Local realty firm wins national recognition as 2015 Green Lease Leader

The historic Detroit Warren BuildingThe historic Detroit Warren Building

NEO Realty Group, LLC does not tout itself as one of the area's largest or most influential real estate firms.

"We're a local company," says Brant Smith, a managing broker for NEO. "We're in secondary markets," he adds, tagging Lakewood, Akron, Willoughby and Mentor. "We're in small- to medium-sized buildings." Most of the rental spaces the firm manages are 1,000 to 5,000 square feet.

Operating on a smaller scale, however, hasn't stopped NEO from applying comprehensive energy savings strategies that garnered the attention of the Institute for Market Transformation (IMT) and the U.S. Department of Energy's Better Buildings Alliance, which designated NEO as a 2015 Green Lease Leader at the Better Buildings Summit in Washington, D. C., earlier this year.

Green lease?

"A green lease is an energy-aligned lease that tries to bring together different concepts and ideas related to sustainability and energy efficiency," explains Smith.

Components include paying close attention during buildouts and upgrades by using low VOC paints (think lower odor and pollutants), window films, reflective roofing, flooring approved by the Forest Stewardship Council, LED and fluorescent lighting systems that adjust when natural light is abundant, low-flow commodes and faucets and perhaps most importantly, highly efficient heating and cooling systems monitored by digital systems that adjust heating and cooling when spaces are unused.
<span class="content-image-text">Brant Smith</span>Brant Smith
"You start combining those things and they really do add up," says Smith, noting that NEO often tracks energy savings of 30 to 40 percent.

Those numbers aren't pulled from the air. NEO has partnered with New Ecologix LLC, which performs energy audits and analyses on the firm's spaces. They use the resulting figures to construct clauses in leases that outline energy-saving commitments from both the tenant and the landlord. Industry insiders refer to the practice as overcoming split-incentives.

An explanation per the IMT:

"Traditional leases separate costs in a way that discourages landlord and tenant collaboration, while creating what is known as the 'split-incentive' problem: landlords have no incentive to improve the energy efficiency of their building, while tenants bear the brunt of wasteful and poorly performing building systems (AC, heating, etc.).

With a modern, green lease, both landlord and tenant have incentives to invest in long-term, energy-efficient solutions. These sorts of investments are what you would see in today’s modern, green trophy office buildings."

Smith believes that NEO's efforts to quantify green practice and adopt green policy by way of their leases is what set the firm apart and helped to garner the 2015 Green Lease Leader designation.

"They were intrigued and impressed by what we were doing here in a secondary market in the Midwest with small- to medium-sized businesses," says Smith.

For an example, Smith points to the firm's centerpiece holding, the historic 1923 Detroit Warren Building in Lakewood. How does he view the challenge of transforming a nearly 100-year-old building into a green property?

"It's a huge opportunity," says Smith. And one NEO has taken hearty advantage of: the firm has reduced common area utility usage by 41 percent courtesy of upgrades to the lighting and HVAC systems and elevators.

Smith and the NEO team, however, view their green aspirations on a broader scale.

"Having good community relations and maintaining our buildings so we add to the vitality and livability of the cities we're in, that's the people side of it, the social side of it. It's a fundamental core part of our business," says Smith, adding that NEO aims to nurture the "triple bottom line" of people, planet and profit.

"We don’t view ourselves as landlords. We view ourselves as stakeholders in the community."

Erin O'Brien
Erin O'Brien

About the Author: Erin O'Brien

Erin O'Brien's eclectic features and essays have appeared in the New York Times, the Los Angeles Times, the Cleveland Plain Dealer and others. The sixth generation northeast Ohioan is also author of The Irish Hungarian Guide to the Domestic Arts. Visit erinobrien.us for complete profile information.