Tenants Driving Investor Demand for Healthy Buildings

Ninety-percent of investors expect demand for healthy buildings to grow in the next three years, according to a report that surveyed global real estate investment managers and stakeholders.

The report, coordinated by the United Nations Environment Programme Finance Initiative, the Center for Active Design and BentallGreenOak, found that nearly 87% of respondents experienced increased demand for healthy buildings over the past 12 to 24 months. Additionally, 100% of respondents in Asia, 90% of respondents in North America and 85% of respondents in Europe expressed that the current demand for healthy buildings is moderate or strong.

Even before the pandemic, healthy buildings had been a priority, with nearly 70% of respondents indicating they were gaining importance before 2020.

Demand for healthier buildings seems to be coming from tenants. A wide swath, 95%, of respondents said that tenants were the leading stakeholder group driving demand. Strong or moderate demand was coming from the office (87%) and residential sectors (61%). They were followed by the retail sector (48%).

A large majority of respondents, 89.5%, plan to enhance their company’s health and wellness strategies in the coming year. However, they are doing this for different reasons. One hundred percent cited COVID concerns as a driver, while human health (86%), tenant satisfaction (71%), market differentiation (71%), enhancing reputation (57%) and compliance concerns (43%) were other key motivators.

It’s not surprising that the report revealed that COVID-19 has elevated the importance of health in investment decision-making. An overwhelming majority, 89.5%, planned to enhance their wellness-related asset management strategies in the coming year.

But there is more to wellness than just making investments in products and design. Monitoring what is happening in the building is also crucial. Seventy-four percent of respondents say that tracking data is a key priority for implementing healthy buildings into their ESG strategies. A slightly smaller amount, 61%, of respondents use healthy building certification systems, which can provide clear benchmarking and reporting standards.

Still, there is a lot of ground to cover. Overall, only 53% of respondents incorporated health and wellness into their ESG strategies to a great extent. However, 42% percent note that they have begun to do so.

“Responsible real estate investors have awakened to the notion that the buildings we manage for our clients are part of the critical infrastructure that cities will rely on for the resilience, health and well-being of their citizens,” said Amy Price, president of BGO, said in a prepared statement. “Where excellence in environmental performance has rightly become a more common pursuit for our industry, our fiduciary responsibilities are increasingly taking us into new territory that requires attention to the multitude of social factors that impact asset value.”

Already some office developers are designing healthier buildings in the wake of the COVID experience.

As one example, in San Jose, Calif., Briggs Development acquired a development site to build a COVID-safe office project. The property will include street entry, operable windows throughout and covered outdoor seating areas. The design focuses on an indoor-outdoor model that helps to protect against viral transmission.

“As we emerge from the pandemic, this property offers an ideal opportunity to create an indoor/outdoor office space model that can provide greater safety and better health to office occupiers,” Jeffrey Rogers, president of Briggs Development, told GlobeSt.com.