How Healthy Building Design Increases Rent, Occupancy and Property Value

Joanna Frank (00:00)
I think one of the pieces that I’ve learned looking at the evidence is that it’s the fundamental attributes of a building or of a community, because we work at a lot of different scales that are impacting the health. so how close are you to a park or to transit or how well maintained is your site? How well maintained is your green space? all of these kind of like how like

How good is your sound insulation? You know, are you actually addressing the acoustic comfort of your resident? It has about an 8% impact on value. Acoustics in residential projects are massively impactful as far as value is concerned.

Meghan Escobar (02:12)
Welcome back to another episode of Real Estate Pros Podcast. I am your host, Meghan Escobar. And you know, one of my favorite parts about being a host on this show is to be able to sit down with incredible entrepreneurs and learn more about their business and

The person behind the business, because every business truly does have a story and every entrepreneur has turning points that shaped how they think, how they lead, how they grow. And so today we want to dive into exactly that. Super excited to bring on our guest, Joanna Frank. Thank you so much for being here. I always like to start out with anyone who might just be listening in for the first time or meeting you for the first time.

Who are you and what does Fitwel?

Joanna Frank (02:57)
Thank you. Yeah, great to be here. So I am the CEO of Fitwel. And I am a, I always say a recovering real estate developer. So I am someone who works at the intersection of real estate and investment, really providing the industry with information about how to optimize the value of their assets by prioritizing the people that they serve, whether they’re residents or their tenants. How do we use a data-driven, evidence-based approach to optimize your buildings?

both for health as well as for return on investment.

Meghan Escobar (03:29)
Hmm. Very interesting. How did you get into this industry as a recovering real estate developer?

Joanna Frank (03:35)
So

I was a real estate developer until 2010 here in New York City, where I’m based. So we had a small company developing properties in New York, which was which was tricky from 2008 onwards. So in 2010, I joined Michael Bloomberg’s administration when he was mayor of New York City and really was introduced to this idea that we can use data and an evidence-based approach to

change our built environment and optimize our built environment using data, which I think for those of you in real estate know it’s a lot of reliance on gut feeling, which is certainly something we were doing. But how do you break that down? How do you really understand why location is such a driver of value? How do you break down what the demand is from customers? So in New York City, at the time of the Bloomberg administration,

The big kind of goal, the priority of the administration was to set New York City apart from other global cities in order to attract investment from finance and from the tech industry. And so New York and the team really looked at like how do we attract investment rather than it going to Singapore or London or any other global city. and what we heard very quickly was we need talent. We need that talent pool in New York City to support our businesses.

So then we turned to the data about what talent was looking for, and this is 15, 20 years ago. And talent told us we want quality of life. We basically want Copenhagen. So we want walkable streets and we want bike lanes and pocket parks and to sit out in cafes and drink coffee. And New York City was a very car centric environment at the time. So we really needed to turn it into a people centric place. And we did that using the evidence base, using the data.

And really transform New York City. And that was my aha moment. Like once you kind of understand, of course, how do you not prioritize people when you’re thinking about buildings? Of course it directly ties to value. Of course it’s risk if you don’t do it. and that’s what I’ve been doing ever since. Translating that data and evidence into standards and quantifiable strategies for the for the industry to use to really optimize their assets.

Meghan Escobar (06:27)
Mm. Incredible. It really is incredible. And I mean, being honest, it’s the first time I’m ever hearing of something like this. And I think it’s absolutely genius. I told you before we got on here. But I’m curious to know, Joanna, like what was it that drew you to this?

Joanna Frank (06:43)
So I had been a developer. We were thinking about sustainability because we were working in Brooklyn and so we were hearing from the market that folks were interested in sustainability. Obviously, this is 20 years ago. So we actually put a green roof on a building that we created. and we did it. It was one of the first green roofs on a residential property. and it was responding to the market. and then personally, I don’t often share this, my son, who was a small child at the time, had asthma.

