Class-A office buildings typically pass operating expenses (including electricity) to tenants pro-rata under triple-net or modified-gross leases. Locking the building supply rate cuts the energy line of the OPEX by 8 to 14 percent. The savings pass to tenants and reduce CAM (Common Area Maintenance) reconciliation surprises. Some leases require landlord-tenant alignment on supplier choice — the split-incentive problem.
The pass-through mechanism
Class-A office leases typically pass operating expenses through to tenants as part of CAM charges. Electricity is one of the largest pass-through items, typically 12 to 22 percent of OPEX.
Landlords control supplier choice. Tenants pay their pro-rata share regardless of what supplier the landlord picks. Locking at the landlord level cuts the entire OPEX line for all tenants.
The split-incentive problem
Landlords have no direct incentive to lock the lowest rate because the savings pass to tenants, not the landlord. Some landlords therefore stay on the utility default with no shopping.
Green-lease standards address this with shared-savings frameworks. The landlord captures 25 to 50 percent of the savings as incentive payment, and tenants get the rest as reduced CAM.
Lock the rate before the next reset.
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Further reading