Organisation: Harrison Street
Signatory type: Investment manager
HQ country: United States of America
COVERED IN THIS CASE STUDY
Asset class: Real estate
Harrison Street’s mission is to be at the vanguard of healthy senior-living communities. This reflects our exclusive focus on alternative real assets, including senior housing. Indeed, health and wellness, part of the “S” in ESG, have always been critical elements of our strategy.
In 2019, the firm began studying how a building impacts residents’ wellbeing. The concept was to leverage design and operations to enhance physical and mental health. The team began by searching for healthy building performance-based standards, leading to the discovery of a certification called Fitwel™. By partnering with the Center for Active Design (CfAD), the licensed operator of Fitwel™, we created a senior housing scorecard.
Since then, Harrison Street has committed to pursue certification at all applicable properties and will use the scorecard to track effectiveness of health and wellness initiatives. This will not only ensure healthy environments for residents, but may increase valuations, as demonstrated in MIT’s study on office buildings. The scorecard is not exclusive to Harrison Street – it is a commercially available product the entire senior-living industry can now utilise.
Why this approach?
Harrison Street’s ESG strategy and response to climate change is multifaceted. The firm is attempting to reduce its impact on the climate with a 70% carbon emissions reduction goal by 2025. It lessens impact by conducting physical and transition risk assessments and executing mitigation plans. But climate change doesn’t simply impact physical buildings; it also impacts physical beings. A net-zero, climate-resilient building is only an empty shell if it fails to consider the needs of occupants. In addition, the Covid-19 pandemic raised the stakes in senior housing, making it more important than ever to promote the health and wellness of residents. Harrison Street has invested about US$13 billion in over 312 senior housing communities since 2005.
The firm decided to undertake the Fitwel approach for three reasons:
- To provide individual assets with a powerful differentiator they could market to residents and staff.
- To ensure properties within the Harrison Street portfolio meet a set standard for health and wellness.
- To determine how buildings that are designed and operate according to Fitwel standards demonstrate better health, productivity, and an overall sense of wellbeing – and might perform better financially.
On the last point, the firm is connecting with MIT, whose earlier work found office buildings certified as healthy in 10 large US cities commanded 4.4% to 7% higher rents per square foot than their nearest non-certified peer properties.
Details of the approach
Most products developed for the real estate sector, including healthy building certifications, are initially designed for traditional assets, such as offices. A typical scorecard, for example, would award points for promoting the use of stairs rather than the elevator. In a senior living environment, where many people have difficulty walking or are in wheelchairs, travelling via stairs often isn’t an option. The firm had to find a partner to create a scorecard for the senior-living industry. Fortunately, a strong partner was found in CfAD, which is committed to healthy buildings for all.
Fitwel was created by the Centers for Disease Control and Prevention (CDC) and the General Services Administration. To develop new scorecards, CfAD used an algorithm that drew on 5,600 peer-reviewed studies. This helped it create weighted strategies for achieving healthy buildings. When it came to a scorecard specifically for senior housing, this approach wasn’t enough, and collaboration was needed with Harrison Street and our operators to better understand the industry. We attended workshops and ran pilots over many months to develop a scorecard that didn’t compromise the original.
One of Harrison Street’s operating partners, The Springs Living, was a collaborator in the development of the senior housing scorecard. The Springs at Greer Gardens became the first Fitwel certified project using the new scorecard. The project serves needs in independent living, assisted living, and memory care.
The property earned 106 points (out of a possible 144), achieving a two out of three stars rating. The community’s selected scorecard strategies met certain aspects of Fitwel’s Health Impact Categories, including:
- Impacts Community Health
- Reduces Morbidity + [staff] Absenteeism
- Promotes Social Equity
- Provides Healthy Food Options
- Promotes Occupant Safety
- Increases Physical Activity
- Instils Feelings of Wellbeing
Some of the successful Fitwel Strategies applied at the community include:
|Site access||Shared amenity spaces and design|
- Universally accessible site
- Bike parking and located near bike lanes for employee commuting
- Safe street infrastructure for pedestrians
- Street furniture and amenities at shuttle stops, pavements, and streetscapes
- Efficient parking practices
- Full-service dining
- Fitness centre
- Common activity rooms
- Accessible common restrooms
- Indoor walking path
- Best practices in corridor design, lighting design, and wayfinding
|Outdoor spaces||Employee spaces|
- Therapeutic garden
- Fruit and vegetable garden
- Outdoor fitness area
- Walking path
- On-site outdoor spaces are designed to reduce the heat island effect
- Access to break rooms, quiet rooms, and lactation rooms
- Access to showers and lockers
|Healthy foods||Health programming and operational policies|
- Access to groceries
- Enhanced access to fresh produce
- Shared educational materials promoting the health benefits of healthy food and beverage selection
- Healthy food and beverage selection practices implemented at prepared food areas
- Support services
- Health promotion programming
- Paid Sick Leave and Family Support policies for employees
- Enhanced cleaning and hygiene policies
- Visitor policy
- Emergency preparedness measures
The certification is being promoted to prospective residents and their families and will be incorporated into satisfaction surveys. It will also be part of the data set for the anticipated MIT’s Real Estate Research Lab studies.
The initiative first performed a gap analysis using the original scorecard at two of the firm’s properties in New York. From these pilots, ongoing research, and operator input, the product was updated throughout 2020, and became commercially available in 2021. In February 2022, a Harrison Street community in Oregon was the first to certify under the new standard. To date, another 110 communities have Fitwel projects.
The senior housing scorecard has now been applied to Harrison Street’s wider portfolio, with the goal of certifying 80% of applicable assets within the first year of ownership.
Simply achieving certification is not sufficient. Fitwel is a newer programme and is less well established than standards such as LEED. Another challenge is educating the audience on the power of a CDC-designed, performance-based standard. Research has shown that buildings that are designed and operate to healthy standards correlate to better sleep, higher productivity, less illness, and a greater sense of wellbeing. Thus, marketing this certification through press releases, websites, flyers, plaques, and to leasing agents has been critical.
Following these efforts, we put in place metrics to measure the impact. Are prospective tenants more attracted to a building with such a distinction? Does it increase occupancy and staff retention? How does it impact building valuation? What is the effect on the community? These are all questions Harrison Street is exploring alongside research partners.
In addition to senior housing, Harrison Street is pursuing Fitwel certification across its broader portfolio, including student, medical, life sciences and build-to-rent properties, amounting to 550 in total.
The firm is excited about their accomplishments thus far and hopes its approach towards positively impacting the wellbeing of residents through certifications and subsequent research will aid in enhancing the broader industry.