space turn down a building because they didn’t have enough EV charging stations or none at all. In a recent survey by JLL, occupiers were asked what sort of lease clauses they were including in leases already, and what kinds of ESG priorities they planned to include in the future. The responses showed that EV charging was the least likely to be included in current leases but the most likely to be included in future leases. “That carries countless implications on how landlords and tenants need to engage with each other,” Torres said. With so much demand expected for EV charging in leases, tenants and landlords will need to work together on carving out the details. Both parties will need to work out what exactly installing EV chargers will entail, including things like capital expenditure requirements, in the lease. “All these nuances need to be discussed and agreed upon in the lease and really play a greater role in RTO strategy, where it can be a way to enhance the attractiveness of a property,” Torres said.
As more tenants look to include EV charging in leases and meet ESG commitments through their real estate, green leasing can make a big difference. Among the findings from JLL’s report was that about 34 percent of occupiers currently implement some form of green lease language in their leases, but that number is set to double. Torres believes the green leases of the future should evolve to be less compliance-based and centered on a single leasing event to ones that focus on an ongoing collaboration between owner, occupiers, and any third-party stakeholders. “Green leasing should be more of a verb, an ongoing action instead of a single event,” she said. Industry groups like the Building Owners and Managers Association (BOMA) offer helpful examples of what a green lease may look like, adding additional “green” clauses and language to a typical lease. For electric vehicles in particular, language should be included that details what percentage of parking space should be reserved for hybrid and electric vehicles and how costs will be shared for the installation, maintenance, and upkeep costs for the chargers.
Putting more charging stations in commercial buildings has gotten a lot of support over the last decade. In 2013, the Department of Energy launched a program to encourage more employers to provide charging stations at workplaces. The DOE partnered with hundreds of companies around the country over the course of four years, and it resulted in a host of best practices, templates, and tools that have been made available to anyone interested in workplace charging. Installing chargers in office buildings can also contribute to green building certification through a charging station credit. The programs that recognize this include LEED, ENERGY STAR, and Sustainability Tracking, Assessment & Rating Systems, or STARS. And last year, the Inflation Reduction Act passed by Congress restored expired tax credits for installing EV chargers in homes and businesses. The credits can be used for up to 30 percent of the costs of EV charging equipment and installation.
At the city and state level, lawmakers are paying attention to the issue too. In California and Washington, building codes already include clauses that properties be “charger ready,” according to BOMA, and more states are soon to follow. New York and several other states are looking to increase EV adoption and are expected to modify their building codes to reflect it. In New York City, legislators recently passed an ordinance that requires a minimum of 20 percent of parking spaces in new construction open lots to be ready for EV charging. As part of its comprehensive transportation plan, Go Boston 2030, the City of Boston released a how-to guide for starting an EV workplace charging program. Even major oil companies like bp are getting in the EV game. Earlier this year, bp announced it was investing $1 billion in EV charging stations across the U.S. by 2030. The company is partnering with rental car company Hertz, which is aiming to make one-quarter of its fleet electric by 2025, in the initiative.
As we’ve seen from last year’s record number of purchases, the EV wave is already happening. Both landlords and tenants should be prepared. Lease language is an important part of the growth in electric vehicle use and spelling out all the details on EV charging stations in a green lease will be crucial for landlords and office tenants. Fortunately, there are a lot of industry resources and examples available that both can look to for guidance. Since not all office properties offer charging stations yet, these kinds of facilities can be an added draw for office tenants. They can also help contribute to a property’s green building certification. It will take some real communication and collaboration between landlord and tenant to ensure it’s done right, but the extra effort could pay off if EV adoption happens as quickly as some are hoping.