When the idea of rating properties for building health first materialized, the real estate world largely treated the concept as worthy only if it made strict financial sense. Then the pandemic hit, sending property owners scurrying for the rating to encourage employees, tenants and customers to return.
 
Rachel Hodgdon, chief executive officer of the International WELL Building Institute, wrote in a blog post in January that it took 66 months to reach 600 million square feet enrolled for WELL certification, but “it took less than six months for WELL Health-Safety Rating to reach the same milestone.”

Demand for a similar certification called Fitwel rose 140% last year, according to Joanna Frank, CEO of the Center for Active Design, which manages the ratings system. Frank said that “we have companies signed up I’ve never heard of.”

Both Fitwel and WELL added features to their certification processes to deal specifically with infectious diseases such as COVID-19 now that healthy-building standards are big business. WELL launched a national advertising campaign this year that included celebrities such as Jennifer Lopez, Robert De Niro and Lady Gaga who hawk the WELL Health-Safety seal on physical real estate as a sign it is safe to enter.

Companies and real estate investors have increasingly sought to apply the certifications to an entire portfolio of buildings rather than picking and choosing one-off projects to be certified. Bank branches, fast-food chains and entire hotel portfolios are going through the certification processes.

Office tenants are driving most of the demand for healthy buildings globally, followed by residential, according to a new study done by investment firm BentallGreenOak, which is part of Canada-based Sun Life Financial, in conjunction with the Center for Active Design and the United Nations Environment Programme Finance Initiative.

The study is the result of surveying investment firms with roughly $1 trillion in real estate around the world. Of those, 61% said there was strong demand for buildings rated healthy in the office sector. Another 26% said there was moderate demand. For residential, 45% said there was moderate demand, while 16% said strong demand.

Overall, demand for certifications is likely to continue once the pandemic passes, the study found. About 92% of respondents said they expect demand to grow over the next three years.

Under both certifications, buildings receive scores for specific criteria. Generally, scores rank properties on such factors as indoor air quality, water supply, general sanitation, bathroom cleaning schedules, amount of outdoor space, the level of sunlight available in buildings, healthy food options and walkability.

Before the pandemic, the healthy-building certification leaned toward a nice-to-have rather than a must-have for real estate owners. After all, taking health and wellness into consideration when designing or retrofitting a building costs money. Real estate owners seemed to focus on return of investment when deciding whether or not to pursue certification.

“Today, we rarely get that question because as we navigate the pandemic, the ROI of investing in human and social capital is suddenly so obvious,” said Hodgdon with the International WELL Building Institute.

Paid sick leave is one of Fitwel’s criteria for its new viral response certification. “Having just two days of sick leave” reduces flu transmission significantly, Frank said.

Kilroy Realty Corp., a Los Angeles-based real estate investment trust, uses both standards for its portfolio of office, mixed-use and multifamily properties, which are in California and the Pacific Northwest.

“They are both rigorous,” said Sara Neff, senior vice president for sustainability at Kilroy, about WELL and Fitwel.

Kilroy has a contract to sell The Exchange on 16th in San Francisco, a WELL-certified building that is the headquarters for file-sharing company Dropbox, for more than $1 billion, which would set a price-per-square-foot record for the city despite the mounting challenges the city's commercial real estate market faces in the pandemic.

Kilroy received its most recent Fitwel certification in January for an office building in Santa Monica, California, that was built in 1974 during what Joseph Allen, assistant professor at Harvard University’s T.H. Chan School of Public Health, has described as the “era of sick building syndrome.” Energy efficiency took precedence over health and infectious disease.

Kilroy applied for the certification before the pandemic and "had to open stairwells" as one of the criteria for obtaining Fitwel certification, said Neff.

The Santa Monica building also has a LEED certification, as does the office building Kilroy is selling.

Kilroy was one of the early adopters of the healthy-building standards, having been among early pilots for the Fitwel certification. It recently earned Fitwel’s “Excellence Award” for having the most certifications.

Pasadena, California-based Alexandria Real Estate Equities earned an award for the all-time highest score with its Alexandria LaunchLabs at the Alexandria Center at One Kendall Square in Cambridge, Massachusetts.

Alexandria, which counts coronavirus vaccine makers Pfizer and Moderna among its office tenants, touts its healthy-building certifications with Fitwel and WELL to investors.

The company said in its February annual report that it became the first one to achieve the highest designation with Fitwel’s new viral response certification in October 2020 and received WELL’s first health-safety rating the following month for its laboratory space at Alexandria LaunchLabs in New York City.

Neff said the life sciences companies in Kilroy’s buildings are particularly fond of healthy-building certification.

“Those tenants want to walk the talk,” Neff said.

Plano, Texas-based Aimbridge Hospitality started on WELL certification for its portfolio, which includes 1,550 properties in 49 states and 21 countries, last year. It earned the WELL Health-Safety Rating touted by the celebrity-driver advertising on 96 initial hotels in North America. The company has another 209 hotels enrolled to obtain the certification, with the goal of adding more, according to the company.

Elie Khoury, executive vice president of operations for Aimbridge, said the goal was to have the company's associates feel safe and comfortable coming back to work by going through the safety training themselves, as well as building confidence among hotel guests as the industry recovers with group business that vanished during the pandemic.

The visible WELL seal on the hotels is a way for consumers to connect the dots with seeing it on sports and entertainment venues, then retail and office space, and "connecting the dots is really powerful messaging," Khoury said.

The International WELL Building Institute launched its first standard in 2014, and the Center for Active Design introduced Fitwel in 2016.

From a cost standpoint, Fitwel tends to be less than WELL.

That might stem from Fitwel being a nonprofit, while WELL is a for-profit venture that includes billionaire Bill Gates among its backers and alternative medicine doctor Deepak Chopra and actor Leonardo DiCaprio on its board.

Fitwel has its foundation in government. The Centers for Disease Control and Prevention and the U.S. General Services Administration developed Fitwel starting in 2011 in a partnership with New York City. Government buildings were used to pilot the standard.

Fitwel and WELL complement the Leadership in Energy and Environmental Design, a green-building certification process started in the mid-1990s that took years to become a must-have in real estate development.

Fitwel’s registration fee is $500 compared to $2,500 for WELL. A building just shy of 2 million square feet costs $10,000 to score on Fitwel.

Under WELL, the price is 16 cents per square foot for non-industrial buildings but capped at $98,000. WELL charges $6,500 for on-site performance testing costs. Industrial buildings cost 8 cents per square foot.