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

36 Pages Posted: 17 Feb 2021 Last revised: 10 Mar 2021

See all articles by Zhengzhen Tan

Zhengzhen Tan

MIT Center for Real Estate, MIT Sustainable Urbanization Lab

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate

Juan Palacios

Massachusetts Institute of Technology (MIT) - Center for Real Estate; IZA Institute of Labor Economics

Carl Hooks

Massachusetts Institute of Technology (MIT) - MIT Sustainable Urbanization Lab

Date Written: February 12, 2021

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.

Keywords: Healthy Buildings, Building Certification System, Value Proposition, Real Estate Value, Healthy Office, IEQ

Suggested Citation

Tan, Zhengzhen and Zheng, Siqi and Palacios, Juan and Hooks, Carl, Market Adoption of Healthy Buildings in the Office Sector: A Global Study from the Owner’s Perspective (February 12, 2021). MIT Center for Real Estate Research Paper No. 21/07, Available at SSRN: https://ssrn.com/abstract=3784793 or http://dx.doi.org/10.2139/ssrn.3784793

Zhengzhen Tan (Contact Author)

MIT Center for Real Estate, MIT Sustainable Urbanization Lab ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA MA 02139-4307
United States

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

Juan Palacios

Massachusetts Institute of Technology (MIT) - Center for Real Estate ( email )

United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Carl Hooks

Massachusetts Institute of Technology (MIT) - MIT Sustainable Urbanization Lab ( email )

77 Massachusetts Avenue
Cambridge, MA 02139
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
100
Abstract Views
566
rank
314,333
PlumX Metrics