Healthy building, healthy bottom line
How investing in a healthy indoor environment can increase asset value
What’s the Point?
Not surprisingly, the COVID-19 pandemic—and in some regions, the rising incidence of wildfires—accelerated already-growing interest in indoor air quality and overall workplace health. In fact, employers have found that investing in workplace well-being can produce significant returns, not only in employee satisfaction and productivity, but also in talent retention. Major corporate occupiers increasingly seek buildings that are designed to foster well-being while also conserving resources. Building developers and owners are responding in force.
Occupiers, employees alike prefer the healthy building experience
In communities affected by wildfires or other sources of air pollution, a corporate office may be equipped with robust systems for controlling indoor air quality.
Entering Hines’ One Museum Place in Shanghai, a visitor will likely relish the stunning interior architecture—but also appreciate the prominent real-time LED display of indoor and outdoor air quality ratings. The landmark building offers the cleanest air commercially available, with precisely monitored and controlled temperature, humidity and filtration systems. Air quality is kept in continual check by a full-time, on-site air quality manager using technology related to the building’s RESET® clean indoor air certification.
Indoor air quality is a key metric for occupiers in China, and One Museum Place’s certifications and air quality display provide much-needed assurance. One Museum Place, which was awarded a 2023 GRESB 5-star rating, also holds the International Well Building Institute’s WELL Platinum designation—an important designation for employers who value employee health and wellbeing.
Healthy building designations become more prominent
While health-focused building certifications are not yet as established as the leading sustainability designations, many property developers and investors are pursuing health-related certifications to meet tenant expectations. For example, many Hines properties have WELL or Fitwel certifications.
Hines became a Founding Alliance Member of the Well Living Lab back in 2017, alongside the International WELL Building Institute™ (IWBI) and other leading organizations, to support further study on indoor health factors. A collaboration between Delos® and Mayo Clinic, the Well Living Lab is expanding on the IWBI’s work behind the WELL Building Standard™ (WELL), which focuses on air, water, nourishment, light, fitness, comfort and mind. Hines also collaborated with the IWBI in developing the WELL Portfolio™ certification and was an early adopter of the WELL at Scale program in the Asia Pacific region to streamline the adoption and recognition of WELL features across a commercial property portfolio.
Investors recognize wellness certifications
For property investors, certifications make it easier to compare buildings’ wellness bona fides. These certifications have been proven to help retain tenants and increase asset value. For example, a 2022 study in Journal of Building and Environment found that WELL Certified buildings report improvements in overall occupant satisfaction of nearly 30%.
A 2021 Massachusetts Institute of Technology Real Estate Innovation Lab study found that effective rents at WELL- and Fitwel-certified buildings in 10 major American cities earned a 4.4% to 7.7% rent premium. IWBI’s 2022 review of 60 studies found that spaces with health-focused attributes average lease terms of 88.3 months, versus 75.3 months for non-health-focused space.
Furthermore, IWBI’s 2022 research review found that a high-performing healthy building yields a net present value (NPV) of $21,172 per employee, or $115 per square foot, over 10 years, assuming a conservative $20 per-square-foot cost premium based on benefits related only to productivity, retention and well-being. A company with 100 employees would see a $2.1 million NPV over 10 years; with 1,000 employees, the NPV would be more than $21 million.
Certifications programs such as LEED, which can include healthy building components, can increase return on investment even among buildings that have high ventilation rates and low levels of carbon dioxide and volatile organic compounds before certification, according to a landmark cognitive impact study
from Harvard T.H. Chan School of Public Health. The researchers speculate that the steps required to achieve green building certification not only reduce energy consumption and support other sustainability goals, but also have a measurable, positive impact on employee performance and well-being.
GRESB is partnering with IWBI to improve reporting and disclosure of data relating to health, equity and well-being and other key factors to advance social sustainability.
How to target healthy building investments
Increasingly, investors and developers—including Hines—are pursuing high-performance buildings that achieve both green and wellness certifications. To uncover which areas of investment in healthy workplaces are most rewarding, IWBI analyzed specific health and wellbeing design elements in the context of property income and value.
For instance, IWBI’s 2022 study found that green spaces—whether living plant walls, outdoor garden spaces or everything in between—create a 5.6% to 7.8% rent premium, while spaces with high levels of daylight achieve a 5% to 6% rent premium. In addition, IWBI found that high walkability, where neighborhood schools and local amenities are easily reached on foot, improves property values by 1% to 9%, depending on the property type. In a separate study by American Realty Advisors, buildings with the highest walkability scores achieved a 54% per-square-foot sales premium over the prices of comparable buildings sold during the same period.