Large equity investors now require healthy building certification as a condition for investment. Building health has moved from an optional feature to a core part of underwriting. Joanna Frank, CEO of the Center for Active Design, says this marks a significant change in how institutional capital evaluates existing properties, particularly as new construction economics have worsened.
Shift Toward Existing Properties
Rising interest rates, unpredictable labor costs, and supply chain disruptions have made new development financially unworkable for many institutional investors. Instead of building from scratch, investors are buying existing properties and repositioning them to improve performance. This reality creates an opportunity to embed health standards in investment decisions.
Frank says higher rates and cost uncertainty have pushed investors to focus on existing assets. “Folks who would have been building new construction in years gone by, it’s just not penciling out in the US right now,” she says.
The growing investor focus on existing buildings aligns closely with how health certification programs like Fitwel — a building certification system focused on occupant health and well-being — have long operated. Unlike standards built around new construction, Fitwel was designed from the outset to improve the health performance of properties already in use, making it a practical tool for investors repositioning acquired assets.
Frank notes that 80 to 90 percent of the built environment consists of existing buildings, making them the primary driver of occupant health outcomes and financial results. As more capital shifts toward repositioning, the urgency to optimize these buildings for tenant satisfaction and retention has grown.
New Certification Requirement
Harrison Street, a major equity investor in student and senior housing, now requires healthy building certification for all new investments. The firm manages about 500 properties and found that buildings pursuing Fitwel certification achieve better financial results than those that do not.
Frank says Harrison Street identified a strong link between Fitwel strategies focused on health and wellness and the financial performance of their assets. “They have made it part of their lending criteria that you need to be pursuing Fitwel if you’re looking for investment from them,” she says.
This decision was not driven by Environmental, Social, and Governance (ESG) mandates or outside pressure. Harrison Street’s own analysis showed that certified buildings outperformed others in its portfolio. That internal evidence led the firm to make certification a standard part of its investment process.
“They’ve been able to see the financial performance for themselves and make that correlation,” Frank says. “This is something that has now moved into their core business.”
Harrison Street’s policy represents a clear shift in how institutional capital flows through real estate. Building health is no longer just a feature to attract tenants. It is now a prerequisite for accessing equity. This standard requires developers and operators to incorporate health optimization into their business plans from the outset.
Certification Tied to Higher Returns
Academic research supports the connection between building health and financial performance. A 2025 Cambridge University study found that certified buildings earned rent premiums of 4.4 to 4.8 percent over comparable properties. A 2020 MIT study reached similar conclusions, suggesting the premium persists across market cycles.
Frank’s organization maintains a database of more than 7,000 peer-reviewed studies linking built environment features to health outcomes and financial metrics. The evidence shows that health optimization leads to higher tenant satisfaction, stronger retention, faster lease-up, and rent premiums. All of these factors improve investor returns.
“We have over 7,000 peer-reviewed research studies looking at the connection of built environment elements — design, location, amenities, operational strategies — and the health outcomes for occupants and the surrounding community,” Frank says. “We also have the evidence base of how those strategies correlate to economic outcomes: ROI, NOI, tenant satisfaction, risk, and productivity.”
For Harrison Street, the certification requirement was a direct response to that evidence. Portfolio data showed that certified buildings consistently outperformed non-certified ones, prompting a formal change in investment criteria. This approach reflects a broader trend: institutional investors are using data to identify return-driving features and making them mandatory.
New Certification Pressure
This shift creates new demands for building operators, who must achieve health certification to qualify for capital. This is a challenge in a market where many owners are cutting costs.
Frank notes that in real estate, “if a health certification is seen as a nice-to-have or just ancillary, then it’s going to get cut. It’s really important to show that there is a direct correlation to financial performance by meeting this standard.”
For operators seeking equity from investors like Harrison Street, health certification is now a requirement. This forces operators to prioritize health optimization even under budget pressure. Failing to do so means losing access to investment.
Certification also serves as a marketing tool, helping operators demonstrate to tenants that a building meets recognized health and wellness standards. This is particularly important in residential markets, where tenant demand for healthy environments has grown since the COVID-19 pandemic.
Frank says residential tenant demand has increased sharply. “Our fastest-growing sector is residential, across all facets of residential,” she says.
Student housing stands out as a growth area, with students seeking environments that support mental health and social interaction. Frank describes this generation as highly aware of how surroundings affect well-being, giving certification a competitive edge for student housing operators.
What This Means for Real Estate
Harrison Street’s policy may be an early indicator of how institutional capital will evaluate real estate going forward. If more investors adopt similar requirements, building health will become central to investment decisions. Operators unable to meet these standards may struggle to access capital. Those who prioritize health optimization will gain a competitive advantage.
Frank expects the trend to continue as climate change and shifting tenant preferences make health features more critical to asset performance. “This isn’t just a fad. How people are affected by buildings is a forever piece of the puzzle,” she says.
The shift is currently most visible among investors in residential and student housing. It may spread as more firms track portfolio performance and confirm the link between health optimization and financial returns. Building health, once a secondary concern, is becoming a baseline requirement for capital deployment.
Trend Going Forward
As institutional investors tie capital to healthy building certification, owners and operators must adapt or risk losing equity access. The evidence points to a clear connection between health-focused strategies and financial results. Certification is less a matter of preference and more a business necessity.
For the broader market, this signals a move toward data-driven, outcome-based investment standards. As more investors recognize the financial value of health optimization, certification is likely to become a baseline expectation. This will reshape how capital is allocated and how buildings are managed across the real estate sector.
