Industry Outlook for Adding Value with Design

Experts discuss the influence of “design thinking,” the challenges and opportunities for quantifying design quality in the built environment, and ways that architecture firms and developers could more effectively work together to solve business challenges with better design.

Sleek, modern iPhones are everywhere, and “design thinking” is a buzzword in business circles. Do you think that increased awareness about high-quality design is having an effect on the built environment?

Scott Wyatt: What’s interesting about iPhones is that they are beautiful, but the interface is also incredibly well designed. Apple got the design right in both form and function, and I believe that had a lot to do with the success of the iPhone. With urban design and architecture, it’s the same thing. The lesson of the iPhone helped move people past an either/or way of thinking about what quality design is.

Greg Johnson: The higher-quality design of devices does help people become more aware of good design. I don’t think you can make a direct link between devices like the iPhone and the built environment, but many people may be more aware of the value of design on a subconscious level. Cost is an obstacle to raising the design quality of the built environment, however. It always has been, but particularly, nowadays, if you’re a company having to compete globally, you don’t have the luxury that you may have once had to put money into great design or public art. Large corporations are often trying to wring every dollar out of every bit of space and eke as much efficiency out of their properties as they can.

Chris Jerde: Design thinking has absolutely had an impact on architecture and design. There’s so much more in the media about design these days, like television shows about how to make your house more beautiful. Stanford University has the d.school [Hasso Plattner Institute of Design], and there are more business leaders now with a background in design. Design thinking is viable because it works. If it were just a flash in the pan, it would have died a long time ago.

What tools are there for measuring the impact that good design has on the bottom line for developers, property owners, or tenants?

Amber Richane: One way to measure good design is whether a building won a design award. The AIA’s COTE [American Institute of Architects’ Committee on the Environment] award is moving toward [considering] how a building impacts the community and its sustainability as well as its aesthetics. At our firm, we consider things like energy use intensity and lighting power density as metrics for how well that building is performing, because they translate into bottom-line and operational dollars. We also benchmark our projects, internally as well as for Architecture 2030 [a Santa Fe, New Mexico–based nonprofit organization that has set targets for reducing energy use and greenhouse gas emissions from architecture projects to achieve carbon neutrality by the year 2030], so that we know where we stand and [can] measure their sustainability. We are also working with our clients to show them what building performance means for their businesses, because when we measure these types of things, it translates into either dollar savings or differentiation from their competitors.

Johnson: Willingness to pay the rent is probably the ultimate measure. As a developer, we work very intensely with users to try to understand their needs, because good design has to be responsive to what they and the community need. Can a company retain more of its employees if [it chooses] a built environment that’s underscored by good design versus one that isn’t? There are a lot of reasons why an employee might stay or go, but particularly in highly competitive industries, like technology, there are a lot of companies that can provide employees interesting work and competitive pay. So where they can differentiate themselves is through the built environment they offer employees. That’s where they can find return on their investment in good design. Why else would Amazon be building biosphere domes full of plants at its Seattle campus? Why else would tech companies be so focused on providing engaging interior designs in the workplace?

Jerde: Smart phones offer a lot of possibilities for gathering big data–type feedback on the relative success of an asset. It’s possible to create feedback mechanisms on people’s phones to poll their perceptions of a space, either actively or passively. For example, in an office building, you could ask employees to have an app running in the background for a few weeks that will track their movements within a building. Who is interacting with whom? How often are they engaged in collaboration versus focused work? Are they spending time in conference rooms or the fancy lounges and hubs that were designed to encourage social interaction? It would be powerful to have hard data on whether these spaces are being used the way we thought they would be.

Wyatt: Starting a few years ago, Jones Lang LaSalle has been analyzing the return on investment of what they call “trophy buildings” in Manhattan. These are buildings of clearly distinguished architectural design quality, often more expensive than the average high rise in New York City. The study found that these trophy buildings cost the investors more, but also made more money. This is the most exciting time in the design business because of the data and the technology available to us. We can measure building performance even in the concept design phase. For example, companies are interested these days in fostering good health in their employees. We can calculate how many calories the average employee will burn in a day in one facility compared to another, how much daylight every employee will have access to over the course of a day, and how many different people in the organization each employee will encounter in a day. Some buildings encourage interaction more than others, and we can measure that even before we move into the development of the design.

How could architects make a stronger case to their clients about the value of good design?

Johnson: I think architects need to be prepared to articulate the value of good design in ways that the users can really understand. Companies are trying to create workplaces that express their values and their culture. Architects can make a stronger case if they do it in a way that speaks the language of the occupants. I’d challenge the design professionals to embrace the requirements for global competitiveness that so many commercial retailers are facing and find creative ways to deliver efficient, great design so that we can have our cake and eat it, too.

