Wellness and productivity are significant considerations for businesses, as staff costs typically make up 50%–85% of the budget [1
]. When office conditions (poor indoor air quality, thermal discomfort, poor lighting, etc.
) negatively affect productivity or employee health, the economic impact for the company is significant [2
]. While energy costs (either paid directly or indirectly) represent a small fraction of the total cost of doing business for the average occupant, wellness features can have a much larger impact; consequently, there is increasing discussion in the Corporate Real Estate (CRE) industry on how to improve occupant health and wellness. A recently published standard that is receiving substantial industry attention and has been adopted by several Green Building Councils (e.g., ref. [4
] is the WELL®
Building Standard [5
], which was created to allow certification of buildings designed and operated to promote occupant wellness. This paper is not intended to evaluate the effectiveness of this standard in promoting wellness, but uses it as a conceptual framework to evaluate factors known to affect wellness within a larger context.
Concurrently, market demand for high building energy performance is driving increased investment to achieve higher building energy ratings by Real Estate Investment Trusts (REITs) [6
] and increasing adoption of sustainable certifications in the larger CRE community [7
]. Because energy retrofits are commonly occurring in buildings, this provides an opportunity for incorporation of wellness enablers. This paper discusses the holistic benefits of such retrofits and presents a framework to evaluate potential approaches (“retrofit bundles”) that considers wellness impact and energy efficiency, as well as commercial/financial implications, risk management, and occupant satisfaction (qualitative) issues, within a commercial real estate context. A sample case study using real building data is provided to demonstrate the use of this framework as a decision-making tool.
2. Wellness and Energy Efficiency in the Building Context
Current benchmarking and available data have shown that as the market for sustainable buildings is growing globally [10
], the Commercial Real Estate (CRE) industry is embracing investment in this area [11
]. As Environmental Product Certificates for buildings (i.e.
, building energy labels) become adopted increasingly internationally [10
], Both large empirical industry studies [15
] and academic research have found that high sustainability certification ratings lead to statistically significant decreases in vacancy rates (10%) and increases to property value (10%–25%) [17
]. A comprehensive review [19
] of academic papers and industry surveys demonstrated both increased rental rates for sustainable and energy-efficient properties and a willingness by the majority (70%) of tenants to pay a premium to occupy such properties. In similar research, poor energy performance has correlated with reduced rental rates [20
], reinforcing the commercial importance of energy performance.
Energy conservation measures (ECMs) reduce energy consumption and thus directly impact the operational costs of a building, motivating the party responsible for paying utility bills to invest in ECMs providing an acceptable payback period. Incentives further improve the financial attractiveness of these measures, either in the form of a cash rebate, reduced development charges or building permitting fees, or decreased tax burden. Regulatory pressures such as Mandatory Building Energy Labelling [22
], along with local legislation—both incentives and carbon taxes—provide additional motivation for these improvements [1
]. Indirect benefits of the ECMs also result in economic benefit to the owners, such as Green Premium rental rates and increased absorption and lower vacancy rates due to tenant retention and attraction to more sustainable buildings [16
]. Conversely, poor performance has been correlated with tenant relocation from the property [22
This combination of factors can be used to support a strong financial case for landlords to improve the energy efficiency of their buildings, although research has shown that this can be complicated where a split incentive exists [23
]. Landlords charging on a gross rent
basis avoid the split incentive dilemma as they will benefit directly from decreased operating costs (and thus increased net operating income (NOI)) from any energy savings. Conversely, when they charge on a net rent
basis, the tenants pay their own utilities and thus there is no direct financial benefit to the landlord. That said, it has been demonstrated [12
] that lower occupancy costs due to low utility rates attract and help retain tenants and in many instances simultaneously allow a Green Premium rents to be charged, providing an identifiable, albeit indirect, payback.
From a tenant perspective, if paying their own utility rates and given an adequately long lease (i.e.