And so I had also become very aware of the materials within the house and so on that were triggering his asthma. So I think it was a kind of convergence of the market demanding it, being in Brooklyn, which is, you know, a pretty kind of progressive place, I guess, and then personal experience of really having to get into like what are the materials, you know, that we’re putting in to our household and the cleaning materials and all of these things that were triggering asthma. So I think it was probably those two pieces.

made me interested. And then I think seeing the data had me convinced. I mean, I was so sold on the data. I’m very much a data-driven person myself. And I think what’s really interesting about New York City’s transformation, and it’s the it was called the Active Design program that that we were running. But it was actually set on a precedent where New York City

A hundred years prior had used the built environment to address infectious disease. So New York City had created Central Park specifically in response to infectious disease and typhoid outbreaks and the understanding you needed green space, and they at the time called it the working man’s lung. the subway system was created to alleviate overcrowding in Lower Manhattan, which again had this terrible kind of you know disease-ridden.

history. And so that precedent that New York City had addressed infectious disease, and really quantifiably, like about a 30% decrease in infectious disease after these built environment changes were made, the reservoir system, all of these infrastructure projects were really prioritized because of this understanding, or actually not a great understanding about infectious disease, but because of this commitment to address infectious disease. So I think the precedent made it feel possible.

And that it wasn’t too much of a reach. and then obviously Michael Bloomberg’s kind of commitment to data really showed us that there was a there, that actually this was tied to value, this was tied to demand, this was something that basically I could sell. You know, I’m like, yes, this makes sense to me. This makes business sense to me, and not just a feel-good factor.

Meghan Escobar (09:19)
I can definitely see. Thank you for sharing that. I know you mentioned it’s not something you share often. I think it’s very important and tied to your sort story very strongly. But I’m curious, like once you guys started to put this together, what surprised you the most?

Joanna Frank (10:10)
So when we started doing this maybe 15 years ago, I would walk into a room and literally be asked, What are you doing here? Why are you talking to me? Which was interesting. but I love a challenge, right? So that was fine. So talking to the real estate developers, talking to my peers really about you know why I was here. I think what surprises me is that aha moment. and that once people see it and that make the connection, it’s so obvious. And I think

It surprises me that we as an industry haven’t had a higher focus on the people, on our residents, on the tenants. Like, why aren’t we aware of every decision they’re making and all of the demand shifts that are happening? Because it does directly correlate to the value of your asset, to your occupancy rate, how long it takes for you to lease up that property. on the residential side, you know, we’re even seeing a premium.

on the rent or the sales price associated with longevity and life expectancy attributes. So I think the fact that we don’t just think of it as standard practice is still shocking to me. I’ve been doing this for 15 years now. We’re still on a learning curve, right? We’re still actually advocating for this. There hasn’t been a really kind of industry-wide aha moment. we saw it almost happen in COVID.

So we did a big survey with the UN and with BGO out of Canada, BentallGreenOak. And we surveyed global investors about the investor sentiment towards health. And this was just kind of actually what turned out to be the middle of COVID. We thought it was the end of COVID, but it was kind of a lull in COVID. And the industry was saying, you know, we used to see our assets as the kind of base unit was an individual building.

And we weren’t considering that actually what we needed to be thinking about were the individuals within that building, and that was really driving the value of those assets. and we had lots of folks on record from very large asset managers and owners saying, You can’t unsee this, we’ll never go back. this has been a big aha moment as an industry around health. But actually, it hasn’t turned out to be the case. You know, five years on, we are

basically back to business as usual. So that’s always surprising too.

Meghan Escobar (12:19)
Hmm. You said something in our discussion beforehand and I want to bring that to the forefront is when I asked it, you know, any challenges that you may not have cracked yet. And I and I think this goes hand in hand what we were just talking about, but you mentioned that you haven’t gotten to the point in the industry where this approach is seen as a core part of the business.

And I think that’s really important, especially because of what you guys are providing. And I’d like to talk to talk a little bit about that. Why do you think there’s such a disconnect between the industry and what you guys do as far as providing value and increasing ROI?

Joanna Frank (12:58)
Yeah, so I think for the first decade we were doing this, we were looking at the kind of end goal as being health and quality of life. So we were saying, hey, real estate owner or investor, if you implement these attributes around location and design amenities, it will have this impact on the health of your residents and on your tenants. But what we weren’t doing is then connecting what does that mean to

the value of your asset to the ongoing performance of your asset, to the risk within that asset. And it wasn’t until two years ago that we started actually kind of connecting the health outcome to the financial performance of the asset that we really started to see a much faster scaling of this approach. So really translating all of this information, which is coming in in different forms, you know, as a real estate developer myself,

I’m not an expert in public health. I don’t speak public health. I don’t speak a lot of the kind of I don’t I’m not familiar with a lot of the data. It feels in it feels kind of insubstantial or difficult to grasp as far as, you know, what does trust mean? You you’re telling me that trust matters to the value of my asset. How do I quantify trust? How do I, you know, how do I address that? So I think that it took us translating all of these different inputs of data.

