LEED, BREEAM…and now WELL? Sustainability certifications for commercial real estate

14 years ago, a paper was published that illustrated how energy-efficient office buildings are quite a good business case for investors. Building certification programs like LEED ("Leadership in Energy and Environmental Design”), EnergyStar, and BREEAM (“Building Research Establishment Environmental Assessment Methodology”) are used as a signal of the energy efficiency of buildings. Research has provided evidence of the positive impact of such certifications on real estate values. While the main focus of LEED and BREEAM is the energy efficiency of a building, there is also a small focus on providing an indoor climate that supports (or at least does not harm) human health. However, recently a new certificate was created which makes this very point its purpose.

The WELL certificate is used to signal that a particular building provides a healthy indoor climate which also increases the satisfaction of its occupants. This could be again a relevant business case for tenants of office buildings. Sickness absenteeism and dissatisfaction with the indoor environment among employees are a problem for businesses and can lead to tangible economic costs. Especially after the COVID-19 pandemic, which increased the options for working from home, businesses face pressure to provide their employees not just with an office space, but with an office space that is superior to their home environment and incentivizes employees to come to the office.

However, this leads to two questions. Firstly, does a WELL-certified office building really have a better indoor climate in terms of air quality? Secondly, are employees who moved to a WELL-certified building more satisfied and perceive fewer health symptoms? Two important studies examined these questions and came to surprising conclusions. The results of the first study show that WELL-certified office buildings do not necessarily provide healthier indoor air quality. Surprisingly, satisfaction with the air quality among employees was still higher compared to before the re-location (see figure below). A second study by the same team of authors confirmed that moving to a WELL-certified building does not necessarily lead to a higher satisfaction rate with the indoor climate, but some small improvements in health symptoms.

Licina And Langer 2021

Figure derived from Lina and Langer (2021), Figure 5, page 8.

Does that mean now that the money spent on certifying a building with WELL is not worth it? Unfortunately, this question can still not be answered. There are numerous papers about how poor air quality or too high temperatures affect the health and cognitive performance of individuals. How that translates into economic costs for businesses and commercial tenants is still poorly investigated. However, this is necessary to compare the tangible costs of renovations to improve a building's indoor climate (and the costs of certification) with the less tangible economic benefits of healthier, more satisfied, and more productive employees in office buildings. Without this comparison, no business cases can be made on how to invest in a building envelope in a profitable way, profitable for investors and tenants.

Disclaimer: The author of this blog post has no affiliation with any of the mentioned certification institutions.