In Oregon Lease Renewal, New York-Based Tenant Negotiates Green Building Upgrades

Welch Allyn, a New York-based manufacturer and distributor of medical supplies, was recently able to capitalize on the soft commercial real estate market by negotiating green building upgrades in connection with a 100,000-square-foot office renewal in Beaverton, Oregon.

Welch Allyn OR Lease

Welch Allyn, a Skaneateles, New York-based manufacturer and distributor of medical supplies, purchased Protocol Systems in 2000. Since then, it’s leased 100,000 square feet of space in Beaverton, Oregon from PS Business Parks, which owns over 27 million square feet of office and industrial space across the country. In 2009, when its lease came up for renewal, the company was able to capitalize on the soft commercial real estate market by negotiating nearly $1 million in base building upgrades that should result in – at the very least – a Silver rating from USGBC under the LEED for Existing Buildings: Operations and Maintenance rating system.

“It was the worst business climate possible (in 2009), so building owners everywhere had to be as receptive to the terms in a long-term lease as they would ever be,” Peter Murray, vice president of operations at Welch Allyn and site executive for the Beaverton office told the Oregon Daily Journal of Commerce. “They knew they’d have to make these investments, even though getting a client to stick around for a certain price level is not a straightforward (return on investment).”

Specific retrofits that Welch Allyn successfully negotiated with PS Business Parks included the replacement of the building’s 28-year-old HVAC system, new lighting systems, and plumbing upgrades that are projected to save over 465,000 gallons of water annually. The tenant also created its own internal “green team” that monitors utility bills and banned personal space heaters (which were adding $20,000 to annual energy bills). The team continues to encourage behavior changes and promote ideas for new cost-saving projects.

Although it’s unclear how the landlord’s obligation to perform the retrofits was incorporated into the lease documents (if at all), the project demonstrates that economic conditions remain ripe for commercial office tenants to use both base building improvements and LEED certification as a tool in lease negotiations.

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