Kennedy Associates: Setting the Bar for Tenant Improvements

To tackle this dilemma, Kennedy Associates, a Seattle-based commercial real estate investment advisor, partnered with NEEA's BetterBricks initiative to develop a Sustainable Tenant Improvement (TI) Manual. By establishing minimum green requirements for all TI's - and providing extra suggestions for tenants that want to go above and beyond - the manual enables Kennedy's asset management team to both maintain and improve  sustainability over time.

With over $2 billion worth of LEED-certified assets and one of the first portfolios in the country to proceed through the USGBC's volume certification program, Kennedy is well aware of the market's demand for LEED certification. As such, the TI Manual aligns with two rating systems - LEED for Commercial Interiors (LEED CI) and LEED for Existing Buildings: Operations & Maintenance (LEED EB: O&M). The first can help facilitate certification of the tenant space for those tenants that wish to pursue it; the second ensures that new or renewed leases in EB: O&M certified buildings are adhering to the buildings' documented efficiency standards. "For both LEED certified and non-certified buildings," said Christian Gunter, Kennedy's VP for Responsible Property Investing, "the TI Manual establishes a core set of practical, cost-effective strategies related to energy, water, materials, and indoor environmental quality, while providing key technical assistance resources."

Kennedy has established itself has a leader in Responsible Property Investing (RPI), which considers the environmental and social aspects of property development and operations in addition to typical financial considerations. With the TI manual, Kennedy promotes RPI by proactively engaging its tenants. Because a basic level of sustainability is inherently going to be part of their TI, it gives tenants the opportunity to occupy sustainable space and demonstrate market leadership without the burden of additional costs. "We can say to prospective tenants, 'You know that when you lease space in one of our client's properties, you're not only getting a green building that is healthier and more productive for your employees, but ultimately becoming a partner in making green a reality,'" said Christian.

"The manual is a quality control tool for asset managers, property managers, tenants, and legal counsel," said Jack Davis, Market Manager for NEEA's BetterBricks office building initiative. "It sets the bar high for the portfolio, aligns with other Kennedy policies, and delivers on Kennedy's promise of a superior product." Kennedy's green lease model already requires that tenants implement certain sustainability measures, including pursuing LEED CI in certain cases; now, with the TI Manual, Kennedy asset managers have a clear, consistent way to explain these requirements to new and existing tenants and their lawyers as they work through the lease terms. The manual also gives team members involved in the TI process a better understanding of what's expected of them - and where they may need to develop additional expertise.

To support both the successful development and implementation of the TI manual, Kennedy formed a Sustainable TI Committee composed of Kennedy asset managers and sought insight from other experts in sustainable TI's. As they pilot the manual, they'll collect data along the way about what works and what doesn't, and incorporate those lessons-learned at other properties in the portfolio. Meanwhile, the team will look at developing supplemental resources like construction contract language, product specifications, and case studies - which are already in high demand.

To advance the practice of sustainable TI's throughout the real estate community, the Kennedy Sustainable TI Manual is being made available to the public via the BetterBricks website.

Download Kennedy's Sustainable TI Manual.