My favourite tabloid story of 2017 was probably the one where the ‘Australian real estate mogul’ publicly declared that if millennials wanted to get on the property ladder, they should stop buying avocado on toast [and expensive coffees] and save. As you may recall, the reaction on social media was, to say the least, colourful.
The reason I kick-off with this old not-really-news story is that, as sensational as it was, it encapsulated multiple poignant concepts:Expectations are changing
People are focusing on good, healthy living
Real estate plays a key social as well as economic role in society.
Changing societal expectations
It will be news to no one that as a society we are ever more focused on both our collective and individual health and wellbeing. While the focus intensifies, the emphasis is apparently shifting from exercising and dieting predominantly in order to look good towards engaging with activities, foods and technologies that move us towards total wellbeing. With this, consciously or subconsciously in the backs of our minds, we are increasingly scrutinising the health impact of everyone and thing in our lives, and that includes our employers and the buildings we inhabit.
And what are these ‘wellness-related features of buildings’? To list but a few: safety, comfort, air quality, accessibility, green travel options, healthy food options, green space and daylight.
As more and more of these improved outcomes are tracked and converted into ‘hard’ savings or benefits in this way, tenants are being pushed towards a new way of thinking with regards to their space needs. Small savings on costs per square foot and operational expenses may, in the end, prove a false economy. Gains or losses in occupant health, happiness and productivity may, in fact, impact the bottom line more significantly.
Risks and opportunities for landlords
Admittedly, this conversation is at various stages of maturity within different property and tenant classes. However, in the round, strong health and wellbeing features are increasingly expected to drive faster lettings, higher rents and longer tenancies. ‘Wellness’ also now gets a direct reference in the Royal Institute of Chartered Surveyors most recent guidance on property valuation.
Furthermore, investors are showing greater interest in the health and wellbeing strategies of their asset managers. For example, as of 2019, GRESB (formerly the Global Real Estate Sustainability Benchmark) will include health and wellbeing questions within its main Real Estate Survey.
Lastly, what about legal compliance? Though legislation has traditionally focused on health and safety, rather than health and wellbeing, that could soon change, particularly if issues such as air quality continue to dominate in the headlines. And of course, this is certainly an area where planning requirements are burgeoning.
So, how to manage the risks and unlock the value? Put simply, define and implement a strategy. Take a structured approach: use a ‘management system’ to set out and drive forward your policy, objectives, performance data collection processes, targets and reporting/communications.
As a fundamental first step to defining your house view (and shortly after that policy and objectives), complete a ‘materiality review’ to whittle that long list of wellness issues down to something more focused and that you can meaningfully influence. Avoid attempting to reinvent the wheel: draw on publicly available best practice guidance (e.g. from the World Green Building Council) to inform your review. And take this opportunity to engage with your business and supply chain: ask asset managers, property and facilities managers, and lettings agents what they are seeing in the market and hearing from tenants. This will also help secure the buy-in you will require during implementation.
Naturally, ensure your strategy covers all relevant phases of the property cycle. Incorporating the right considerations at acquisition and during early asset management is just as important as providing property and facilities management with clear procedural responsibilities. For major renovations and new buildings, make sure your project teams are adequately skilled and empowered to integrate health and wellbeing from the very beginning of the project.
Also, try not to focus solely on the office sector. Although this part of the market has undoubtedly led the conversation, other sectors are now stepping into the limelight.
Lastly, consider who you need on your side to ensure a successful outcome. It’s such a broad theme that cuts across so many disciplines. You will need to make sure you have that wider support and engagement: draw down on the expertise of the likes of property managers, facilities, human resources, health and safety, customer services and community engagement teams, where available. Then there’s always consultants...