Unlocking the Benefits of Healthy Buildings: From Certification to Satisfaction
In the competitive world of commercial real estate, property managers are always looking for ways to enhance property value, attract high-quality tenants, and ensure long-term profitability. One strategy that has gained significant traction is obtaining healthy building certifications, such as WELL Certification and Fitwel Certification.
WELL Certification, spearheaded by the International WELL Building Institute (IWBI), focuses on enhancing human health and well-being through building design and operations. Fitwel Certification, led by the Center for Active Design (CfAD), aims to optimize buildings to support occupant health and productivity. Each certification program is a globally recognized standard for building design and has its unique strengths and methodologies. Learn more at IWBI's website and Fitwel's website.
Both certifications share a common goal: to create spaces conducive to human health and indoor environmental conditions that are prepared for future challenges. These certifications not only contribute to the well-being of occupants but also offer significant financial benefits. This blog explores the evidence supporting these advantages, highlighting key studies and real-world examples to demonstrate the value of healthy building certifications for commercial real estate, making it highly relevant and informative for property managers.
Increased Rental Income
Healthy building certifications have a proven track record of driving higher rental incomes. According to a 2021 study by the MIT Center for Real Estate Research, buildings with WELL or Fitwel certifications can command a rental premium of 4.4% to 7.7% over non-certified buildings.[1] This is due to the growing demand from tenants for workspaces that prioritize health and well-being, making them willing to pay higher rents for such environments.
Enhanced Tenant Satisfaction and Retention
For property managers, tenant satisfaction and retention are critical metrics. A 2022 study published in the Journal of Building and Environment found that WELL Certification significantly boosts occupant satisfaction and well-being. The research, which compared pre-and post-certification data across multiple office buildings, showed a nearly 30% improvement in overall occupant satisfaction and a 26% increase in well-being scores. [2] These enhancements directly impact tenant retention, reducing turnover costs and ensuring stable rental income. Further supporting these findings, the International WELL Building Institute (IWBI) has released numerous studies and reports demonstrating the benefits of WELL Certification. [4; 5] For instance, a comprehensive study titled “How WELL Certification Pays Back: A Study of Four Buildings” found significant economic benefits, including higher rental income and increased property value, alongside improved employee satisfaction and productivity. [4]
Improved Market Perception and Property Value
Healthy building certifications also enhance a property's market perception and long-term value. The study “Capturing Sustainability-Related Information for Property Valuation” highlighted that properties with certifications are perceived to have lower operational risks and higher value stability, making them more attractive to investors. [3] This improved market perception can lead to higher property valuations and greater investment appeal.
Longer Lease Terms
Spaces with health-focused attributes yield longer lease terms, averaging 88.3 months compared to 75.3 months for spaces without such attributes. [6] This difference of more than a year demonstrates the value tenants place on health-focused environments, leading to longer commitments and more stable income for property managers.
Attraction of High-Quality Tenants
Buildings with certifications attract high-quality tenants, including corporate clients, agencies, and socially conscious businesses, by signaling a commitment to health and sustainability. Tenants value the prestige and corporate responsibility associated with certified buildings, aligning with their own sustainability goals, and enhancing their brand image, which promotes long-term leasing relationships and stable revenue streams for property owners. [6]
Case Studies: Real-World Evidence
Here are a few examples of buildings that not only show increased rental rates due to healthy building certifications, but also demonstrate enhanced tenant satisfaction and retention:
1. The Edge, Amsterdam
Certification: WELL Platinum, BREEAM Outstanding
Features: Advanced climate control systems, abundant natural light, and an emphasis on biophilic design.
Increased Rental Rates: The Edge commands higher rental rates due to its sustainable and wellness features, attracting premium tenants like Deloitte.
Enhanced Tenant Satisfaction and Retention: Deloitte reported increased employee satisfaction and productivity, leading to longer lease terms and reduced turnover.
Sources: Building and Construction Authority, The Guardian
2. 100 Mount Street, Sydney
Certification: WELL Platinum
Features: Superior air quality, ergonomic workspaces, access to fitness facilities, and mental health support spaces.
Increased Rental Rates: The building commands a rental premium, with tenants willing to pay more for the health and wellness benefits.
Enhanced Tenant Satisfaction and Retention: Tenants report higher satisfaction and well-being, contributing to improved retention rates and longer leases.