, exceeding the payback period), several fit-out ECMs are financially viable, and the scope of these increases in instances where the landlord shares the burden of investment. Those tenants paying Gross Rents, however, have difficulty justifying investment in ECMs, unless these are inherent in renovations and retrofits addressing wellness and thus improving employee productivity and satisfaction [24
After the 1970s oil crisis and the rise in energy conservation retrofits, “Sick Building Syndrome” prevalence began to rise, with fully air-conditioned buildings most typically affected [25
]. Recent research has identified increased productivity with increased ventilation rates. For example, Wargocki et al.
] correlated performance improvements of 1.7% for each doubling of ventilation rate for tasks simulating “normal office work”. Indoor air pollution is known to negatively affect cognitive function, overall health and absenteeism [2
], while daylighting has been correlated with improved performance [28
] in school due to improved visibility due to higher illumination levels and better light quality, mental stimulation, and improved mood, behavior or well-being. In the healthcare context, studies have shown that access to daylighting where the patients have control over the lighting levels and blinds result in improved patient outcomes and more rapid recovery [29
]. Given the impact of the building environment on health and productivity, neither occupants nor landlords can afford to overlook the factors affecting occupant wellness in buildings when planning investment in buildings. Where occupants are aware of these factors, e.g., where post-occupancy or employee health studies have been undertaken, they are often primary drivers in the decision to either (a) remain in the building, (b) vacate, or (c) remain only if remediation work is done.
Significant research has been undertaken within the healthcare/hospital context in the United Kingdom to identify best practices for wellness in buildings. The National Health Service in the UK developed a progression of Toolkits [30
] to evaluate and guide hospital design to facilitate improved working environments for staff and a better therapeutic environment for patients. The key factors rated within the staff and patient environment section of this guide include views, access to outdoors, thermal comfort, thermal system controllability, attractiveness of building, understandable building navigation, good sanitation facilities for patients, and good relaxation spaces for staff. A complementary report [32
] looked at the recruitment, retention and performance of nurses in the same context, and how this is impacted by elements of the building itself and the hospital design. This report found that the quality of external space and the internal environment were the two most important factors in nurse retention, above space functionality, staff facilities and civic value. Within these two areas, the most important factors raised (which could be affected by a retrofit) were access to sufficient parking, public spaces fostering interaction and controllability of the environment (i.e.
, temperature control). Some survey respondents even indicated that “the ability to control the local environment in which they worked could have an impact on the sickness levels of staff”.
The discussion of wellness and building design does not simply apply to hospitals. Post-occupancy evaluation and occupant satisfaction studies are widely used in a variety of commercial, institutional, residential and industrial buildings, and are often the only way for a building owner or occupant to understand what may be driving reduced productivity. The Building Use Studies methodology [33
] was the original method to evaluate occupant satisfaction, beginning in the 1990s. Because it has been in long-term use, it is possible to benchmark levels of occupant satisfaction against a large database of results for similar buildings. This methodology is summarized in twelve indicators to summarize the overall building performance: summer temperature, winter temperature, summer air quality, winter air quality, lighting, noise, comfort, design, needs, health, image to visitors, and perceived productivity, the latter of which most clearly demonstrates the economic benefits of wellness in buildings.
5. Demonstration: Application of the Framework
This section presents the proposed framework applied to a historical project delivered using the previously published methodology ([37
], summarized below) to demonstrate how wellness evaluation would affect the decision-making process for a variety of weighting factors. This presentation of the project differs from the real-life case because wellness and qualitative factors had been considered as a single category, rather than separated. All data presented is based on the initial analysis; the difference in application is the sub-categorization of these factors, and the exploration of the impact of different factors as demonstrated in the demonstration project (Section 5
). Note also that the intent of this section is to demonstrate the application of the framework and subsequent evaluation, not to comprehensively evaluate its effectiveness. Future research will undertake additional case studies to achieve the latter.
5.1. Building Context and Stakeholder Priorities
The project under consideration was a low-rise, 3300 m2 commercial office building in North America seeking to attract new tenants. The stakeholders involved in the analysis were the property owner and the asset management firm acting on their behalf. Because the goal of the retrofit was to attract new tenants, their needs were based on the asset manager’s experience with comparable buildings in the immediate area, and current market demands and leasing trends. These were reflected in the following priorities: Demand for high energy performance (reflected in a “green premium” included in the rent for buildings where applicable), a high degree of thermal comfort, moderate concerns regarding acoustic comfort, and the desire for daylighting.