Wyatt: The research and the data are important, but the best way architects are going to make a strong case is to be better listeners. If we can really understand how our clients measure design and what they really expect from design, I can guarantee you they will hear the case we make a lot better. We sometimes worry too much about convincing people. If you understand them, you can convince them. Ask more questions and have fewer answers.

Jerde: There are plenty of traditional metrics of identifying value, like lease rates or dollars per square foot or sales prices. The difficult part is, how do you isolate and extract the intangible aspect of design quality from other factors that determine value, like the energy systems in the building, the proximity to public transportation, the existing amenities in the area, and real estate market conditions? A few years ago, I partnered with Christian Redfearn, associate professor of real estate and economics at the University of Southern California, to conduct a statistical analysis to test whether a building’s architect has an effect on its market rental rate. We chose multitenant office buildings by award-winning architects and subtracted as many external impacts as we could to try to quantify the impact of design on these monetary measures. The results suggested premiums in certain markets but were inconclusive at a national scale. We’re continuing to take an empirical approach in search of added value, and there are many ways to test for an impact. Findings from a credible study would certainly build a stronger case for architects about the value of good design.

Richane: As an example, we renovated an existing office building—1225 Connecticut Avenue, N.W., in Washington, D.C.—into a LEED Platinum [the U.S. Green Building Council’s Leadership in Energy and Environmental Design ratings program] building. Using one set of metrics, we could say it uses 28 percent less energy and 40 percent less water than the baseline. But when we start to look at what those metrics meant for our client and their business, [the metrics] showed that the project was delivered at 5 percent below what our client had budgeted for the project, and it had the highest sales rate for an office building in Washington, D.C., for that year, largely due to the sustainable strategies. With sustainable design, we can show that rents are higher, occupancy rates are higher, building value increases, the operational costs go down, and the sales per foot go up.

What do you wish more developers or property owners were asking of their architecture firms?

Jerde: I’m not an architect, but what I hear from our teams is that they would like to be more involved earlier in a project. Often, a developer or client will come to us and say, for example, “I want a hotel with this much retail. I’ve already built my pro forma, so just give me some ideas and I’ll pick one.” But if the client comes to us earlier, designers can ask, “Is there a higher and better use for this project that you may not be considering?” Developers could also invite architects to participate earlier in terms of measuring project success, so we could set up our systems to measure the real costs and the tangible outcomes of our project, instead of waiting until much later, when you have to scramble to try and pull that data from wherever [they] might exist.

Richane: When clients see us as partners, that’s where we see the biggest impact. Some clients are taking advantage of this, but we could be even more useful to them, especially because of the knowledge sharing across our practice groups, which lets us apply good ideas from our retail practice to a health care project, or ideas from our hospitality practice to an office building. Architecture is becoming less about making a pretty building and more about advancing our clients’ businesses and providing solutions for them. For example, in our health care practice, we are looking at the number of steps nurses have to take to visit the variety of patient rooms that they need to. If we reduce that number, [we might be able to] reduce the number of nurses needed, because there is a shortage of nurses in the employment market. That solves a problem for our client, and we’re handling that in the design of buildings. Those are the types of synergies that developers don’t always think to come to architecture firms for.

Johnson: What we’re asking from our architecture firms is that every design decision, at every step of the process, needs to drive value for the project—a value that’s greater than the cost. A good architect is going to generate good designs with the full awareness of the cost of what they’re proposing and the ability to articulate the case for that particular decision. The better architecture firms are able to embrace that approach. The last thing a developer wants is to have a design that is visually exciting and then discover it doesn’t warrant the cost, especially at a point too far along in the process to change. An architecture firm needs to make the case that it has systems and processes in place that deliver value for cost in every design decision.

Wyatt: The best clients speak in terms of human results—health, safety, happiness, and meaning. That helps architects stay focused on what’s important. Also, there is a positive trend toward considering the environmental impact of the built environment, but particularly in the second- and third-world countries, we want to see clients really look at the environmental impact of everything that they’re doing. And this may be a big dream, but I would love for more clients to view buildings and cities with longer return-on-investment cycles. Looking at the return on investment of a building over just five or even ten years limits our ability to build the best value for humanity and for civilization. The more we can find ways in our economy and in our lending and investing communities to think in terms of longer cycles, the more likely we will create better cities and buildings.

Ron Nyren is a freelance architecture and urban planning writer based in the San Francisco Bay area.