CREJ

December 2018 — Office Properties Quarterly — Page 9 www.crej.com Workplace Trends U ntil recently, many compa- nies viewed their workplac- es as independent of their core corporate responsibili- ties and sources of profit. Even when they did see the draw of investing in high-performance offices, companies couldn’t quan- tify the financial value. But now there are clear metrics that show the correlation between high- performance workplaces and enhanced productivity, increased retention and reduced absenteeism for employees, which in turn pro- duces significant positive impacts on an organization’s bottom line. A report we recently released provides commercial real estate owner-occupants and tenants with a methodology and dollar value to evaluate the financial impact of high-performance buildings due to occupant benefits. The analysis of a hypothetical company finds that by designing for the occupant, owner-occupants and tenants can gain an estimated $3,395 per employee in annual profit, or $18.56 per square foot. This means a net present value of $21,172 per employee, or $115 per sf, over 10 years, assuming a con- servative $20 per sf cost premium. This total only includes produc- tivity, retention and wellness find- ings. Include utility and mainte- nance savings, and the total NPV of high-performance buildings results in $23,584 per employee, or $129 per sf, over 10 years. • The shift toward human-centric design. This shift toward deriving greater value from human capital is over 40 years in the making. In the 1970s, the U.S. was driven by capital investment and manufac- turing. Today, the foundation of the U.S. economy is services, which are driven by intellectual capital rather than tangible assets. A report by Ocean Tomo demonstrates that in 2015, 84 percent of the S&P 500 was derived from intellectual capital as opposed to tangible assets. If more than 80 percent of a com- pany’s value is based on its people, shouldn’t buildings be designed to optimize their performance and wellness? In alignment with this increas- ing emphasis on valuing human capital in busi- ness, a growing body of research contributed to by the Harvard School of Public Health, Dodge Data & Analytics, and the Center for Disease Control, among many others, has emerged demonstrating the increasing importance of human-centric high-performance building design strategies. Some of these essential design strategies include indoor air quality and ventilation, thermal comfort, natural and artificial light- ing attuned to circadian rhythms, noise and acoustics, active design, views and biophilia. Human-centric design is a grow- ing trend in Denver, where devel- opers are aiming to attract tech tenants and talent by finding new ways to add value through their real estate, matched with a higher quality of life and lower cost of liv- ing compared to primary markets. Leading organizations are redesign- ing their workplaces to actively pro- mote the health and well-being of their employees in the office. This championing of health and well- ness in the office aligns remark- ably well with Colorado companies, given that Colorado and Denver have consistently ranked in the top 10 healthiest places in the U.S. Our report dives into three key areas impacted by human-centric design: productivity, retention and wellness. Using a hypothetical building and organization example based on averages for human-capi- tal-intensive industries, we applied financial impact calculations to findings from over 60 robust peer- reviewed research studies on the effects of high-performance build- ings in the three key occupant impact areas. The numbers may not transfer to every company, but the report provides a baseline method- ology that is easy to apply to any real company. • Productivity. More productive employees translate into more reve- nue. Accordingly, high-performance buildings provide occupants with an indoor environment that best suits their needs at work. Some examples of these strategies include incorporating enjoyable views of nature, immersing workspaces in natural elements through biophilic design, maintaining thermal com- fort and air quality, maximizing natural light while reducing glare, and eliminating common office dis- tractions through smart design to provide both quiet and collaborative spaces for employees. By implementing the strategies above, our research found that own- er-occupiers and tenants in an opti- mized indoor environment could experience as much as a 9 percent gain in occupant productivity. How- ever, due to the varying methodolo- gies behind the reviewed research findings, our research assumes a conservative 3 percent occupant productivity enhancement due to high-performance buildings in its calculations. • Retention. Talent is paramount. But while it is increasingly chal- lenging to attract skilled workers, it is nearly as difficult to retain them. In fact, a recent study of owner- occupiers found that 57 percent of corporate real estate executives identify talent attraction and reten- tion as a key business driver. This is unsurprising, given that employee separation costs can range from 90 to 200 percent of their annual sal- ary. At the average fully burdened salary cost for management, profes- sional and related occupations of $100,000, this means employers pay and lose revenue of at least $90,000 for each worker that leaves the company. High-performance buildings serve as powerful retention tools. People are more satisfied with employ- ers in high-performance work- spaces, as they are designed with the occupant in mind. Our analysis of retention research identified a 1- to 10-percent range in increased retention due to high-performance building design. Given the limited availability of retention research, we estimate a 5 percent increase in retention throughout the report. • Health and wellness. The con- nection between employee well- ness and revenue has continued to strengthen. A recent study found that 75 percent of job seekers care that their potential employer sup- ports and values their health and wellness, and 57 percent are more likely to stay with the company lon- ger if they do. Accordingly, 67 percent of U.S. building owners are interested in creating healthier buildings for people, and 73 percent of employ- ers believe their responsibility to ensure the health and wellness of their employees will increase in the next three to five years. When connected to the environ- ment through generous amounts of daylight and natural materials, and more comfortable due to improved ventilation, thermal systems and the ability to control their environ- ments, employees can realize a reduction in absenteeism through improved health and wellness. Spe- cifically, a large and robust body of research indicates reduced absen- teeism can range from 10 to 50 per- cent in high-performance buildings. Our research uses an estimated 30 percent reduction in absenteeism in its calculations. • Quantifying the benefits: A new way to value cost. By combining these findings on productivity gains, reduced separation rates and decreased absenteeism, the report quantifies the benefits of adopting high-performance building strate- gies for owner-occupants and ten- ants. In the hypothetical example, an organization gains $3,395 per employee in annual profit, or $18.56 per sf. This totals to a combined benefit of $2.78 million per high- performance building in annual profit, or 6.29 percent of total Design for human health provides financial returns Jeremy Attema Project manager, stok Net present value per employee and per square foot over 10 years, assuming a $20 per square foot cost premium. Cumulative studies of key design elements affecting occupants, linking human produc- tivity, satisfaction and health to high-performance buildings. The impact of indoor environmental quality on productivity Cumulative financial benefit of high-performance buildings due to enhanced produc- tivity, increased retention and reduced absenteeism (assuming a 150,000-square-foot space housing 820 employees). Please see Attema, Page 20