The first step in this process was a kick-off charette where the stakeholder priorities were collected through a semi-structured interview regarding known building conditions, market demands, prospective tenant profile and associated needs, risk appetite of the owner, minimum acceptable financial performance, and sustainability/energy performance goals. This discussion allowed the weighting factors for each category (financial, environmental, risk, wellness, and qualitative performance) to be assigned, and individual wellness, qualitative, and risk drivers factors to be categorized and assigned a priority factor (Wp). These priority factors as well as the overall category weighting factors were presented to the stakeholders after this charette and agreed to be appropriate and thereby formed the basis of the bundle development.
Four bundles were developed based on a site walk-through to evaluate the existing conditions of the building, including equipment requiring replacement and damages, and represented significant increases in the scope of the renovation. These bundles are summarized in Table 4
Summary of renovation bundles.
Summary of renovation bundles.
|Factor||Baseline||Bundle 1||Bundle 2||Bundle 3||Bundle 4|
|ECMs||RTU replacement with standard efficiency||Baseline, plus lighting upgrade; low-flow fixtures||RTU replacement with high-efficiency air-source heat pumps; lighting upgrade; low-flow fixtures||Bundle 1 plus: gas boilers; domestic hot water heater changed to gas-fired; VAV units provided with gas reheat to replace baseboards||Bundle 3, plus 10 kW roof-mounted photovoltaic array|
|Qualitative/Occupant Experience Elements||Demolition of previous layout, Worn finishes replaced||Same as baseline||Same as baseline||Lobby and washroom renovations; upgraded ground floor tiles||Same as bundle 3|
|Wellness-enabling elements||Replacement of worn finishes (drywall, etc.)||Same as baseline||Baseline plus: Improved controls from electric reheat||Baseline plus: Improved control from VAV; reduced VOCs in new lobby materials||Bundle 2 plus reduced VOCs in new lobby materials|
Financial and environmental analysis was undertaken as a single process as follows. For each bundle, a conceptual design was developed and this was used to develop a simplified energy model to predict ongoing energy costs and associated GHG emissions, as well as to develop the construction cost estimate and duration estimate. The outputs of this analysis were used to predict operational (energy and maintenance) costs. Income (rent) was estimated based on lease conditions in comparable buildings within the immediate area, such as typical rental rates, lease-free period, and potential green premium rents (limited to Class A buildings capable of meeting the LEED® EB:O&M pre-requisites). Finally, the discount rate used was the minimum internal rate of return acceptable to the property owner. To evaluate the drivers in the qualitative, wellness, and risk mitigation categories, the performance of each bundle with respect to each individual driver was evaluated on a Likert Scale from −3 (very poor performance) to +3 (extremely good performance/best practice). These performance values are then used to calculate an overall performance as presented for wellness in Equation (4). For each category, each performance rating is multiplied by the priority weighting for the driver, and summed to obtain Qi, Wi and Ri, respectively. While each driver is not truly independent of the others, the simplification of considering each driver individually is expedient and necessary for ease of use of this methodology. The evaluation and model development to address relationships between individual drivers this model warrants future research.
presents the financial and risk performance results. The degree to which qualitative factors and wellness-promoting features were integrated in these bundles were calculated for each bundle in Table 6
and Table 7
Financial and risk performance.
Financial and risk performance.
|Factor||Baseline||Bundle 1||Bundle 2||Bundle 3||Bundle 4|
Qualitative factor evaluation.
Qualitative factor evaluation.
|Qualitative Driver||Wpq||Baseline||Bundle 1||Bundle 2||Bundle 3||Bundle 4|
|Disruption & Potential Vacancy Period||1||0||2||2||3||3|
|Performance Prediction Accuracy||0.5||0||3||2||2||2|
|Remaining Life of Building/Major Systems||0.5||2||2||2||2||2|
|Compliance with Market Standards (OBC etc.)||0.8||3||3||3||3||3|
|Qualitative Experience Score (Qi)||–||0.57||1.73||1.65||1.98||1.90|
Wellness enabler potential evaluation.