Sources: WELL Certified Projects, The Sydney Morning Herald
3. One Bryant Park, New York City
Certification: WELL Platinum, LEED Platinum
Features: Enhanced air and water quality, sustainable materials, and wellness amenities.
Increased Rental Rates: The building achieves higher rents due to its comprehensive wellness features, attracting high-profile tenants like Bank of America.
Enhanced Tenant Satisfaction and Retention: Tenants report higher satisfaction and reduced employee turnover, leading to stable, long-term occupancy.
Sources: Environmental Leader, Green Building Council
4. Salesforce Tower, San Francisco
Certification: WELL Gold, LEED Platinum
Features: Indoor air quality monitoring, fitness centers, ergonomic workstations, and mental health resources.
Increased Rental Rates: Commands premium rental rates due to its wellness-oriented design, with tenants like Salesforce valuing the health benefits.
Enhanced Tenant Satisfaction and Retention: Salesforce has reported improved employee satisfaction and retention, attributing it to the building’s health features.
Sources: Salesforce News, WELL Certified Projects
These case studies demonstrate that certifications positively impact rental rates, tenant loyalty, and lease lengths, making them valuable investments for property owners and managers.
Practical Steps for Property Managers
Property managers should actively pursue healthy building certifications to create environments that enhance tenant well-being, improve overall appeal, and increase property value. Even without committing to the full certification process immediately, they can take several practical steps to move towards certification. Here are some actionable steps:
Evaluate Current Building Standards: Conduct a comprehensive assessment of existing health and wellness features such as air and water quality, natural lighting, ventilation, and ergonomic design. Use tools like occupant surveys and building performance data to identify areas for improvement.
Engage with Certification Experts: Partner with consultants or organizations that specialize in healthy building certification to guide you through the process.
Implement Key Features: Prioritize air and water quality improvements, enhance natural lighting, and integrate ergonomic and biophilic design elements. These upgrades, though not always visually striking, form an excellent foundation for boosting occupant well-being. Additionally, foster a healthy food environment and implement strategies to promote physical activity opportunities. Encourage tenant feedback.
Educate and Communicate Benefits: Highlight the benefits of the healthy building improvements and available amenities to current and prospective tenants and staff, emphasizing improvements in health, productivity, and satisfaction.
By taking these steps, property managers can enhance tenant satisfaction and well-being, potentially setting the stage for future certifications. These improvements not only benefit the tenants but also increase the property's value and marketability. In a follow-up blog, we will delve deeper into each of these strategies, providing detailed guidance and examples.
Conclusion
The body of research on healthy building certifications presents a clear and compelling case for their financial and operational benefits. From increased rental income to enhanced occupant well-being and favorable market dynamics, the advantages of these certifications extend across various dimensions of real estate performance. As evidenced by studies from reputable institutions like the MIT Center for Real Estate Research and journals such as the Journal of Building and Environment, the benefits of healthy buildings are multifaceted and significant. Incorporating healthy building certifications into real estate development strategies is not just a trend but a prudent investment decision backed by robust research. As demand for healthy, sustainable environments grows, developers and investors prioritizing these certifications are likely to reap substantial financial returns and tenant satisfaction, contributing to sustainable development.
References
[1] MIT Center for Real Estate Research (2021). The financial impact of healthy buildings: Rental prices and market dynamics in a commercial office: The Financial Impact of Healthy Buildings
[2] Journal of Building and Environment (2022). Impact of WELL Certification on Occupant Satisfaction and Perceived Health, Well-being, and Productivity: A Multi-Office Pre- Versus Post-Occupancy Evaluation. https://www.sciencedirect.com/journal/building-and-environment
[3] Building Research & Information (2011). Capturing sustainability-related information for property valuation, 39(3), 256-273: Capturing sustainability-related information for property valuation
[4] International WELL Building Institute (2022). How WELL Certification Pays Back: A Study of Four Buildings: International WELL Building Institute's website.
[5] International WELL Building Institute (2022). Groundbreaking Study Finds WELL Certification Boosts Occupant Satisfaction and Perceived Health, Well-being and Productivity: International WELL Building Institute's website.
[6] Facilities Management Insights (2022). Understanding the Financial Benefits of Health and Wellness Strategies: You might find this article on the Facilities Management Insights website.