Healthy Buildings Becoming the New Normal in Real Estate

Originally published on TriplePundit

On a pleasant April weekend, several hundred people carrying bags and pushing strollers meander through the Tanger Outlets National Harbor. Three years ago, this bustling shopping center across the river from the nation’s capital was brought to a standstill, temporarily shuttered like many retail and business sites nationwide to prevent the spread of COVID-19. Although some public health protocols remain in place here, most signs of the worst pandemic in a century have disappeared.

Yet, even as Tanger Factory Outlet Centers Inc., the property’s North Carolina-based owner, has embraced the return to normalcy, it is one of thousands of real estate companies executing a new strategy to promote long-term wellness and safety: Making its buildings healthier.

Earlier this year, Tanger announced it achieved the International WELL Building Institute’s (IWBI) WELL Health-Safety Rating for its 36 North American shopping centers and its corporate headquarters. The designation, launched by IWBI during the pandemic and now used globally across more than 3.8 billion square feet of space, defines health leadership related to cleaning and sanitation, emergency preparedness, air and water quality, and other facilities management criteria.

In a statement, Leslie Swanson, Tanger’s executive vice president and chief operating officer, said the designation is helping the company “build confidence that all our facilities are a safe place for communities to gather,” by protecting the health of shoppers and store workers.

Like video conferencing and remote working, the shift to healthier buildings predates COVID-19 but intensified at the onset of the pandemic. According to research by the nonprofit Global Wellness Institute, the number of healthy buildings collectively certified by providers grew nearly five-fold from 2018 to mid-2021. IWBI, which offers a suite of health and wellness designations for buildings and companies, recorded a total of about 500 million square feet of registered or certified space through its first six years of operation. Since 2020, it has added an astonishing 4 billion square feet of new projects across its WELL offerings.

Real estate owners are driving demand for healthy buildings as they seek to retain tenants and strengthen leasing activity at a time when the pandemic still casts a long shadow on occupancy, said Wendy Feldman Block, executive managing director at Savills, a global real estate advisory firm.

By adding protections for occupant health, the WELL Health-Safety Rating “gives owners a path to get tenants back in the building, and gives tenants a path to get their workers back in,” she said. “Seeing the WELL seal makes you feel better about going into your building.”

IWBI now says it is enrolling an average of nearly 4 million square feet of projects per day, with active engagements with more than 20 percent of the Fortune 500. Those projects include retail destinations like Tanger outlet centers, the offices of corporate giants like Goldman Sachs, Accenture and EY, and iconic structures like the Empire State Building and Yankee Stadium.

The surge in demand for healthier space — though remarkable — isn’t a surprise, said Rachel Hodgdon, IWBI’s president and CEO.

“The primary purpose of buildings has always been to serve the needs of the people inside of them,” Hodgdon said. “The pandemic sharpened that focus.”

Americans on average spend about 90 percent of their lives indoors where they are at significantly greater risk of exposure to pollutants, according to the U.S. Environmental Protection Agency. Building construction codes in most U.S. states have long specified minimum ventilation requirements for clean air delivery to reduce pollutants and disease transmission, while real estate sustainability frameworks such as the U.S. Green Building Council’s LEED rating system and the International Living Future Institute’s Living Building Challenge began referencing certain health measures before IWBI’s launch in 2014.

But while the rationale for healthy buildings is well established, the real estate industry is racing to understand just how far the benefits extend.

A study published in late 2022 in the Journal of Building and Environment found that healthier buildings significantly improve worker satisfaction, wellness and productivity. Participants in the study, which analyzed the impact of WELL Certification using more than 1,300 pre- and post-occupancy survey responses, reported a nearly 30 percent post-certification improvement in overall satisfaction with their workplace, a 10 percent perceived improvement in mental health, a 10-point increase in median productivity, and a 26 percent perceived increase in wellbeing, including energy levels and motivation at work.

Those results add to a growing body of research linking healthier space to reduced employee absenteeism, improved cognitive function and lower healthcare costs for companies, as well as stronger real estate financial returns from rental premiums and longer lease terms.

The overall progress in creating and quantifying healthier space is validating, Feldman Block said. She was involved in 2017 in the world’s first lease to receive both WELL and LEED certification at the Platinum levels and remembers when talk of certifying a building as “healthy” was met with indifference.

“At the time, nobody was familiar with WELL," she said. "Landlords, contractors and most architects — they’d never heard of it.”

Now, many property owners and occupiers with portfolios are budgeting for certification in what she calls a “widespread embrace” of health and wellness. “Landlords know they have to talk about what they’re doing to protect health and safety. They have to be competitive," Feldman Block said.

She expects healthy building enrollment numbers to potentially recede from their peak as the real estate industry faces headwinds from inflation, permanent remote working and job cuts, especially in the tech sector. Microsoft, Amazon, Meta, Salesforce and Doordash are among the scores of companies to recently announce layoffs. Property owners are expecting to feel the impact as certain employers pull back on space needs.

But the long-term prognosis for healthy buildings remains excellent. IWBI has spent the past several years expanding its infrastructure and offerings, which now include a credentialing program for real estate professionals, Fannie Mae’s inclusion of WELL in it its Healthy Housing Rewards program, a dual-certification partnership with Enterprise Community Partners for affordable housing, and a workplace equity designation launched at the end of last year targeted at a broad swath of employers. It is also exploring a foray into the single-family housing market.

All of those initiatives are designed to accelerate the post-pandemic reach and impact of healthy buildings in a world that is projected to add as much new real estate space as currently exists in North America by 2030, Hodgdon said.

“If part of the legacy of COVID-19 is that it helped make buildings across the world healthier for people and better prepared for future public health emergencies,” she said, “that would be an excellent outcome.”

This article series is sponsored by the International WELL Building Institute (IWBI) and produced by the TriplePundit editorial team.

Image credit: R ARCHITECTURE/Unsplash