There’s no shortage in terms of challenges within commercial real estate (CRE) currently. Occupancy rates are struggling at 35%, budgets for investment are being stretched and many occupiers are reviewing whether to renew their lease, take up new space or ditch the office altogether.
Ensuring that your space both meets the needs of your prospective tenants whilst keeping future demands in mind is of utmost importance to landlords and owners alike. And with budgets scarce, choosing the right areas to invest in is even more important.
So what do tenants demand from their workplace?
AirRated’s latest research suggests that building location and health are the two leading office features that prospective tenants are looking for, followed by sustainability and amenities.
With location a factor that’s hard to control for existing building stock, the demand for healthy buildings, alongside that of sustainability has put increased importance upon ESG initiatives and reporting across commercial real estate.
Having gained momentum pre-pandemic, sustainability reporting across real estate has become increasingly popular. The Global Real Estate Sustainability Benchmark (GRESB), is the global benchmark for real estate and infrastructure investments and in their most recent reporting period assessed 2,084 real estate portfolios, 172 infrastructure funds and 687 assets, collectively representing USD 8.8 trillion in gross asset value (GAV).
Whilst sustainability is of significant importance (AirRated’s research suggests that 76% of office workers felt that sustainability had become more important to them over the last year), the demand for healthy buildings has significantly increased in the wake of the COVID-19 pandemic and shifting tenant demands also.
In a study conducted by the United Nations Environment Programme Finance Initiative (UNEP FI) and the Center for Active Design (CfAD) in 2021, the majority of landlords reported an increase in the demand for healthy buildings, with 92% expecting this to grow over the next three years thru 2024.
It was also revealed that tenants were a large factor in driving demand across sectors, with offices seeing the highest level of demand amongst tenants.
So why are tenants demanding healthier spaces?
General awareness of indoor air quality is increasing amongst office workers. According to AirRated’s data, in the past year, 92% said their awareness had maintained or increased having grown during the pandemic, whilst 80% state that they understand how IAQ impacts their health and wellbeing.You can read more about the science behind air quality, productivity and health here.
There’s also extensive research into the impact healthy indoor environments have on our productivity. Results from the COGfx Global Buildings study in 2017 showed that occupants’ cognitive function test scores doubled in good indoor air environments.
Healthy buildings could also hold the key to bringing employees back to the office too. AirRated’s research found that 78% of employees would be more likely to come into the office if it had an associated healthy building certification, whilst 69% of office workers said a lack of transparency around indoor air quality performance would influence their decision to work for an organisation.
With organisations such as HSBC, Goldman Sachs and Citigroup ordering staff back to the office at least three days a week, it’s vital that landlords and occupiers are ensuring that their workplace offers what their employees are looking for.
While tenant satisfaction is high on the list, other challenges around health and absenteeism, as well as differentiating their assets are key motivations for landlords and investors.
The health of employees is becoming an increasingly important aspect due to the impacts of both absenteeism and presenteeism post-pandemic.
Absenteeism is the term used to describe an employee being away from work for more than is reasonable or usual; presenteeism describes being present at work, but performing at low levels due to feeling unwell.
In the UK the average amount of days lost in 2022 was 5.7 per employee, with a sharp increase post covid. CIPD research from 2016 placed the cost of absence per employee per year at over £500, this is likely to have increased since then.
Issues with presenteeism can be linked to poor indoor air quality and cognitive performance as demonstrated by the COGfx study referenced earlier.
How else is IAQ future proofing real estate?
New legislation is always a potential risk for any landlord, and regulations relating to indoor air quality are high on the agenda in both the UK and the US.
In the UK, a new Clean Air (Human Rights) Bill is at first reading stage within the House of Commons and would establish a right to breathe clean air. The bill would require the Environment Agency and the Committee on Climate Change to review pollutants and limits annually, including for indoor environments. This would potentially lead to new legal requirements for indoor air quality in public spaces as well as in workplaces.
The UK’s Chief Medical Officer, Professor Chris Whitty, focussed on the threat of air pollution to human health and the need to increase legislation to improve health outcomes in his annual report at the end of 2022.
“Air pollution is one of the biggest environmental threats to health in the UK, and although substantial progress has been made to reduce harmful levels of pollutants, more needs to be done.
“The adoption of national and local strategies will be vital in reducing indoor and outdoor air pollution across the country. But that has to start with the UK government making a bold long-term commitment to a reduction in air pollution.”Professor Chris Whitty, UK Chief Medical Officer.
The US on the other hand has seen the White House host the first ever Indoor Air Quality Summit in 2022, while New York officials proposed two new indoor air quality bills earlier this year. This was in response to the major pollution event caused by Canadian wildfires that led to New York experiencing unprecedented levels of air pollution.
What are landlords doing to make their buildings healthy?
Investors are typically looking at ways to enhance their health and wellness strategies going forward. The CfAD’s research suggests that collecting the right data and communicating it in the right way are the most pressing issues to be addressed going forward.
The majority of respondents also suggested they were looking to pursue healthy building certifications and align with best practice, both go hand in hand. This is particularly the case if you undertake one of AirRated’s certifications which benchmarks your buildings performance against commercial real estate worldwide and IAQ best practices.
Looking for support?
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We’ve certified over 10 million sq. ft of real estate projects across the world, working with some of the best property marketing teams to make their buildings both healthier and more attractive to prospective tenants.
We’ll help you work out whether certification is right for you and if so, how you can position the AirScore both to your internal and external stakeholders.
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