The Leader Magazine

SEP 2018

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46 September 2018 the leader It proves true: High-performance buildings increase productivity – and profit by Jeremy Attema and Warren Neilson W ith the tremendous growth of companies investing in corporate real estate (CRE) sustainability programs over the last decade, there are now many studies analyzing the various metrics through which healthy buildings with environmentally efficient systems benefit their owners, tenants, and occupants. While most of these studies focus on energy or water savings, some go further to analyze how a high-performance building (HPB) can benefit the people who occupy it and the major impact this can have on a company's bottom line. We analyzed more than 60 of these academic and industry studies, and our results showed that investing in healthy and sustainable strategies that foster occupant happiness dramatically enhances employees' lifestyles. In fact, the effect occurs on such a large scale, these capital investments pay for themselves and, more important, substantially increase bottom-line profits for companies occupying HPBs. The findings were broken down into three measurable effects that HPBs have on employees: productivity, retention, and health and well-being. The corporate profits that HPBs generate in each of these categories are calculated by specific equations that factor in average industry metrics gathered from various sources. Productivity First, let's define how productivity is measured. The U.S. is no longer a manufacturing economy. In fact, the U.S. has shifted to a service- based economy where a company's value is based off of its employees or intellectual capital as opposed to tangible assets. Therefore, we can no longer measure productivity on the basis of how many widgets are produced each day. What we can do is take the average revenue per person for a company, building, or team; multiply this by a productivity enhancement that HPBs have proven to increase; and then multiply this revenue enhancement by a firm's profit margin. These calculations result in providing bottom-line value. We would be remiss to not acknowledge that there are undoubtedly other variables or factors that contribute to the revenue-per-employee metric, but our analysis found that workplace environment overwhelmingly determines occupant productivity. After analyzing about 35 studies on HPB design, we found that employees exhibit an average of 3-percent-productivity enhancement when working in an HPB. When we multiply this by the annual revenue-per-employee average of $540,000 1 and a 10-percent company profit margin average 2 , this 3-percent enhancement translates to a company profit of $1,620 per employee, or $8.86 per square foot when applied to a model of 820 employees in a 150,000-square-foot (13,935-sq.-m.) building 3 – a hypothetical example we created based on data from the National Association of Industrial and Office Properties (NAIOP). Thus, the total benefit of this increased productivity averages out to $1.33 million, or 3 percent of a company's annual profit. r etention Retention can also be calculated to a real dollar figure. Starting by calculating a baseline for measurement, we took the average cost of an employee ($100,000) 4 ; multiplied this figure by the actual cost of losing an employee (lost time, training, lost clients/customers, HR cost, hiring a replacement, etc.), which was conservatively estimated to be 90 percent of an employee's salary 5 ; and then multiplied by the average employee separation rate of 34 percent 6 (meaning on average, according to the Bureau of Labor Statistics, 34 percent of the workforce leaves their position annually in pursuit of something else). Once this baseline was established, a reduction was applied to this separation rate. Our analysis of about 10 studies found that the separation rate for employees working in HPBs was reduced by an average of 5 percent. 7 This increased employee-retention results in an annual savings, per head, of $1,530, or $8.36 F E A T U R E A R T I C L E

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