Shadow metering isn’t free. Rolled out across a portfolio, it can cost hundreds of thousands—or even millions—of dollars. But the issue isn’t the price tag. It’s that most real estate teams don’t know how to think about it, particularly relative to triple net tenants.
It’s not traditional capex. It doesn’t slot cleanly into traditional CAM buckets. And it’s not always written into the lease. So some teams get paralyzed—not because it lacks value, but because the budgeting playbook isn’t obvious.
That’s a miss.
Because while the value to landlords is automation and data coverage—streamlining data collection, avoiding tenant bill chasing, and simplifying ESG reporting—the value to tenants is direct. Shadow metering helps them reduce baseline energy costs, shave peak demand, and access additional energy services.
How do you budget for this? It’s the classic split incentive. Here are three common strategies we see to budget for shadow metering, why they work and how to deploy them.
Three Ways Landlords Are Covering the Cost
1. Specific Green Lease Clauses
The cleanest way we see clients budget for shadow metering is to pass the cost through using green lease provisions.
Green leases are increasingly common in institutional portfolios. They align landlord and tenant on sustainability, and often include language around data sharing and recovering costs for equipment upgrades.
But many are not directly adding clauses for shadow metering specifically.
In our recent podcast with Leslie Moore, SVP and Director of ESG and Corporate Operations at LXP, an industrial REIT, she shares insights on implementing green lease language, not just for data sharing, but deploying shadow metering technology.
Leslie shares, “We’ve been really successful getting that provision in our leases. Standard operating for us is that every time we’ve got a new lease or an amendment, we try to insert that language if it doesn’t already exist. I would say it’s been fairly easy to get that language in. I think tenants have gotten to the point where they’re not surprised to see it.”
Interested in learning more? Watch the full podcast episode here.
The only challenge here is that green leases often require waiting until leases are renewed or new tenants come in, which can take many years.
2. Including It in CAM (Common Area Maintenance)
For landlords who don’t have green lease language specifically for shadow metering in place (the majority), the most common path is including shadow metering costs in CAM.
As mentioned, it doesn’t fit cleaning into the primary CAM buckets of admin, management fees, leasing expenses, repairs and maintenance, utilities, taxes or insurance.
But, according to IREM, landlords charge, on average, another 14 cents per square foot for “OpEx - other” out of the $3.03 total for CAM.
Now, adding a penny to CAM (3% increase) is not nothing, but it does not typically raise eyebrows.
That is, as long as the project is framed correctly. We covered in depth how to address permissibility and tips on how to clarify the value to tenants.
To be clear, it is much easier to pass down costs when tenants can expect to see outsized benefits. Many tenants see 5-10X returns on the added costs to CAM.
This is the most common strategy, but there are situations where CAM budgets simply cannot take any additional costs, even if there is a return on investment.
3. Using Corporate ESG or Innovation Budgets
Costs are not always passed down to tenants.
We have seen some cases where owners / asset managers have a corporate ESG or innovation budget.
Obviously, this requires a strong business case internally to have budget allocated.
This usually centers around connecting shadow metering to the highest priorities for the portfolio, such as:
- Increasing GRESB ratings to access institutional capital
- Lifting the brand in the eyes of tenants, leading to better retention and leasing efforts
- Driving decarbonization outside of landlord-controlled operations
The benefits here are obvious. Evaluations can be made in a much more straightforward manner; there is no need to look into any specific property’s operating expenses and CAM.
And so, while this might be the most challenging route to pursue, the payoffs can be worth it from a speed and scale perspective.
What About Tenant Objections?
In reality, we meet with tenants every week to introduce insights that come as a byproduct of shadow metering. Many landlords would be shocked to hear their sentiments:
“What’s the catch, this sounds too good to be true.”
“It's definitely interesting to have a landlord who wants to be on this journey with us.”
"We've looked into installing metering ourselves, but we don't have the analytical capabilities to take advantage of the data.”
When the benefits are clearly articulated, in our experience, about 2% of tenants continue to put up major objections to absorbing the costs.
Let them see how the information can help them catch waste, avoid overcharges, and validate internal sustainability goals. When tenants understand that the meter isn’t there to surveil them—but to save them money—they usually get on board.
Final Thought: Budget Is a Framing Problem, Not a Barrier
Shadow metering isn’t something to do “when there’s extra budget.” While it might not be the right solution for any given portfolio or property, the budgeting for it should not be a major blocker.
The cost is real. But landlords have real tools to cover it:
- Green lease clauses that enable clean pass-throughs specifically of shadow metering
- CAM allocations along with framing of the benefits tenants will see
- Central ESG budgets where priorities align with the corporate level
When used well, those tools unlock a platform that automates data collection for owners and delivers meaningful value to tenants.
