While the benefits of healthy spaces have long been qualitatively understood and appreciated, their value and impact on economic decision-making has not been financially analyzed. In this research, we use CompStak and Healthy Building public databases from Fitwel and WELL to operationalize a real estate hedonic model in order to ascertain the value of healthy spaces on the effective rent of offices spaces in ten cities within the United States. These cities include Atlanta, Boston, Chicago, Denver, Los Angeles, New York, Philadelphia, San Francisco, Seattle, and Washington DC.
We find that healthy building effective rents transact between 4.4 and 7.7% more per square foot than their nearby non-certified and non-registered peers. This premium for healthy spaces is independent of all other factors, such as LEED certification, building age, renovation, lease duration, and submarket. These results indicate that healthy buildings are seen as an asset that correlates with employee or tenant well-being and productivity.
Around the world, many communities are facing troubling health trends. Though people are living longer, they are leading less healthy lives. By 2030, a projected 52 million people will die due to chronic diseases caused by poor lifestyle. This is five times the amount of communicable diseases.
In the face of these problems, the impacts of the building environment have become an increasingly important factor in combating these risk factors given the average American spends 90% of their time indoor (Allen et al., 2016), and out of that time, a significant portion of that is spent in the workplace. Health does not stop at the hospital, it starts in our homes and our work, and our everyday life. Environmentally, social, behavioral, and even the decision of what part of the city to live in all have impacts on our health.
Common Features of a Healthy Building
So, how do we define a Healthy Building?
The World Health Organization (WHO) defines a healthy building as a space that supports the physical, psychological, and social health and well-being of people. This interest in a more holistic approach to real estate has been implemented in a wide range of design strategies and certifications. While there has been research done to reflect the potential economic impacts of Smart, Connected, and Green, there has not yet been research done to reflect the impacts of Healthy-Certified Buildings.
The World Health Organization (WHO) defines a healthy building as a space that supports the physical, psychological, and social health and well-being of people.
Healthy Building Identification Strategy
In this project, we take the first step towards understanding the financial impact of Healthy Buildings on achieving effective logged rents. We use CompStak and Healthy Building public databases from Fitwel and WELL to operationalize a real estate hedonic model in order to ascertain the value of healthy spaces on the effective rent of offices spaces in ten cities within the United States: Atlanta, Boston, Chicago, Denver, Los Angeles, New York, Philadelphia, San Francisco, Seattle, and Washington DC.
Certified and Registered Healthy Contract Locations and nearby control contract locations
Our identification strategy seeks a rigorous matching strategy for the time and location of the healthy space. After identifying healthy 407 projects spanning across 2,322 healthy space rental contracts, we then extract CompStak rental contract data points and match these with nearby healthy spaces in the same market to ensure neighborhood quality controls.
Based on the results within our regression analysis, we observe that health-certified spaces, both registered and certified, transact between 4.4 and 7% more per square foot than their nearest non-certified neighboring peers.
Potential Implications of Healthy Buildings
Based on the results within our regression analysis, we observe that health-certified spaces, both registered and certified, transact between 4.4 and 7% more per square foot than their nearest non-certified neighboring peers. This premium for healthy spaces is independent of all other factors, such as LEED certification, building age, renovation, lease duration, and submarket. Our analysis of our variables explains 65 to 70% of the variation in the effective rents per square foot. Also, the results show that health certified buildings are positive, economically, and statistically significant (*). These results indicate that healthy buildings are seen as an asset that improves employee or tenant well-being and productivity.
Financial support for this research was provided by the MIT School of Architecture and Planning Covid-19 Fund and the MIT Real Estate Innovation Lab.
