Here’s the good news: tenant permission isn’t (necessarily) a barrier to shadow metering. Here’s why.
In triple net leases, where tenants pay the bills and operate the buildings, it’s natural to wonder whether deploying shadow metering is permissible. (Not sure what shadow metering is, check out our ‘What is Shadow Metering’ article here.)
The truth is, there’s no definitive rule permitting or forbidding shadow metering.
At the same time, we don’t have to be fully reductive and claim that each scenario depends on the specific lease.
Through experience deploying this technology in tens of millions of square feet, we have seen patterns that are worth sharing.
The View of the Bulls
Those who deploy at scale operate under the premise that, ultimately, it’s the landlord’s asset.
Even though tenants are responsible for operations and maintenance, landlords maintain the right to upgrade or adjust their assets.
Many point to the fact that it's typical to install submeters if a tenant installs any electrical equipment that may overpower the supply, or that no one blinks when turning a single tenant property into a multi-tenant one and adding metering.
A critical thing to understand about shadow metering is that it’s generally less invasive than these examples.
In our experience, 0% of the time when capturing gas data, does anyone need to get physical access to a tenant space. Only 20% of the time is entering a tenant space necessary to capture electric data.
Obviously, when energy regulations are in play, that helps the case, but many of the “bulls” are comfortable with giving the tenant notice that they’re implementing energy efficiency upgrades.
A big reason here is that these upgrades benefit the tenant directly. As long as the data being captured during shadow metering is valuable to the tenant, they don’t see any reason to not proceed.
In our experience, tenants won’t have a problem with installing shadow meters when it’s positioned as a benefit to them.
Highlighting that they gain access to insights that optimize energy savings and cut costs, as well as services that can earn them money. They also no longer have to deal with being chased for their utility data.
The View of the Bears
In reality, we’ve found that only a small percentage of tenants have hesitations.
Nevertheless, here are some practical tips to help progress scenarios where there is hesitation around tenant permissability.
One best practice is to add smart metering clauses to green leases. 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.
Even when a green lease isn’t in place, more often than not, a simple conversation eases a tenant's uncertainty around shadow meters. It’s pivotal to help them fully understand that the value of this solution is not just for the landlord but for the tenants themselves.
In the extremely bearish camp, some sustainability teams believe that they are not permitted to set foot on site at all.
In fact, there are several reasons why landlords routinely visit a tenant’s property. This can be to confirm maintenance, for lender inspections (which equity and debt lenders have the right to), or to market a space they want to lease.
The Edge Cases
Everything mentioned above covers the vast majority of lease agreements.
However, there are cases of tenants—often larger corporations that are incredibly sensitive regarding data —that don’t want to give access to their utility bill data for privacy reasons.
Ironically, these companies also typically have aggressive net zero goals and stand to benefit the most from the byproduct benefits of shadow metering.
In our experience, this is not a deal breaker, but simply an extra hurdle.
Oftentimes, these tenants will make the technology vendor jump through hoops and enforce rigorous protocols to ensure their data is safe.
Here’s where the devil is in the details for shadow metering providers. While devices can be installed by many, only companies with DNA as data and analytics companies.
At Enertiv, our entire business revolves around the security and quality of our clients' data and we deploy dedicated cellular networks protected by end-to-end encryption, ensuring robust security and compliance with data privacy standards.
The Bottom Line
The truth is, even after you demonstrate to tenants the benefits of shadow meters, the money they’ll save, and how their data will remain secure, there might still be some who won’t budge and put up enough of a fight to make it not worth it.
At scale, we’ve seen this can be expected in about 2% of properties. Given that, it’s important to keep the eye on the prize and realize the benefits of dramatically increasing the portfolio’s data reporting, as well as tenant engagement.
Tenant permission is not a barrier for shadow metering. Industry peers are blazing forward, and, at least in terms of GRESB, if you’re standing still, you’re moving backward.
Even if you can’t get 100% of your portfolio to adopt shadow metering, concerns about permissibility shouldn’t slow you down.
