Real estate investors see rising demand for healthy buildings – report

Real estate investors are expected to increase their demand for assets designed to prioritise the health and wellness of occupants, according to a report.

The report titled A New Investor Consensus: The Rising Demand for Healthy Buildings – which attracted global real estate investment managers and stakeholders managing $5.75trn assets – revealed that 92% of respondents expect demand for healthy buildings to grow in the next three years.

The study, coordinated by the United Nations Environment Programme Finance Initiative (UNEP FI), the Center for Active Design (CfAD) and BentallGreenOak, stated that COVID-19 has elevated the importance of health in investment decision-making, with 89.5% of respondents signalling their intent to enhance their wellness-related asset management strategies in the coming year.

The need for healthy buildings has been steadily rising over the last decade, with nearly 70% of respondents indicating that they were seeing increased demand prior to the pandemic, according to the report.

It highlights an increasing investor awareness of the ”importance of health and well-being to their environmental, social and governance (ESG) strategies” and the link between building design and function, and personal and societal health and wellness.

“This has given rise to a more concerted focus on the S, or social component of ESG, which has traditionally lagged behind the more well-defined environmental and governance pillars.”

Currently, only 53% of respondents report that they incorporate health and wellness into their ESG strategies to a great extent and 42% note that they have begun to do so, leaving significant room for growth, according to the report.

Amy Price, BentallGreenOak’s president, said: “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.

“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. Our collective experience with the first modern pandemic in our lifetimes is teaching us how closely tied investment performance is to operational excellence, tenant engagement and community relationships.”

Joanna Frank, president and CEO of CfAD and its Fitwel certification system, said, “This study quantifies for the first time the extent to which the industry is focusing on health and wellness in ESG investment strategies.

“We expected the findings to demonstrate strong demand for healthy buildings, especially given the pandemic, but it also points out the lack of consistency around measuring and reporting the impacts of these initiatives.

“There’s a clear case for standardising benchmarks to track performance. Certifications like Fitwel can provide a framework, but we need to keep pushing for broad adoption so that we can track the measurable impacts.”

Eric Usher, Head of UNEP FI, said: “We know from our members that there is broad consensus for finance actors to think holistically about the impacts they are creating through their capital allocation decisions, and that attention to societal goods is part of the value creation process for enterprises and real assets.

“This study confirms that health and wellness is now firmly part of that social agenda and must affect how real estate is designed and managed.”

As reported in the latest edition of IPE Real Assets, COVID-19 has highlighted the importance of health in office buildings.

To read the digital edition of the latest IPE Real Assets magazine click here.