That are all coming in in different forms into a single output, which is the financial performance of your asset. It really took us translating all of that into this financially focused output for the industry to start to see it as core business. And we’re still very much at the beginning of that process. It is core business, it does impact return on investment. There’s a couple of very large studies, one by MIT and one by University of Cambridge.

That are showing that an asset, a commercial asset that has a Fitwel Certification, actually specifically, or healthy building certification more broadly, is seeing above about a 4.4% increase in rent premium. So strong connection to financial performance. We’re seeing even stronger numbers on the residential side because high net worth individuals are really looking to longevity and

health span and kind of all of these like quality of life pieces and are willing to pay more for it. I was telling you there’s a big study out of Sotheby’s that came out mid-year, which is saying there’s about a 10 to 25% increase in value for longevity-focused residential projects that are targeting the ultra-high net worth. So as we begin to build on the financial outcome piece, obviously that will at some point reach a tipping point where the industry as a whole is

Kind of convinced, basically.

Meghan Escobar (16:24)
Aware, right. So it sounds like the biggest struggle for you guys has how do we fit this language into the real estate industry for it to make sense.

Joanna Frank (16:34)
Yes, absolutely. How do we simplify the message? And I think I’m still not simplifying it in a way that how do we just, you know, have that kind of A plus B equals C? Optimizing your asset for people does increase the value of your asset.

Meghan Escobar (16:44)
Because it’s

that

the people is their business.

Joanna Frank (16:53)
Right? Who are you building for? Who are you when you’re building a residential asset, you’re building for people and you’re building for very specific people in a specific context. And I think like being able to crunch all of that data together to answer the so what? Like, so tell me what to do. Like, how do I optimize this asset based on what the target market is demanding, based on that kind of context as far as the site or the building is concerned, and based on all of those other kind of market factors.

and that’s also something that we really have only had the tools to do that for the last few years because the computing power that it takes to crunch all the evidence that we have, which is the global evidence base, massive amount of information, to be able to crunch all of that together is now instantaneous. We’ve built a big AI platform that we can just ask it, here is the address of my asset, what are the key risk factors, what is the market demand in this region? And

Meghan Escobar (17:48)
Yes.

Joanna Frank (17:49)
strategies

should I prioritize? so it’s become a lot more accessible recently and believable as well.

Meghan Escobar (17:55)
Yeah. Incredible. And what as a business woman in this industry and in transitioning out of being a real estate developer, what’s been your hardest lesson with Fitwel? And a follow-up with that is what belief changed how you lead currently?

Joanna Frank (18:14)
So I think as a developer, as a real estate developer, you have a certain amount of autonomy. Obviously, you have investors. So, but after that, you’re really making decisions day to day and implementing, and you know, you have a lot of control in the outcome of the asset, even if you can’t control the market, as we discovered in 2008. so I think that that is that is the beauty of real estate, also is the risk of real estate.

As someone who is now peripheral to those decisions, right? We are a single decision amongst many decisions that developers and investors are making. So I think that that is the kind of the challenge of this position. And a new skill set that I’ve had to learn is how do we understand our part to play in this much broader set of decisions that developers are making. And so that’s to me been a challenge because.

I don’t, we don’t have any power. We aren’t making the decisions. The developers are making decisions. We are advocating for this approach as one of many decisions. So that is a that’s a big challenge, right? That’s kind of we see what we’re doing as very important. But of course, in the larger context, it’s one of I mean I can’t even imagine I can imagine because I’ve done it, but then you know, in a given day, think about what you’re dealing with. You’re just dealing with so many different

pieces of information that you have to make a decision on. So I think for me that’s a that’s a that’s a change. so putting myself in other people’s decision making and really and the team as well. So for me, the team obviously it’s essential and our team are excellent. And we really have to be able to be conversant in both developer motivation and language that real estate development is using at the same time as remaining credible

To the evidence base and the evidence, the research and the data, because our credibility and that trust is essential in our business. we need to remain really kind of consistent and not overstate the evidence, even if it’s easier to make a statement that is, you know, kind of more definitive. Research is rarely definitive, it’s always you know, there’s a correlation or there’s a strong potential, but it’s not.

