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Is WELL Certification Worth It for Developers?

Some argue that buildings with healthy features command up to a 20 percent rent premium over market rate, in addition to savings on operational costs.

Creating healthy workplaces is the next step in the evolution of office building sustainability. “Health is a key component to real estate for the long-term,” says Rachel McCleary, Urban Land Institute senior vice president, who heads the organization’s healthy buildings initiative. She points out that a healthy workplace requires a building to meet certain performance standards, and certification is based on testing.

The healthy workplace movement got a boost a few years ago when the U.S. Green Building Council (USGBC) partnered with the International Well Building Institute (IWBI) to streamline certification processes and minimize paperwork to achieve both Leadership in Energy and Environmental Design (LEED) and the WELL certifications simultaneously.

Launched in October 2014, WELL has registered or certified 450 projects, encompassing nearly 100 million sq. ft. of space in 27 countries, including 361 office projects.

“The rapid expansion of WELL worldwide underscores the fact that building and business developers, owners, and operators are taking notice of the need to harness the built environment as a tool to promote human health and wellness,” says IWBI President Kamyar Vaghar. He notes that IWBI is seeing increasing interest from core and shell building developers looking to achieve WELL certification, as well from tenants looking for buildings that facilitate a healthy fit-out.

WELL is an evidence-based system for designing, measuring, certifying and monitoring how buildings impact the health and well-being of occupants. It provides a 100 wellness features that impact 23 health pathways across seven concepts, including air, mind, water, nourishment, light, fitness, and comfort. Applicant spaces are evaluated for one year to ensure all necessary criteria are met before achieving certification and then are re-evaluated every three years for recertification.

In a 2014 Urban Land Institute study, which looked at the business case for developing healthy buildings, 13 developers reported that healthy buildings resulted in greater marketability and faster leasing and sales velocity, in addition to commanding higher rents than pro forma projections. They said the cost attributable to inclusion of wellness features represented a minimal percentage of the overall development budget.

An IWBI spokesperson told NREI that the cost to buildout the headquarters of Structure Tone, a New York City-based design firm, with WELL features came to less than $1 per sq. ft. 

Dave Pogue, CBRE global director of corporate responsibility, who recently worked with a developer on a WELL-certified project in Vancouver, Canada, says that the cost to add WELL features to a building varies considerably, with ground-up projects usually costing less because healthy features can be incorporated into what the developer is already doing. For existing projects, the cost is determined by what types of features a building already has in place.

Developers Hines and Kilroy Realty are embracing the WELL standard for new buildings going forward.

Kilroy has started construction on its first WELL project, a $450-million, 680,000-sq.-ft. office campus at Mission Bay, a tech-centric master-planned community in San Francisco.

The Mission Bay project is a pilot for the company to demonstrate the value of WELL features, according to Maya Henderson, Kilroy sustainability manager. “This is a great place to start building this type of project into our portfolio going forward,” she says.

Hines’ first building to register for WELL is 609 Main in Houston, Texas, a one-million-sq.-ft., multi-tenant building, which is also pursuing LEED Platinum.

Designed architect Pickard Chilton, the exterior at 609 Main is composed of highly reflective glass curtain walls that change colors as the weather changes. But what sets 609 Main apart are details on the inside that pay attention to the health and happiness of occupants and enhance operational efficiencies for tenants, says Hines Senior Managing Director in Houston John Mooz, who oversaw the project’s development.

The building incorporates technology that provides continuous fresh air and natural light, in addition to managing energy efficiency and water conservation. Features include heat sensors that adjust room temperature according to the number of occupants in the room and an advanced under-floor air system.

The air system added $10 million to building cost, according to Mooz, but allows each employee to control the temperature around their own desk by delivering heating and cooling through individual portals in the floor around each workspace.

The building also has 3,000 sq. ft. of dynamic glass embedded with an electric current, in addition to floor-to-ceiling windows that provide natural light. The glass turns dark when the sun is high, shading building occupants.

“Our intent was to respond to the modern day workforce of Millennials with an amenity-rich, and tech-savvy environment,” Mooz notes. Additional amenities include a rooftop garden, an 8,500-sq.-ft. fitness center and a lobby concession stand that serves coffee in the mornings and drinks at quitting time.

High-quality buildings have higher resale values, according to Mooz, so the higher cost of adding WELL features is recouped over time. He notes that buildings with healthy features command up to a 20 percent rent premium over market rate, in addition to savings on operational costs.

He notes that 2017 was not the best timing to deliver one million sq. ft. of office space in Houston, as the market has been depressed due to the energy industry layoffs. Houston’s office vacancy reached a 22-year high in the first quarter, according to real estate services firm CBRE, at 16.8 percent, and is expected to rise to 17.5 percent by next year.

But despite unfavorable market conditions, 609 Main was 65 percent pre-leased before the building was completed in May.

“Demand for buildings that promote health and wellness has continued to increase among our tenants,” says Gary Holtzer, Hines senior managing director, global sustainability office. “The WELL Building Standard is one of the leading frameworks for measuring and certifying the impact of the built environment on humans and we want to help lead the charge.”

Hines has multiple office projects across the U.S. and globally that are being positioned for WELL certification, he adds.

“This is a new way the market is going,” says Evin Epstein, sustainability analyst at New York City-based SL Green Realty. Her company, in partnership with Hines, is developing One Vanderbilt, a 1.7-million-sq.-ft. office tower under construction in Midtown Manhattan that is registered for both WELL and LEED certifications.

Epstein shares Hines view on the marketing advantages of healthy office space. She notes that LEED provides some elements that benefit health, but WELL has a much more direct impact on tenants, with better lighting and air quality and a host of other tangible features.

At One Vanderbilt, natural light will flood 80 percent of the building, maintenance will use only green cleaning products and a water filtration system is being installed.

Designed for the modern workforce, the building will also feature floor-to-ceiling windows, extra high ceilings and 360-degree views, in addition to best-in-class building systems.

CBRE’s Dave Pogue agrees that high-performance buildings have been shown to have benefits for both tenants and building owners. He notes, however, that the hope of developers is that WELL will give a project greater market advantage, but there are too few studies so far to know if this is true. “We do think the market is highly sensitive to this sort of thing,” he notes.

Correction: July 07, 2017
Editor's note: A typo in an earlier version of this article misidentified SL Green Realty as NSL Green Realty. The article has since been updated.
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