December 10, 2018
New Report on the Financial Case for High Performance Buildings -- Why It Matters
The decision to occupy a high-performance building can increase a tenant’s profits by millions during the course of a standard 10-year lease, according to a new report “The Financial Case for High-Performance Buildings” from real estate advisory firm stock. This profit comes from increased retention, more productivity, and reduced absenteeism.
Supported by hundreds of research studies from leading experts, the paper aims to help owner-occupants and tenants track and quantify the benefits of investing in High-Performance Building (HPB) workplaces. As defined by the report, high-performance buildings are those that are designed to improve the occupant experience and improve health and wellness.
These buildings have design elements to optimize thermal comfort, light, air quality, acoustics, and views of nature or natural materials. For example, View Dynamic Glass, a new generation of smart windows let in natural light and views and enhances mental and physical wellbeing by significantly reducing headaches, eyestrain and drowsiness.
Traditionally, the business case for HPBs depended on energy savings and increased asset value as the most appealing incentives. But a much more important avenue of value creation that HPBs deliver is rarely discussed: HPBs benefit the people who occupy them, which in turn can greatly boost company profit.
Why? Because people are a company’s greatest asset. A HPB workplace that enhances their performance and experience can produce a significant positive impact on the business's bottom line. With employees spending nearly 2,000 hours per year at the office, a workplace that fosters productivity, happiness, and wellness is paramount.
Companies have realized that to attract and retain top talent, a workplace aligned with boosting occupant wellness is required and in turn, produces significant positive impacts on a company’s bottom line.
It should be noted that while employee experience is key, the benefits of HPBs extend to materials and resources as well. Real estate is by far the dominant financial asset class globally, worth nearly 3 times the world’s GDP. At the same time, buildings account for over 40% of U.S. and E.U. energy consumption, use nearly 14% of all potable water, and create over 500 million tons of construction and demolition debris in the U.S. alone. Beyond these financial and environmental impacts, humans spend 90% of their lives indoors.
So how can we quantify the benefits of these human-centric HPB design strategies? In the paper, stok applies financial impact calculations to findings from over 60 robust research studies on the effect of HPBs in three key occupant impact areas: Productivity, Retention, and Wellness. In short, stock's sensitivity analysis found that a conservative estimate of 3% enhancement in productivity, 5% increase in retention, and 30% reduction in absenteeism can be realized in an HPB.
Given this, in a 150,000 square foot HPB when enhanced productivity, increased retention, and improved health are accounted for, the occupier of this space is likely to see a benefit of $3,395/employee, or $18.56/square foot annually in bottom line profit compared to conventional buildings. At a conservative $20/square foot cost premium, a company occupying an HPB can realize a Net Present Value of $17M in profit over 10 years due to improved occupant performance and experience alone.
That is clear, quantified, and impactful value that must be accounted for in the delivery of HPBs and spaces. The question is no longer “How much do HPBs cost?”; now it is “How much can my company benefit by working in an HPB?”
The findings provide concrete evidence for prioritizing design strategies that optimize the indoor environment for enhanced occupant performance and experience. The resulting financial metrics allow owner-occupants and tenants to easily make the business case for High-Performance Buildings.
Download the full report here.