Filmed September 30, 2014, at Johns Hopkins University in Baltimore.

ULI Global Chief Executive Officer Patrick L. Phillips discusses building healthy places for the 2014 Allan L. Berman Lecture at the Johns Hopkins Carey Business School’s Edward St. John Real Estate Program.

Patrick L. Phillips’ Berman Lecture Transcript

Good evening and welcome. I am delighted to be with you and to have the honor and pleasure of delivering this year’s Berman Lecture. Thank you, Dean Ferrari, Professor Wang, members of the faculty, students, and honored guests. And thank you to the Berman family, whose generosity brings us together.

Although I now have one of the best jobs on the planet, when I began my affiliation with the real estate program at Johns Hopkins I was principally involved in the dark arts of real estate economic analysis and forecasting. I taught Urban Economics and Market Analysis at the Dupont Circle campus and often, to be candid with you, would much rather have headed home after a long day than face down 20 or so energetic and inquisitive students for three hours. Nevertheless, I always found their energy and enthusiasm contagious, and left class with a spring in my step.  So I’m expecting the same kind of experience this evening.

I have another connection with JHU: through EBDI, the university’s partnership with the City of Baltimore to regenerate and enliven distressed urban neighborhoods in ways that increase opportunity, economic vitality, and quality of life for neighborhood residents, businesses, and institutions. I played a small role in helping forge the relationship between the city, the university, and their development partners. I’ve continued to watch their progress with great interest.

I understand that the University is now involved in a more incremental, bottom up approach to revitalizing commercial districts near the Homewood campus. Anchor institutions are so important to the health and vitality of our cities. This is an area of keen interest for ULI—44 of our members now serve on a newly formed University Development Council.

In addition, the latest recipient of ULI’s JC Nichols Prize for Visionaries in Urban Development is Dr. Judith Rodin, former President of UPenn and now President of the Rockefeller Foundation. The Nichols Prize is ULI’s highest individual honor, and Dr. Rodin was chosen in recognition of her commitment to the university neighborhood in West Philly, as well as her more recent efforts to promote resilience, which is another of ULI’s priorities.

JHU is to be commended for its work to integrate the campus into the neighborhood.

I’ll turn now to an initiative that ULI began almost two years ago — one that has helped unify and focus our somewhat sprawling organization,  brought increased attention from major philanthropic partners, and  elevated our ambitions for using our mission—leadership in the responsible use of land—to drive significant social change. Most importantly, it has reminded us of the profound importance of what real estate professionals do best, which is to champion the creation of thriving, sustainable, and vibrant communities worldwide.

At ULI, we have an expansive view of what we call “the industry” or “real estate professionals.” We include those making important public policy or public investment decisions, those providing the capital required to build our cities, and those preparing a new generation of participants.

The initiative, and the subject of my remarks, is Building Healthy Places—a multi-year, multi-dimensional program to examine the linkage between the built environment and health—to leverage the power of ULI’s global networks to shape projects and places to improve the health of people and communities.

For those less familiar with the organization, ULI is global nonprofit education and research institute with more than 33,000 members representing all aspects of land use and development disciplines. The institute was founded in 1936 in the U.S. and now has representation in 100 countries. It has a robust set of membership networks including  District Councils at the local level, Product Councils targeted to individual real estate sectors, and Research Centers that explore specific aspects of urban development. ULI also has an active program of convenings, education, and advisory services.

The Building Healthy Places initiative has four areas of impact:

• Awareness – This refers to awareness of the connections between health and the built environment, and ensuring that health is a mainstream consideration in decisions our members make every day as part of their business operations.
• Approaches and Tools – Above all, ULI is a practical organization. Our members look for useful methodologies and innovations that can help them advance approaches to healthy buildings, projects, and communities. In this regard, ULI focuses on real-world experience, often using a case study approach.
• Value – We know that broad adoption of these practices will depend on a compelling business and public policy value proposition—we are striving to understand the market and nonmarket factors at play in building healthy places and the impact of these approaches on asset values and investment returns, fiscal health, and social equity.
• Commitments – ULI is seeking commitments from developers, governments, and others to work, build, and operate in more health-promoting ways.

