How Healthy Buildings Are Shaping the Future - The ROI of Clean Air in Real Estate
- Ava Montini
- Aug 20, 2024
- 5 min read
Consider this: A recent project in New York City transformed an aging office building into a modern, WELL-certified workspace.
Not only did the building lease out faster, but tenants were willing to pay a premium for the enhanced air quality and wellness features. In fact, within six months, the building’s occupancy rate shot up by 20%, and tenant satisfaction surveys reflected a significant boost in productivity and well-being.
Stories like this are becoming increasingly common as the real estate industry undergoes a profound shift. Healthy buildings are no longer a niche luxury; they’re becoming a must-have in today’s competitive market. Whether it's a corporate headquarters, a high-end residential complex, or a mixed-use development, the demand for spaces that promote health, sustainability, and comfort is skyrocketing.
In this evolving landscape, the importance of IAQ cannot be overstated. Real estate professionals are quickly realizing that investing in clean air is not just about meeting tenant demands—it’s a strategic move that delivers substantial returns on investment (ROI). From attracting high-quality tenants to enhancing property value and ensuring compliance with Environmental, Social, and Governance (ESG) standards, clean air is shaping the future of real estate.
The Financial Benefits of Investing in IAQ
While the initial costs of improving IAQ can be significant, the long-term financial benefits are compelling. Here’s how investing in clean air can yield a high return on investment (ROI) in real estate:
Increased Property Value: Properties with advanced IAQ systems are seen as premium offerings. A study by the World Green Building Council found that green-certified buildings typically achieve 7% higher property values and up to 23% higher occupancy rates compared to non-certified buildings. As tenants increasingly prioritize health and wellness, buildings with superior IAQ are positioned to command higher rents and sales prices.
Tenant Retention and Attraction: Tenants are increasingly willing to pay premiums for spaces that promote health and sustainability. According to a CBRE report, rents for sustainability-certified office buildings are, on average, 21% higher than those of non-certified buildings. This premium reflects the growing tenant demand for buildings that offer enhanced well-being, reduced operating costs, and a better overall environment.
Operational Efficiency: Modern IAQ technologies, such as smart ventilation systems and air quality monitoring, not only improve air quality but also optimize energy efficiency. By reducing energy waste and improving HVAC system performance, these technologies contribute to lower operating costs. According to the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE), improving IAQ can reduce energy use by up to 40%.
ESG Compliance and Marketability: Investors are increasingly focused on ESG criteria, including sustainability and health metrics, when making investment decisions. A 2021 survey by JLL found that 79% of occupiers anticipate that carbon emissions reduction will be part of their corporate sustainability strategy by 2025, and 78% of investors believe that climate risk is a financial risk. This growing emphasis on ESG factors makes buildings that prioritize indoor air quality (IAQ) and other sustainability aspects more attractive to investors and often results in higher market valuations.
The Role of Green Building Certifications
Green building certifications have become a hallmark of quality in the real estate industry, signalling a commitment to sustainability, health, and overall building performance. Among the most recognized certifications are WELL, LEED, BOMA BEST, FITWEL, and Energy Star. These certifications not only validate a building's environmental credentials but also play a significant role in its market value and appeal.
WELL Certification
The WELL Building Standard focuses specifically on human health and well-being, evaluating buildings based on air quality, water quality, lighting, and comfort. WELL-certified buildings are designed to enhance occupant health and productivity, making them highly attractive to tenants who prioritize wellness. Studies show that WELL-certified buildings often command higher rents, with tenants willing to pay a premium for these benefits. Additionally, WELL certification is increasingly seen as a key differentiator in competitive markets, contributing to higher occupancy rates and long-term tenant satisfaction.
LEED Certification
Leadership in Energy and Environmental Design (LEED) is one of the most widely recognized green building certifications globally. It assesses buildings on sustainability metrics such as energy efficiency, water conservation, and CO2 emissions. LEED-certified buildings are not only more energy-efficient but also tend to have higher market values. According to studies highlighted in the Crittenden Report, LEED-certified buildings often command higher sales prices compared to non-certified properties, underscoring the financial benefits of sustainability certifications. This premium reflects the market’s growing preference for sustainable and energy-efficient properties, which are seen as lower-risk, higher-value investments
BOMA BEST BOMA BEST (Building Environmental Standards) is a certification program tailored to the Canadian real estate market that focuses on energy and environmental performance. It provides a practical framework for assessing and improving building operations, with an emphasis on energy efficiency, resource management, and environmental impact. Buildings that achieve BOMA BEST certification are often recognized for their operational excellence and sustainability, which can enhance property value and marketability, particularly among environmentally conscious tenants.
FITWEL Certification
FITWEL is a building certification system that supports healthier workplace environments, improving occupant health and productivity. It focuses on a wide range of criteria, including IAQ, access to natural light, physical activity opportunities, and healthy food options. FITWEL-certified buildings are increasingly valued in the market for their ability to attract tenants who prioritize employee well-being. A report by the Center for Active Design highlighted that FITWEL certification is linked to increased tenant satisfaction and retention, as well as enhanced building reputation.
Energy Star Certification
Energy Star certification, while primarily focused on energy efficiency, also indirectly supports IAQ by promoting the use of ventilation systems and technologies that reduce indoor pollutants. Due to their energy-efficient design, Energy Star-certified buildings typically have lower operating costs and are often viewed favorably by tenants and investors.
These certifications provide a measurable way to demonstrate a building’s commitment to sustainability and occupant health, and as such, they are highly valued in the real estate market.
Certified buildings are typically associated with reduced operational costs, lower vacancy rates, and increased tenant loyalty, all of which contribute to a higher overall property value.
The Future of Real Estate: A Focus on Health and Sustainability
The trend towards healthier buildings is not a fleeting one. As awareness of the impact of IAQ on health and productivity grows, so too will the demand for real estate that prioritizes these factors.
Building owners and managers who invest in IAQ improvements now will be well-positioned to capitalize on these trends and achieve a competitive edge in an increasingly health-conscious market.
Moreover, as ESG requirements become more stringent, properties that do not meet high standards for IAQ may face declining values and limited investment opportunities. On the other hand, those who excel in this area are likely to see enhanced reputation, stronger tenant relationships, and sustained financial performance.
By prioritizing indoor air quality, property owners can significantly boost property value, attract and retain quality tenants, and ensure compliance with emerging ESG requirements. The shift towards healthier buildings is not just a trend but a critical investment in the future of real estate. As the market continues to evolve, those who embrace this change will find themselves at the forefront of a new era in real estate, where health and sustainability drive success.
