How COVID-19 has shifted the spotlight to ‘healthy buildings’

Center for Active Design CEO & President Joanna Frank joins Yahoo Finance Live to discuss how COVID-19 is accelerating investments in “healthy buildings”.

Video Transcript

[MUSIC PLAYING]

ZACK GUZMAN: Welcome back to "Yahoo Finance Live." What if I were to tell you that before-- even before the pandemic, investors and occupants alike had been increasingly looking for healthy buildings? That is, of course, one of the findings from an interesting new survey out looking at global real estate investment managers and stakeholders representing about $6 trillion in assets under management in a way that a lot of occupants and investors are turning to healthy buildings.

And I want to bring on one of the authors of that study with us here right now. Joanna Frank is Center for Active Design CEO and President. And Joanna, when we look at the study, obviously the first thing that jumped out to me was what does it really mean to be a healthy building?

So maybe we'll just start there, because there's a lot of different definitions that might come with it. And a lot of people might expect that that's a direct result of the pandemic, but that's not what you guys found. So-- so how would you-- I guess we'll start with how you define a healthy building and why the interest was there all along.

JOANNA FRANK: Sure, absolutely. Thank you. Good morning, everyone. So a healthy building is kind of three things, I would say. First of all, it's responding to its occupants. So every building needs to actually kind of prioritize the people it's serving when it comes to health.

The next thing is really that that building or the owners of that building are following strategies that are backed by the evidence base coming out of public health research. And there's 100 years of that that we can look at, so plenty of evidence. So they're really prioritizing the strategies that have already been shown to impact the health of the occupants of buildings.

And I'll just give you a quick example of what we mean by that. So there's a lot of evidence around stair use. So if you walk into a building and in the lobby you see a stair, as opposed to the stair being kind of tucked away behind a steel door in the corner, you are 50% more likely to take that stair. And just six flights of stairs a day can offset the average annual weight gain of an American. So you can see just how impactful that small decision around design can have on people's overall health and health outcomes.

And then the last part of being a healthy building is really that you are actually measuring and have measurable impact on the health of your occupants, which is really important. Especially when it comes to investors, we really need to demonstrate with metrics how we are impacting health and why that matters for business. So health of your occupants, whether they're tenants or your employees, impacts satisfaction, impacts levels of trust, and it's also impacting the overall value of your property in commanding premium rents.

AKIKO FUJITA: Where does wellness fit into all of that? There's been a lot of talk about mental health and how a lot of offices are rethinking that component. You talked about three qualifiers there. Where do you fit mental health in that?

JOANNA FRANK: Absolutely. So when we talk about health, that's an integrated part of health, so we're talking about holistic health. So we're talking about physical health, mental health, and also social health, which is kind of that level of trust. Trust in one another is very much impacted by the design, and operation, and maintenance of our buildings and our built environment, generally.

So mental health has obviously been deeply affected by the COVID pandemic. It was already in a poor state before. Actually, mental health accounts for the greatest percentage of disability from work globally, according to the World Health Organization. But something as simple as access to daylight, access to well-maintained greenery in a building, the air quality of the building actually impacts, measurably impacts people's mental health.

ZACK GUZMAN: Yeah, I imagine at a time right now, too, when we're talking so much about people staying in this virtual setting, not even going back into the office, that that premium would be rather important in terms of investment in healthy buildings, ones that you're describing, because they actually sound very good to be working in. So I mean, how much of that is really what's going on behind the scenes when you think about the excitement from investors out there knowing that maybe that premium is only going to get higher if-- if people really don't want to go back into offices that aren't that nice?

JOANNA FRANK: Absolutely. I mean, I think, in speaking to these investors, we didn't just survey them, we also interviewed folks, that there has been a connection now made between investors in portfolios of property and the individuals in those individual assets in a way that there really wasn't that connection before. So now as an investor, I care deeply about the trust of an individual who's in a property that I invest in. And having made that connection, that's really something that will never change, according to the folks that we interviewed.

Over 90% of them said that they're going to continue to prioritize healthy strategies and metrics around health going forward. So after the pandemic finishes, this is a trend that is not going to finish. It's not going to end with the end of the pandemic. I think this is gone from being a nice-to-have, promoting health was nice to have before the pandemic, and now it's essential. You have to be able to answer for your tenants, for your employees how you are not just protecting their health, but promoting their health, because they are demanding it.

AKIKO FUJITA: And Joanna, this is a discussion that was already happening pre-pandemic. But to what extent has the pandemic accelerated those investments? And how big of a bump are we talking about?

JOANNA FRANK: Sure. Absolutely. I mean, this is a trend that's been going on for 10 years. We actually started-- the actual design movement was launched by Michael Bloomberg at the end of the administration. So this has been a long haul for us, but this is very new for most investors.

So yes, there was a rise in demand. We were seeing a pretty steep rising demand. We run a healthy building certification called Fitwel. We were seeing 80% increase year-on-year before the pandemic. So there was absolutely demand before. In 2020, we had 190% increase in use. And the fourth quarter was actually over 600% increase in demand for Fitwel for the building certification.

So just in our own kind of world, we were seeing this increase in demand and building on this strong foundation that some of the early adopters in the market had already moved towards a healthier building movement, because there was already a return on investment argument that could be made and is actually demonstrated through research. So it has grown, and COVID is undoubtedly an accelerator. And we see that in the data.

AKIKO FUJITA: Joanna Frank, Center for Active Design CEO and President. Interesting perspective there. Appreciate your time.