In a concurrent session at the 2020 ULI Virtual Fall Meeting, experts in multifamily housing discussed how the sector is ripe to be a leader in sustainability, health, and wellness. Referring to several key case studies, they highlighted how they had not only made energy, sustainability, and health a core part of their business strategy, but also seen financial and energy savings, as well as improved resident retention from their efforts.
“We think about sustainability, health, and wellness both broadly and deeply,” Lauren Krause, environment, social, and governance (ESG) director at Grosvenor Americas, said at a session titled “Beyond Amenity Status: How Demanding Sustainability and Health in Multifamily Buildings Is a Winning Strategy for All.”
“Not only do we consider residents in our own buildings, but we include the larger community of resident needs in our approach,” she said. “We think about affordability levels, open space, access to healthy food, etc., when we select locations in which we invest.”
Grosvenor, a 350-year-old London-based company that operates in more than 60 cities worldwide, has a long-term approach to investing and development, Krause noted. She shared two recent examples of projects that highlight the company’s enduring and active approach to sustainability, health, and wellness.
Morse Street, located in the Union Market neighborhood of Washington, D.C., is approved for 260 units, 29 of which are affordable, and 6,000 square feet (557 sq m) of retail space. The building has the full range of amenities that one would expect from a class A apartment project, including a gym, lounge, and resident fitness facility.
But Krause is most proud of Neal Place Park, an 11,000-square-foot (1,000 sq m) public park that will be created at the base of the building, providing all community members with a quiet, serene green space. Although it will be activated by retail and art at its core, the park is designed to provide respite and a place for quiet enjoyment in the midst of the bustling Union Market neighborhood.
Krause said a variety of inputs were factored in during design. Grosvenor partnered with Centric Lab, a London-based real estate advisory firm, which looked at how neuroscience data might affect design choices. “We really wanted to consider older people, younger people, a whole gamut of people who would be using the space,” she said. “We also drew inspiration from the natural beauty of nearby national parks.”
Also in Washington, Grosvenor’s commercial project 1500 K Street was constructed in 1928 and contains 260,000 square feet (2,400 sq m) of office and retail space. In 2017, Grosvenor undertook a dramatic transformation and revitalization program to maintain the building as a top choice for tenants seeking office space.
The extensive refurbishment included renovating the office and common areas, restoring the heritage details, and integrating new technologies, including a state-of-the-art upgrade to the building systems. Nearly $12 million was committed to the heating, ventilation, and air-conditioning (HVAC) system, as well as the electrical system, which resulted in increased tenant comfort, raised ceiling heights, and a significant reduction in environmental impact and electricity use. Utility costs declined 30 percent, ultimately qualifying the building for Leadership in Energy and Environmental Design (LEED) Gold certification, a rarity for a historic retrofit in Washington. “What we see with both Morse Street and 1500 K Street is not only an ability to incorporate environmental sustainability features that reduce the overall carbon footprint and energy footprint of our buildings,” said Krause. “They also demonstrate an ability to contribute to communities in a holistic way and also to attract and retain both residential and commercial tenants because of the economic and social benefits that these projects are creating.”
Renee Loveland, director of sustainability at Gerding Edlen, believes that a significant evolution has taken place over the past decade in how ESG considerations are viewed by investors. Her commercial real estate investment management firm, based in Portland, Oregon, has over $1 billion in assets under management displaying a deep ESG commitment and a strong track record. The company focuses on occupant experience with curated programming that supports sustainable lifestyles.
“Financial returns are no longer enough,” said Loveland. “Today, investors are looking for responsible investments that demonstrate positive social and environmental impacts, including health and wellness benefits. At our multifamily properties, design strategies are combined with robust tenant engagement and extensive programming to promote sustainable living.”
In downtown Chicago, 420 East Ohio, located in the Streeterville neighborhood right off Navy Pier, was built in 1991 with no green attributes before being acquired by Gerding Edlen. The 40-story, 263-unit apartment building has since undergone extensive renovation, including updated amenity spaces and a sustainable operations platform, enabling it to be certified LEED Gold. An expanded recycling program that includes textiles was implemented and several successful book drives have been held. Gerding Edlen also partnered with the nonprofit Humble Design to furnish and decorate homes for people making the transition from homelessness.
Loveland also highlighted 5 MLK in Portland, Oregon, a new 17-story building with 220 apartment units, 12,000 square feet (1,100 sq m) of office space, and 15,000 square feet (1,400 sq m) of retail space. It has received certification from Fitwel and Salmon Safe. A key influence has been biophilic design, which increases the human connection to nature.
“As an industry, we’re seeing an awakening to a deeper understanding of the connection between human health and the built environment,” said Loveland. “Scientific studies show that biophilic design strategies evoke a variety of positive physiological responses in people that lead to improved health and wellness through stress reduction, improved comfort, higher productivity, and fewer physical ailments.”
A genuine win/win situation exists for owners investing in ESG, says Summer Haltli, senior vice president of strategic management and sustainability at FCP, a Chevy Chase, Maryland–based real estate investment company. “There are a lot of things that we can do in the multifamily side that better serve our communities and our residents, and actually reduce expenses and enhance value for owners,” said Haltli. FCP invests in three main strategies—multifamily development, commercial adaptive use, and workforce housing.
Half of FCP’s work focuses on workforce housing—properties built between the 1940s and 1980s—which serves an important social need by providing homes at affordable rent levels.
Holly Spring Meadows, located seven miles (11.3 km) outside Washington in Maryland, was built in 1965 with 224 units and acquired by FCP in 2017 before renovation. Through a partnership with the state, a $1.7 million retrofit project was completed that included replacing all HVAC units and installing low-flow water fixtures. The project has led to annual savings for the owners and residents, and FCP’s $500,000 contribution has led to a 70 percent internal rate of return.
Haltli cited the importance of partnership in social impact investing. Noting that many of those who live in workforce housing are families, she said FCP implemented an after-school program at Holly Spring Meadows through a partnership with a local nonprofit organization.
“This program is an overall win/win,” says Haltli. “It’s reducing turnover, it’s reducing expenses, it’s generating positive branding and reputation for the community and serving a really important need by providing educational programming to children who would normally be home alone in their apartments while waiting for their parents to come home from work.”
Another FCP project, Ladera Palms in Fort Worth, Texas, is the first stop for many refugees entering the United States. FCP has partnered with three organizations—World Relief of Fort Worth, Refugee Services of Texas, and Catholic Charities of Fort Worth—to ensure that the residents can receive assistance. The project has three clubhouses where English-language courses are provided, along with job placement and job training services to make it easier for residents to acclimate to the United States.
“These fantastic case studies show such leadership and progress,” said panel moderator Marta Schantz, senior vice president of the ULI Greenprint Center for Building Performance. “All the while it shows the wonderful business case for why advancing sustainability and health equity provides a value not just on the social side of things, but there is a very clear economic value as well.”
CHRIS HARRIS is vice president, communications at ULI.