Just you know, kind of this will impact whatever the attribute is. So I think it’s learning that moderation as well. that my team has definitely taught me that I can’t make a big declarative statement is essential for credibility. And our research partners include the U.S. Centers for Disease Control and Prevention. They actually created Fitwel at the beginning. so they were a big partner of ours, but we also work with a lot of academics around the world. and we have to

maintain their trust and maintain that kind of credibility as far as adherence to the evidence base. So that’s moderating factor because it’s hard to kind of pencil within the lines as far as research is concerned and make those big statements that developers are used to hearing from folks.

Meghan Escobar (21:11)
Right. That makes a lot of sense. I mean, you guys, everything you do is based off data, evidence, and, you know, current, you know, current projects that have already proven that what you guys are doing is making a huge difference. So let me ask you this. What are you what do you feel Fitwel is most focused on next, like the next big goal for you guys?

Joanna Frank (21:33)
So for me, it’s really understanding that shift in consumer demand that we’re seeing globally. So we work in 60 countries, at least actually, it might be more now. But so we are seeing consumer zero. Yeah. so we are seeing really strong consumer demand globally for health and for quality of life, longevity. So really understanding that increase in demand, the specificity.

Meghan Escobar (21:44)
Zero? Six. wow. Okay. Incredible.

Joanna Frank (21:59)
Of that increase in demand? Like what is it that people are asking for, as opposed to what do we see as having the greatest impact on health? Because those two things aren’t necessarily the same. So that’s again where we need to kind of navigate between what people are asking for, what we know to be the most impactful, and then how do we advise the developers how to move forward? Because there may be something that their dem their market is demanding, which we’re like, well, there really isn’t an evidence base behind that.

But then, you know, the market wants to is willing to pay for it. So that’s you know an interesting piece. So I think really understanding the market demand shift and leaning into that with the evidence-based strategies. And then I think the other big opportunity and an area I’m excited about is how do we create that consumer language for the real estate industry to be able to talk about what they’re doing to their target market in a way that’s credible.

That they can substantiate any marketing claims they’re making. So one thing we’re seeing in some markets where they’re very hot as far as longevity is concerned is that everybody is claiming that they’re healthy. Everybody’s claiming that, you know, that they’re designed for wellness and all of this. So I think that this approach is definitely susceptible to folks kind of making unsubstantiated claims, really kind of overstating.

what they’re doing as far as its impact on health. And obviously that will then have a detrimental effect on the whole movement of the healthy building movement. So I think being able to arm our clients with the facts and the data so they can back up their marketing claims, so they can actually kind of have an approach which is going to be the most cost effective way to actually meet the market and not just a scattershot approach to paying for

All of these different products that are out there that are claiming to enhance health and wellness, some are effective, some not so much.

Meghan Escobar (23:55)
kind of like yeah, the gym in the basement.

Joanna Frank (23:57)
Exactly. The gym in the basement, that has no light, no air, off-gassing materials, it’s a waste of money. Don’t do it. Nobody’s going to use it. It’s not going to

Meghan Escobar (24:07)
I love it. And I think it’s so huge, especially because of where we are as a society today. And like you made a statement just a few sentences ago that everybody says they’re on this, you know, their health.

Consciousness and they’re in the all knowing, but a lot of the developers that you I’m sure have actually seen are putting money into things that are not gonna provide value for the people are not gonna provide value for the building itself. And so this next move that you guys have, I think it’s I think it’s incredible and dependent on how it’s played.

It can create chaos in the industry or compound things.

Joanna Frank (24:48)
No, I mean, I think one of the pieces that I’ve learned looking at the evidence is that it’s the fundamental attributes of a building or of a community, because we work at a lot of different scales that are impacting the health. so how close are you to a park or to transit or how well maintained is your site? How well maintained is your green space? all of these kind of like how like

How good is your sound insulation? You know, are you actually addressing the acoustic comfort of your resident? It has about an 8% impact on value. Acoustics in residential projects are massively impactful as far as value is concerned.

And yet it’s not something that folks necessarily want to spend the money on. but in the end, it does have this big impact on value. But I think a lot of these pieces that I’m talking about, you don’t see them.

