Market Adoption of Healthy Buildings in the Office Sector: A Global Study from the Owner’s Perspective

Abstract

The emergence of human health and well-being concerns provide market differentiation opportunities for real estate companies globally. Our paper examines the market adoption of healthy office buildings by looking into how a healthy office building is defined and measured in the marketplace. What is its financial value for tenants and owners? What are real estate owner's perspectives and strategies for this emerging market? We synthesized the existing body of academic and industry literature, and conducted interviews with executives from 15 real estate corporations that own office buildings across the globe. The results from literature review indicate that there is some early evidence of a real estate price premium for specific indoor environment quality (IEQ) features. At the level of health-focused building certification systems (BCS), there is no empirical and quantitative research on healthy building’s financial performance, except theoretical return on investment (ROI) models. The results from owners’ interviews confirm that the scarcity of empirical evidence linking healthy building attributes to financial returns presents the mainstream adoption barrier for building owners. Owners are adopting diverse healthy building attributes that are driven by end-user’s health and wellbeing demand regardless if they are adopting health-focused BCSs. Their strategies for pursuing the healthy building market range from risk mitigation to proactive pursuit of new growth opportunities. Private equity funds and real estate investment trusts (REITs) firms tend to focus on the former, while direct real estate investment firms are more likely adopt proactive strategies to lead the adoption curve.