Property management

The Comfort Zone

The heat is on office building owners and managers to improve indoor air quality.

“It's getting hot in here…” but in another hour or so, it may be too cold. Complaints about office temperatures rank first among employee gripes, according to an International Facilities Management Association survey. And while building owners and managers may dismiss claims of stuffy offices, chilly hallways, and lower-level restaurant odors wafting to the upper floors as tenant whining, they risk litigation, a building's reputation, and losing big bucks when it comes to selling and leasing their properties.

A Serious Concern

Americans spend 90 percent of their time indoors, according to the Environmental Protection Agency, and at least half of that time is spent on the job. As employees increase the amount of time at the office working late or nonstandard shifts, businesses are beginning to look more seriously at employee health, comfort, and safety issues.

Poor indoor air quality tops the list of businesses' concerns because it is expensive. The cost of lost productivity due to poor IAQ is between $30 billion and $150 billion annually, according to the U.S. Department of Energy. Companies could save as much as $58 billion annually by preventing sick-building syndrome illness and an additional $200 billion in worker productivity by improving air quality, according to a Lawrence Berkeley National Laboratory study.

While most of those costs are borne by tenants, property owners and managers still put themselves at risk by ignoring IAQ problems. No studies have quantified IAQ and sick-building litigation costs, but the LBNL report cites an insurance carrier paid out $24 million from 1989 to 1993 in illness claims resulting from faulty heating, ventilation, and air conditioning systems; the most common occurrences were in office buildings.

Doctors report a 40 percent increase in the last 10 years in patients with sick-building illnesses and about 12 states now accept a multiple-chemical sensitivity diagnosis for workers' compensation claims, according to BusinessWeek Online. The Americans with Disabilities Act also covers MCS, and, on a case-by-case basis, obliges employers to make changes to accommodate MCS employees.

But building owners also have much to gain by identifying and remedying IAQ problems. They benefit from a financial gain eight to 17 times greater than the cost to make the IAQ improvements, says the LBNL report. And as businesses take note of the studies documenting the connection between increased productivity, reduced health-care costs, and improved IAQ, offices that provide “breathing space” will command higher rents and see increased value.

Play It Safe

Along with reducing building value, owners who ignore IAQ complaints may be putting building safety at risk as well. Employees who are too hot or too cold often take matters into their own hands, bringing in space heaters and fans or taping over ventilation ducts, creating fire hazards and wreaking havoc with a building's HVAC system.

For example, Kevin J. Kiefer, CCIM, CPM, asset manager with ELV Associates in Atlanta, had two tenants raise IAQ issues in a local mid-1960s office building. “A tenant was concerned about some visible particulate matter that seemed to be coming from a couple of HVAC registers in their space,” he says. Kiefer's investigation revealed the particles were flaking off ductwork from a tenant-installed supplemental HVAC system.

Beyond safety issues, owners can pay the price in lost tenants, remediation time and costs, and skeptical potential buyers: Employee comfort and litigation concerns loom large in buyers' and tenants' minds, according to brokers who have dealt with problem buildings.

A Hard Sell

About 30 percent of office buildings experience IAQ problems, often as a result of faulty HVAC systems, experts estimate. But many times IAQ problems stem from water damage and mold, a far more widespread occurrence. Of 100 office buildings tested, 85 percent had past water damage and 45 percent had ongoing leaks according to a 2002 EPA baseline IAQ study.

Such problems can stigmatize a building when it comes to leasing or selling. “We lost a 4,000-sf tenant as the result of a mold problem,” says David E. Guthrie Jr., CCIM, with NAI Earle Furman in Greenville, S.C. “The vacating tenant said one of the major reasons for leaving was due to employees suffering from headaches due to the mold problem.”

The 1980s split-level office condominium building had below-surface water damage on the exterior foundation wall. Each owner was assessed about $10,000 per 2,000 sf of space, resulting in a $60,000 assessment for Guthrie's client.

Yet remediation led to further sales and leasing problems. Although the building has been on the market for a year and a half, Guthrie initially encountered about a one-year delay in showing it to prospective buyers and tenants.

The cleanup has been difficult, he adds. “While the work is finally finished, it failed three times before the owners and contractors were able to correctly cure the problem.” At one point the repairs were finished; yet Guthrie showed the building shortly after a rainstorm and discovered additional lower-level water damage. “The prospect made note of it and, combined with other reasons, chose not to pursue the building further.”

Guthrie feels the remediation has given the entire office park somewhat of a “sick-building complex. The problem adds a level of discomfort with prospective buyers and puts the building at a distinct disadvantage in the market.”

Even the possibility of IAQ problems causes potential buyers to think twice, says Judi A. Woodyard, CCIM, SIOR, of Commercial Associates in Las Vegas. An office building with black mold was “in escrow three times before it closed,” she says. “The first two buyers got cold feet when it came down to the line.” Both expressed concern that “a disgruntled employee could make an issue for an employer occupying the property at a future time.”

Eventually the seller paid for remediation and supplied an insurance policy to get the third buyer to close. “The most serious issue was the fact [that] the seller was not willing to indemnify, so he provided a five-year mold insurance policy in lieu of indemnification.”

Although the problem's cause is fixed, Woodyard thinks the mold still would be a factor if the building were sold any time soon. However, “as time goes by and the building remains mold free, it will be less of an issue,” she says.

A Part of the Problem

Even new buildings in solid locations cannot overcome IAQ stigmatization. Poor IAQ due to mold infestation was one of the problems facing a four-year-old building that originally had been a nightclub, says Wesley Cox, of Long & Foster Real Estate in Salisbury, Md. The building's location offered the potential for conversion to office space, and the property was shown frequently during the last few years. Although the mold was visible on walls and floors, an environmental company determined that the remediation would be fairly simple. However, “time after time, potential prospects were turned off even after we shared the results the environmental company gave me. During my follow-ups, I always asked what their concerns were and the No. 1 response was the thought or risk of the mold coming back.”

Another issue was the discrepancy between environmental clean-up estimates. One response involved a simple bleach wash, the other involved new drywall and ductwork and extensive treating. “Different opinions left the seller and potential buyers with two different approaches, the seller favoring the less extensive [one] and the buyers using the more costly approach as a way to negotiate the sales price.

“Needless to say, we had a difficult time selling the property so the bank stepped in and bought it to renovate into a corporate office.” However the bank now has the building for sale again. “The current listing price is $195,000 lower than the original listing price, and I think it reflects any cleanup to be done and also recognizes that any new use for the building is going to require a substantial renovation,” Cox says.

Future Plans

The construction of most office buildings in the last 30 years focused on energy efficiency. In reaction to the 1970s oil embargo, architects reduced heat exchange by minimizing window size, adding insulation, and creating super-efficient HVAC systems that recirculate air and reduce the amount of outside ventilation. At the time, the theory was to seal a building against forces of nature and outside pollutants.

Today, most of those building technologies have been replaced by sustainable design techniques that focus on using the advantages of nature to increase energy conservation but still provide access to sunlight and outside air.

Owners can remedy IAQ problems by using sustainable design standards for renovation and new construction. For instance, raised-floor ventilation systems, which can be used in extensive rehabs as well as new construction, give office occupants more control over air temperature. Treating HVAC systems with ultraviolet germicidal irradiation can eliminate the coil mold growth that causes allergic reactions through airborne contamination.

All building owners should have an annual or seasonal retrocommissioning performed to check building systems' performance. While improved IAQ is often a result of the process, past studies have shown that retrocommissioning can provide energy cost savings up to 40 percent.

And finally, maximizing the amount of natural ventilation in a building can produce instantaneous results — an act as simple as opening a window.



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