They’re not shiny.

Meghan Escobar (25:42)
And therefore not tangible.

Joanna Frank (25:44)
harder

to like, I’m sinking all my money in this sound attenuation and I what I really want to do is put marble in the lobby. And it’s like

And what is the ROI of that marble? Could you could you give me that? Because I can give you the ROI of the sound.

Meghan Escobar (25:59)
So there you go, right? You’ve got the data and the facts to prove it. So you’ve got a it sounds like a long, strong road ahead. And, you know, a lot of our listeners are either early on in their journey in the industry, you know, whether they’re just getting into purchasing their first investment or developing their first project or just becoming a real estate agent. or they’re somebody who has been in the game for quite a while and

looking to level up. And so I think either way they would benefit from hearing this. on your end, Joanna, like when it comes to building relationships and growing your network, what do you feel has made the biggest difference for you and Fitwel as far as expanding?

Joanna Frank (26:40)
So real estate is a relationship business. That’s it. This is we’re not selling widgets, right? We are this is a relationship business. Our whole business is based on trust. It’s based on individual relationships. we have grown a business without a big marketing budget, really through peer-to-peer recommendations, working with one of our customers, ensuring that we’re addressing their needs, being consistent, building trust.

and then they recommend us to their peers. So I think that even though this industry from the outside looks really big, it is not big. It is a very small industry. even globally, it’s a small industry. and the decision makers, the folks that influence this industry are maybe 200 companies globally. and the folks that work in these companies also move around. so it’s really relationships with individuals as well as.

obviously the companies that they work for. but that’s that to me is that’s why it’s nourishing is because of those relationships. And we really see ourselves as a partner to the industry and not that we’re just kind of selling them something, right? We are listening to our to our clients and really understanding from their perspective what they need. We don’t sit where they sit. We’re not making the decisions that they’re making. We’re not in the conversations that they’re having.

So we really rely on all of our partners and our customers to really tell us where, you know, where their heads are at, what they need to be successful, the shifts that they’re seeing in the market. So that’s I think probably the same for all businesses, but real estate is a very much a relationship-driven industry. And this is something I talk to the team about all the time is you know we really respect our customers and we really want to.

you know, kind of partner with them on this market transformation. And we can’t do it without them, right? So be foolish to think that we could.

Meghan Escobar (28:28)
Yeah.

It’s for sure a people business. Like you said, you know, these business deals and operations, they don’t work without people. They don’t work without relationships. And so I agree, you know, they’re everything especially in this space. I love what you said. we’re not selling widgets, right? So that’s a perfect statement to make. And before we wrap up, Joanna, if

someone wanted to reach out and connect with you and learn more about what you guys are actually building there at Fitwel, whether they want to collab or just simply have a conversation, what would be the best way for them to reach you?

Joanna Frank (29:05)
Sure, the they can find me personally, Joanna Frank. I’m on LinkedIn. and if they want to send me a message through that, then I’m happy to respond to that. they can reach out to the team broadly, the Fitwel team, at fitwel.org, there’s an [email protected]. We do respond to it within a day. so it’s not just some black hole that so fitwel.org. we actually run two companies. One of them is a nonprofit, cfad.org so our research

side of the business is a nonprofit. So yeah, either way you will find us. So either me through our LinkedIn or the company through fitwel.org. And we would love to talk to you. We are excited about this next phase as far as really responding to this consumer demand. We think that this will be, funnily enough, the fuel as you talk about, but this will be the fuel that will really, I think, kickstart or reinvigorate the movement to really kind of

bring about market transformation for people. So I’m excited to be sharing this with your audience and including them in the conversation moving forward.

Meghan Escobar (30:06)
Perfect. Well, I’m very excited for this to go live and for you guys to continue to grow. I mean it’s it sounds like it’s a full circle, you know, from increasing the overall quality of life to health to better buildings and ROI. So I appreciate

your time. I appreciate your story and more importantly, the perspective that you filled here. So we need more people in this space who are doing things the right way. And it sounds like Fitwel has a pretty good handle on that. So thank you again for being here. And for those of you that are tuning in, if you did receive any value from this, please make sure to subscribe because we have

More conversations coming with owners and operators, just like Joanna Frank here, who are out here building real businesses with real people in real time. Thank you and see you on the next episode.