ULI New York Blog

Wrap Up- Building Healthy Places: Development Practices & Outcomes

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BY KRYSTYN GATTO

On Thursday, November 12, ULI New York hosted its second panel discussion on the Building Healthy Places initiative, “Building Healthy Places: Development Practices & Outcomes,” Joe Brancato, Regional Managing Principal, Gensler, Clare DeBriere, COO & Executive Vice President, The Ratkovich Company, Michael Horst, Former Vice President, ULI Robert C. Larson Leadership Initiative, David L. Pogue, Global Director of Corporate Responsibility, CBRE, and  Laura Yablon Rapaport, Senior Vice President, L&L Holding Company, gathered to discuss the business proposition behind building healthy places as the market shifts from building performance to occupants themselves.

Defining what a ‘healthy place’ is and determining the structure and amenities to reach such targets is different from market to market.  The increased return on investment to landlords and developers as well as the projected improved productivity of a tenant’s employees is necessary to justify the increased costs.  While surf board racks, outdoor showers and barbeque pits may be a feature of a project in California, these amenities may not be possible in many markets.  On the other hand, in markets like New York or Pittsburgh, access to natural light, wellness facilities and collaborative spaces may provide similar return on initial investment.

In the 1990s, Energy Star, a voluntary program, gained popularity in the real estate industry.  It soon become an initiative that tenants sought not only in the building at large, but also implemented in their own spaces.  LEED experienced similar popularity in the 2000s, and the WELL Building Standard is now positioning to be the next component in a joint standard to create healthy sustainable built environments.

Both DeBriere and Yablon Rapaport spoke to the cost implications of creating WELL certified projects and estimate a 7-8% average increase on cost for a new project.  They also noted a continuing demand, from tenants for such environments. As employers are concerned with hiring the young and talented, larger firms such as Google and Amazon have little option but to provide a healthy, engaging environment for their employees as part of their retention strategy.

Brancato pointed out that, much like LEED, the costs of incorporating elements that meet healthy building standards will decrease as market adaptation reaches a tipping point of economic scale. DeBriere also noted that many of the costs associated with the Ratkovich Company’s healthy initiatives are passed on their tenant through operating costs.  Those costs that are not passed through to tenants are more than compensated for by the above market rents obtained based on their ability to provide an enhanced healthy environment.

The continuous programing of common areas is another ‘must’ according to DeBriere.  She denoted the importance of continuous engagement after construction is complete as part of the healthy environment model’s success.  Additionally, DeBriere noted that meeting LEED standards has become a prerequisite for not only for tenants, but also in the search for institutional partners.

Broad based implementation of healthy building standards will take time.  As discussed by the speakers, the support of key stakeholders and incorporation of such standards in local zoning codes is key to extensive market adaptation.  ULI is currently working on creating easily adaptable zoning ordinances that could be implemented by local governments.  This is in addition to the Building Healthy Places Toolkit and Healthy Corridors study already released.

Creating a built environment that is both sustainable in its built form as well as tenant-oriented has been picking up momentum for several years.  The business case for creating such buildings and communities is only becoming stronger as more tenants request such environments and demonstrate their willingness to invest in a superior experience.

 

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