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Penetration into non-residential real estate is slow

By Yanika Liew

As the economy transitions into pre-pandemic levels, health and wellness aspects are well on their way to be expected in residential real estate. These same trends are slowly but surely entering into commercial, retail or office environments. It all goes hand-in-hand with sustainability. 

“Developers and landlords would generally look into incorporating the health and wellness aspect as part of their bottom line, as it’s part of the social aspect when advocating for environmental, social and corporate governance (ESG) initiatives,” Knight Frank Malaysia research and consultancy executive director Amy Wong said.

When it comes to office and commercial real estate, Wong noted that the implementation of wellness features typically focused on the design, operation and maintenance of buildings. 

“If you are not well, you can’t work, and that affects productivity. Good health is good business,” Wong said.

Fitness-centred facilities such as green spaces and multipurpose wellness rooms are what the general public thinks of when we talk about health and wellness. However, according to the Global Wellness Institute 2021 report, these are active wellness features and are only one aspect of wellness in real estate.

These features are targeted at improving the physical and mental well-being of the building occupants. Safer building materials, improved indoor air quality, soundproofing and the incorporation of biophilic designs are passive wellness features, which make up the remaining half of health and wellness in real estate.

“While business owners may have concerns on tangible financial returns, wellness-led initiatives do help improve occupational wellbeing and attract new talents, reducing financial and operational costs in the longer term,” Wong said.

The Knight Frank Intelligence Lab reported that implementing wellness as part of a business owner’s social responsibility can help build stronger branding, attract investments and remain competitive within the industry.

According to research done by Knight Frank in 2021, green-rated office buildings, which incorporate health and wellness aspects, in London and Australia yielded 8-18% price premium and 3-13% rental premium when compared to equivalent buildings without green ratings.

Holistic sustainability

The research showed that demand for such buildings was high, supporting income and reducing vacancy rates. Green-rated office buildings are also futureproofed against legislation and obsolescence risks, lowering the risk premium and yield of such assets.

“To date, there are 95 office spaces and 43 retail spaces in Malaysia certified by The International Well Building Institute (IWBI), a global organisation that certifies health and wellness measures of projects and buildings,” Wong said.

Green building certifications such as Green Building Index (GBI) and Leadership in Energy and Environmental Design (LEED) emphasise health and well-being as a whole through active design and building materials. Malaysia boasts more than 300 GBI-certified and 80  LEED-certified commercial properties nationwide, with hopefully an increase in the future.

When it comes to industrial real estate, there is less emphasis on health and wellness aspects. However, there are a few industrial parks such as Elmina Business Park and i-Park @ Senai Airport City implementing wellness features.

These features are typically the provision of equitable worker accommodation and community facilities, such as recreational parks, green spaces and sports facilities.

“Post-Covid, employers are looking into ways to reconfigure workplace designs to address employees’ concerns of risks of diseases as well as ways to promote physical and mental wellness,” Wong said.

“Increasing tenant demand and the growing emphasis on health as part of ESG initiatives could lead to a rise in interest for healthy and health-enhancing buildings amongst real estate investors,” she added.

When it comes to customer demand, Zerin Properties commercial head Jack Chong noted that office tenants are increasingly looking at health and wellness aspects in their commercial real estate decisions. 

“The trend is driven by a growing awareness of the importance of employee health and well-being, as well as the recognition that a healthy workplace can improve productivity, reduce absenteeism, and enhance employee satisfaction,” he said.

The trend towards health and wellness in commercial real estate is likely to continue, he noted, with a growing interest among building owners and developers in creating healthy and wellness aspects in their commercial real estate. 

“To meet this demand, I think some of the building owners and developers have begun to incorporate features such as natural lighting, air purification systems, fitness facilities, and green spaces into their buildings. In addition, there are a number of certification programs, such as WELL and Fitwel, that provide guidelines and benchmarks for creating healthy and wellness aspects in commercial real estate,” he said.

However, as with sustainability, upfront costs have managed to create a more reserved response from local developers from incorporating health and wellness into non-residential real estate.

While developers are moving in that direction to cater for this demand, their concerns are focused on aspects of accessibility, location and green buildings, rather than on air quality, thermal, visual comfort, diet and clean water, IQI Realty subsales team leader Felica Lee said.

“So far, health and wellness are not really their priorities in the lookout for commercial offices,” she said.

Slow and steady

From her interaction with various clients, if they are multinational companies, they do prefer to go for green buildings, which would consume less electricity with natural lighting in their offices. If they are local companies, it is not much of their concern, she added.

Chong agreed that there are indeed upfront costs associated with incorporating health and wellness features into commercial real estate, however, building owners and developers are recognizing that the benefits, both in terms of tenant satisfaction and overall building performance, can outweigh these costs in the long run. 

Incorporating health and wellness aspects into non-residential properties can result in improved tenant satisfaction, higher lease rates, and increased tenant retention. Additionally, a healthier and more productive workforce can ultimately lead to better business outcomes for tenants.

“As a result, we can expect to see continued interest and investment in health and wellness aspects in commercial real estate,” he said.

Their concerns are focused on aspects of accessibility, location and green buildings, Lee said.

“The trend is driven by a growing awareness of the importance of employee health and well-being,” Chong said.

“If you are not well, you can’t work,” Wong said.

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