The highly anticipated first WELL projects have finally hit the market after several years of R&D, marketing and promotion. The first of the new phenomenon opened their doors in NYC, Boston and Vancouver – following on from the early adopters in Toronto, San Francisco and Los Angeles. This trend is fueling the growing property market for “healthy-certified” buildings, not to mention the impacts of the advancements in technology.
Property owners and developers are beginning to look into and consider the business case for healthy building certification – effectively leveraging technology to simultaneously maximize profits and employee wellbeing. A handful of WELL certified projects are now in operation and with hundreds in the pipeline, it is clear that this concept is still only in its early phase but has a significant amount of potential.
WELL Projects – What are they?
A “WELL” building comprises of several elements – air, fitness, water, comfort, nourishment, mind, light and innovation. According to the International WELL Building Institute they represent a movement “to advance buildings that help people work, live, perform and feel their best.”
Pioneered by Delos, the WELL Building Standard is grounded in evidence-based medical research that demonstrates the connection between the buildings where we spend more than 90% of our time and health and wellness impacts on us as occupants. Currently, there are 235 WELL-registered projects in the US with developers in California being the most responsive to the initiative.
How Much Does Building Health Certification Cost?
Costs varied significantly for the first generation of WELL certified office projects. Several early adopters completed their WELL-certified renovations for less than $1 per square foot in additional costs. For the remainder, WELL property costs ranged from $1 – $4 per square foot. The largest reported expense for most tenant fit-out projects related to acoustics (managing noise in an open office), HVAC control services, and increased employee access to healthy & nourishing snacks (replacing vending machines with breakout areas stocked with healthy snacks).
Several companies who have implemented WELL projects have reported beneficial results such as Structure Tone’s New York office and Arup’s Boston office. For Structure Tone employees, their new New York office provided improved nourishment (a health-centric cafe space), better daylight allowances, new sit/stand desks contributing to positive ergonomics and improved ventilation. Meanwhile, Arup estimated that if the extra costs involved in acquiring WELL certification for their Boston office improved productivity by minimum 0.5% over the lifetime of their lease, the cost would cover itself.
The Value Add – Less Employee Churn, More Employee Health, Productivity and Satisfaction
The initial goal of first generation WELL projects was to assist employee satisfaction and productivity levels in the workplace. Based on a report published in the Environmental Health Perspectives, workspaces with strong ventilation and air quality can boost cognitive function by as much as 101%.
Other recent studies have found that advancing thermal comfort, availability of daylight and even a “biophillic” environment can vastly improve employee satisfaction – reducing absenteeism and increasing productivity.
For the majority of office tenants, a 1% increase in productivity is a lot more precious to their bottom line than $1 per square foot per year.
Applying a more logical approach – if a healthy building can reduce employee turnover by 1% per year, this will save most companies between $150,000 and $200,000 in sourcing, hiring and training new hires.
For all first generation WELL projects, there is a lot of interest in how exactly the benefits of such a project will take shape. Will it be improved productivity, decreased absenteeism or reduced turnover? Many of the early adopters have plans to measure pre and post-occupancy outcomes in an attempt to quantify the benefits of their WELL project investments. Arup, for example, has planned to implement an employee satisfaction survey, while CBRE (another early adopter) has quantified the impact of their early health and wellness efforts, and plan to continue to track both employee retention and recruitment for their WELL offices.
Quantifiable results to support the WELL project business case for business owners will take some time, as the market builds up enough WELL-certified data to enable a thorough market analysis. It could be years before a concise analysis can be carried out on the impact of “WELL-ready” buildings on increased rent, lower vacancy rates and the improved net operating income (NOI).
Property owners meanwhile, who want to attract a high caliber of commercial tenants just need to make WELL work. With 500 projects and more than 100 million square feet sitting in the certification pipeline, we don’t think this will be a big problem. Evidently, the standard is quickly growing and it is no secret that technology is a key player in improving profitability.
The Business Case for Real Estate Developers
There is more of a challenge associated with real estate owners to pursue a WELL-certified building versus a tenant. Official business certification does not come into publication until a property is developed, making it hard to market a “WELL ready” property to prospective tenants during the construction phase (and ascertain a rent premium for the potential certification).
For investors financing WELL buildings, it can be tricky to estimate the likelihood of a building matching the ambitious health standards so early in the certification process. WELL certification is also reliant on fit-out and behavior by the occupant. If tenants do not see the value of WELL and fail to align their construction or operations with WELL guidelines, it can jeopardize the properties’ certification.
However, as more and more tenants seek buildings that can facilitate their WELL goals, property developers will need to respond to this developing market.
Challenges of WELL Projects
The WELL rating is a complement to global green rating systems and was created to work alongside certification programs such as LEED, BREEAM, Green Star and the Living Building Challenge.
Aside from the cost factor, the main challenge reported by early adopters was adapting to a new certification process and its associated timelines. WELL certification as a whole took longer than Leadership in Energy and Environmental Design (LEED) certification for many early projects because of the necessary assurance letters and on-site monitoring and evaluation requirements.
Within the corporate sector world, ensuring occupant health is an area of focus can assist in reducing the largest line item in the long-term cost of a building – the personnel. As a result, the program offers a meaningful ROI. For Structure Tone, the first NYC based company to implement a WELL project, they reported certification costs of roughly $1 per employee per day.
The WELL concept can be implemented across all real estate sectors. At the moment, WELL v1 is advanced to suit institutional and commercial office projects and has experienced particularly high adoption rates within the corporate community.
Leveraging the growing trend of WELL buildings as a service provider
With an increasing popularity for WELL certified property spaces, there is a growing demand for service providers of all types to help create associated building improvements. Commercial property database platforms such as Reonomy, which contains information on over 47 million properties allows service providers to identify properties within a location of choice and increase their lead base by getting in touch with property owners through highly targeted sales and marketing initiatives.
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