Wellness enabler potential evaluation.
|Wellness Enabler||Wpw||Baseline||Bundle 1||Bundle 2||Bundle 3||Bundle 4|
|Comfort—indoor noise level||0.5||0||−1||1||3||1|
|Daylight—access to natural light||0.3||−1||0||0||0||0|
|Daylight—access to views||0.3||0||0||0||0||0|
|Air Effects—improved air distribution||0.3||0||0||2||2||2|
|Air Effects—low-VOC materials||0.3||1||1||1||3||3|
|Wellness Enabler Score (Wi)||–||−1.0||1.8||2.4||6.0||3.0|
These tables indicate the highest financial performance for Bundle 4, and highest risk, wellness and qualitative performance for Bundle 3. Table 8
presents the holistic scores for these bundles in three hypothetical scenarios: (1) all factors rated equally; (2) risk weighted most heavily, followed by cost, then qualitative and wellness (WR
= 0.6, WC
= 0.2, WQ
= 0.1); and (3) cost weighted most heavily, followed by risk, then qualitative and wellness (WR
= 0.2, WC
= 0.6, WQ
= 0.1). The preferred bundle for each weighting factor combination has been indicated with bold text.
|Weighting Factors||Baseline||Bundle 1||Bundle 2||Bundle 3||Bundle 4|
|WC = 0.6, WR = 0.2, WQ = WW = 0.1||0.16||0.42||0.70||0.75||0.87 *|
|WC = 0.2, WR = 0.6, WQ = WW = 0.1||0.47||0.75||0.78||0.92||0.72|
|WC = WR = WQ = WW = 0.25||0.22||0.59||0.69||0.90||0.77|
5.4. Project Recommendations and Conclusions
In the historical project, risk and qualitative/wellness effects were considered to be the most important, leading to the recommendation and stakeholder acceptance of Bundle 3, which formed the basis for the renovation and resulted in rapid leasing of this property. This example demonstrates the effectiveness of this framework to balance multiple stakeholder priorities and allow for a customized and optimized evaluation of potential retrofits.
6. Recommendations and Conclusions
Energy conservation measures provide direct, quantifiable savings when incorporated into building retrofits and have become a standard component of renovations; however wellness enabling by these retrofits can achieve a far higher economic value to the occupier than the energy conservation measures themselves when productivity is considered. Given that the ratio of salaries to energy costs borne by the average business are often on the order of 100:1 [1
], a 1%–2% improvement in productivity will more than exceed the total energy cost. Where poor conditions exist, reducing the corresponding decreased productivity is quantifiable and well-documented in the literature.
While many wellness enablers are also beneficial to improving energy efficiency, for example improved daylighting, others such as increased outdoor air provision are associated with increased load. In buildings where there are few to no complaints regarding air quality and temperature, caution is recommended in relying on any productivity improvement to offset costs associated with the increased load, because the majority of studies compared good vs. poor conditions, rather than good vs. better. Within the context of building retrofits, however, other energy savings will offset these increased operational costs and while the maximum possible energy savings will not be achieved, the potential increase in productivity justifies this type of intervention as part of equipment replacement.
The proposed framework aligns wellness enablers with complementary energy conservation measures and provides a methodology to evaluate retrofits not only from an economic perspective, but also including a range of environmental, risk, wellness and occupant experience drivers. By using this approach, renovations can be evaluated holistically to meet the specific priorities of the stakeholder group and thus promote healthy work environments while achieving simultaneous energy savings.
Limitations to this current research warranting further exploration are a lack of comprehensive assessments on the economic benefits of specific wellness-promoting building strategies, particularly within the commercial office context, and of their interactions. Further exploration of this theme in other contexts is also warranted to reflect the differing nature of “productivity” across sectors within specific contexts (particularly commercial offices), and their interaction. The WELL Building Standard is also in its very early stages of adoption and is expected to evolve over time, as emerging research in public health and productivity leads to the identification of new wellness enablers and strategies.