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How focusing on health helps the bottom line

Joanna Frank, president and CEO of the Center for Active Design, reflects on how real estate investment managers can meet the health needs of tenants and investors.

Joanna Frank

Our understanding of the relationship between our built environment and our physical, mental and social health has strengthened considerably in recent years. Leveraging design and policy to improve population-level health can be traced through precedents established over the past hundred years, from resolving infectious disease outbreaks at the turn of the 20th century with city planning and building reforms, to encouraging social interaction and physical activity through design to mitigate today’s dual crises of chronic disease and social isolation.

Momentum for healthy buildings and neighborhoods has grown steadily over the last decade. This increasing demand has spawned healthy building certifications, such as Fitwel, which codify over 100 years of public health research into actionable frameworks for the real estate industry.

Healthy building certifications provide an industry standard that defines the attributes of health-promoting real estate. These certifications rely on evidence-based strategies to guide investment decisions and provide validated data on the impacts of implementation, including return on investment.

Harnessing this data and investing accordingly is driving market differentiation among assets and helping real estate investment managers respond to demands for health from both tenants and investors. A report released by the Massachusetts Institute of Technology late last year confirms the material benefits of healthy buildings, suggesting they yield higher rents, increased rental rates, and expedited leasing – underpinning a healthy bottom line.

Covid-19 has greatly accelerated the healthy building movement. The pandemic has intensely, and suddenly, amplified tenant, owner and investor interest, ensuring health will remain a major theme in real estate – and our daily lives – for years to come.

Change is in the air

2020 profoundly changed how we feel about the places we live, work, study and play, necessitating a near-overnight mindset shift focusing on efforts to mitigate viral disease spread. This pandemic-induced demand for healthy buildings has simultaneously brought about amplified scrutiny of the metrics that benchmark and report progress within ESG frameworks.

Owners, managers and occupiers, who may have considered health as a passive approach within their ESG frameworks are now far more aware of the link between buildings and individual and population health. This renewed focus is giving rise to human health ESG metrics, which go beyond evaluating building performance to measure impacts on people.

Today, as a direct result of covid-19, health is now driving a more concerted focus on the social component of ESG reporting, which has in the past suffered from a lack of clarity and quantification. Health, along with the standardized metrics provided by healthy building certifications like Fitwel, is propelling “social” as a true peer to long-standing sustainability and corporate governance initiatives.