Investing in People: The Real Estate Strategy for Long-Term Value

Research InsightsStrategies & SolutionsFeatured

Mar 25

Written By Janelle Decarreau

Insights from the Center for Active Design Experts

How does promoting health benefit the real estate sector?

Why should our investors care that we are prioritizing health and well-being?

How do we communicate the economic value of the effort we are putting into promoting health?

These are just a few of the questions we receive regularly from our partners in the real estate industry who play an essential role in the fight to build a healthier future. We know that human health and economic outlook are intrinsically linked — two sides of the same coin. According to Deloitte, by building a society that promotes health for all, the United States could add up to $2.8 trillion to GDP by 2040. In fact, while a complex relationship, it is clear that human health and economic vitality support one another, with human health enabling economic growth and economic growth paving the way for improved well-being.

So what does this mean for the real estate sector?

We have spent the past several years working to answer this question, exploring the connection between health-promoting buildings and economic return.. Through this process, we have delved into the nuanced connection between value creation and specific health-promoting tactics, including enhancing indoor air quality, integrating greenergy, and boosting resilience through stormwater management. Simultaneously we have worked hard to navigate the split incentives, where the group making the investment doesn’t always reap the benefits, a persistent issue that often undermines these discussions. Our research has led to several core findings.

Promoting Health in Buildings Drives Returns.

Several years ago, research out of the MIT Real Estate Innovation Lab found that healthy buildings, certified using Fitwel or other health-promoting certification platforms, yielded between 4.4 to 7.7% higher rents than nearby buildings that were not certified. This provided important validation for the power of the healthy building movement to drive financial value. Building on this work, the Center for Active Design teamed up with QuadReal, a Canadian-based global real estate investment, operating, and development company to break down health a bit further and explore which strategies translated to economic return across their portfolio. In addition to finding that health-promotion efforts as measured through Fitwel Score were significantly linked to higher net promoter score, the Benchmark Report also found that operational strategies, like prioritizing indoor air quality and maintenance resulted in driving tenant satisfaction across workplace and residential settings. Similar efforts across the industry have further validated these findings. Recently, research out of global real estate services firm JLL found that robust amenities such as full-service fitness centers, locker rooms, and shower facilities help drive nearly a 3% rent premium compared to other workplaces. The study also found that on-site food halls help support a 1.4% rental premium. It’s clear that occupants want high-quality amenities that offer unique opportunities to socialize, build community, and support daily needs from healthy eating to exercise. These trends match PWC’s prediction that amenities, especially in the commercial sector, will be a key value driver in 2025 as part of what they see as a “flight to wellness.” While difficult to measure, it is becoming increasingly clear that across diverse sectors, buildings designed and operated with health in mind have the upper hand in a tight real estate market, and might just be the key to standing out.

Image courtesy of Crown Property Management

Different Stakeholders Benefit from Different Outcomes.

Whether investors, owners, or tenants, stakeholders are focused on ensuring their real estate delivers maximum value. However, key metrics driving their decisions vary. While investors might prioritize operating income (NOI) and cap rate, owners often place equal emphasis on tenant satisfaction and retention. For tenants, workplace settings often focus on productivity, while residential settings are more concerned with energy efficiency costs and property conditions. These diverse interests mean that meeting all stakeholder needs is a challenge and complicate how to message property achievements.

With this in mind, CfAD has reviewed the more than 150 strategies that make up the Fitwel Standard to identify the unique and diverse value brought across stakeholders. Below, we have outlined a few examples of how the connection between health and value can drive decision making.

Investors can use property resilience to guide investment decisions. Whether flood, fire, extreme heat, or air pollution, climate change realities are impacting projected real estate value, migration patterns, and ability to secure insurance. For example, in Los Angeles, even before the recent wildfires, tens of thousands of residents lost their home insurance, leaving them increasingly vulnerable to the impacts of the Altadena Fire, and a similar trend has played out in other communities across the nation. These significant impacts are all considerations smart investors are keeping in mind when making real estate decisions.
Owners may want to prioritize nature. Not only are landscaping decisions something that owners have control over, but investments in biophilia can also pay dividends. Strategically placed tree canopy or a green roof help lower energy bills, and greenery can also support higher rental rates. According to a study out of the United States Department of Agriculture Forest Service Urban, community trees across the the United States help lower electricity consumption by 38.8 million MWh annually, saving $4.7 billion.
Tenants look to indoor environmental quality improvements to support occupants. Throughout the past decade tenants have expressed a willingness to pay for indoor environmental quality attributes such as Indoor Air Quality and access to natural light. We have seen the attention to indoor air quality, specifically, expand in the wake of the COVID-19 pandemic, given an intensified awareness of the importance of ventilation and filtration and demand for health-promoting building attributes. Within workplace settings, a major selling point for employers is that optimal IEQ conditions are linked to increased productivity for employees working on-site and decreased absenteeism. A well known study led by researchers out of the Harvard T.H. Chan School of Public Health found that high quality indoor air in offices supported an increase in productivity that amounted to $6,500 per person per year.

Doing Well by Doing Good

The evidence is clear: prioritizing health is not only the right choice—it’s a powerful business strategy. Across the real estate sector, those who invest in health-promoting environments are seeing significant, measurable returns, from increased tenant satisfaction to robust financial performance. By strategically aligning economic and human well-being, we create a positive cycle where healthier spaces generate lasting value, and value-driven investments foster thriving, resiliant communities.

As the market evolves, forward-thinking investors, owners, and tenants recognize that the spaces we inhabit have a profound impact on our daily lives, given that we spend approximately 90% of our time indoors. Those who embrace this reality—integrating health, resilience, and well-being into their decision-making—will lead the way to a stronger and more profitable future.

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Janelle Decarreau