The tenant pays for any increases in later years, said Sally Musso, director of asset services for CB Richard Ellis. Most landlords assume that the current crisis will probably end within two years, with prices dropping. So using 2001 as the base year could obligate landlords to foot the tenant's electric bill throughout the lease. Consequently, landlords have been writing leases where the base is the average of the last few years. Or they find some other way to cap payments.
Demand is strong and supply is fairly limited, so landlords are able to get new tenants to agree.
Many landlords installed energy-efficient measures to satisfy modern building codes when they built, noted Kevin Ramos, head of Buzz Oates Real Estate. Another threat facing landlords is tenant fears that rolling blackouts will extinguish their computers or manufacturing equipment. Some tenants are insisting that landlords give them backup generators. As a result, some commercial building landlords are eyeing land now used for parking. The question is whether they should install generators there, sacrificing the parking that tenants might also want.