JHU is an institution that knows a thing or two about health. I don’t need to document for this audience the alarming rate of increase over the past thirty years in a host of illnesses related chiefly to physical inactivity and poor nutrition. Soaring rates of obesity, diabetes, heart disease and depression are just a few of the troubling signs of our population’s declining health.

Health outcomes reflect a complex interaction of many variables. But, many can be linked to land use decisions that have limited people’s ability to include healthy lifestyle choices as part of their daily routines.

Dr. Richard Jackson of UCLA, one of the key spokesmen for this connection, notes that physicians have traditionally been at what he calls the end of the disease pipeline—the point at which the patient is sick and seeks treatment. Moreover, our response typically focuses on the individual—their personal behavior, or even their willpower. As Dick puts it, this is a losing battle. Medical professionals need to move “upstream,” which in his view—and ours—is the way we plan and build our communities.

The simple fact is that, in much of America, we have designed physical activity out of our cities. Examples are all around us: conserving your energy by taking the escalator to your workout; driving to complete the shortest of errands; playing a video game of tennis rather than actually getting on the court. Whether you want to skip driving in favor of walking or biking, or your economic circumstances mean you have to walk or bike, the way we build communities makes it a life-threatening event.

But we can do better. We can build specific facilities; we can employ less toxic building materials; we can provide access to recreational activities; and we can accommodate multiple modes of transportation. But how does this work in practice?

At ULI we have been hunting for developers and projects that are doing things differently. Let me share the stories of two ULI members who are making a difference.

There’s the story of Jeremy Hudson, CEO of Specialized Real Estate Group in Fayetteville, Arkansas, whose project, ECO Modern Flats, has a particular focus on indoor air quality. He took a 1960s complex of 96 rentals and completely redeveloped it with systems, materials and finishes that foster cleaner indoor air. It was the first completely non-smoking apartment community in Fayetteville. His health-oriented, green building approach expanded with the addition of a community garden and a saltwater pool.

Even though the apartments are 15 to 20 percent smaller than the norm for the city, rental rates per square foot are one-and-a-half times the market average, and turnover is 15 percent lower than the market average.  The development was his first – it dramatically outperformed his expectations. Now, investors are lining up to fund Jeremy’s next one.

And, there’s the story of Marja Preston, president of Asani Development in Bainbridge Island, Washington.  Marja’s development, Grow Community, is designed with a strong emphasis on durable value, which is one of ULI’s founding principles. It is a small master planned community near Seattle, a mix of single-family homes and apartments organized around shared community gardens. It is one of only seven “One Planet Communities” in the world – One Planet principles promote zero-carbon buildings, reduced water and waste, sustainable and healthy building materials. It is designed strictly for pedestrian and bicycle access – no cars. In fact, instead of garages, residents have asked for additional space for extra bikes and kayaks.  Auto parking is provided on the perimeter— which was a bold move, but one that has worked.

Future phases will include underground parking to accommodate demand from baby boomers, a market segment whose interest in this alternative project was not expected by the developer. They also asked for one-story units with universal design to allow them age in place. Grow Community has incorporated a strong “software” approach—lots of services and resources to promote healthy living – all of which have generated a strong market response. For-sale units have sold at a 40 percent price premium, and rental rates per square foot are close to twice the amount of the market norm.

These are just two of 13 success stories ULI highlighted this year in our publication, Building for Wellness: The Business Case. However, while there is a growing interest in healthy building practices, it is far from mainstream.  So what are the barriers to more widespread adoption of these approaches?

Awareness – the link between the built environment and health is not widely understood or accepted by physicians; similarly, households don’t often look to real estate professionals for meaningful advice regarding their health. Part of our work is building awareness, getting the word out, changing the culture.

Uncertain demand – our work shows a clear demand for projects and places that promote health and wellness. But the level of demand is  hard to disentangle from other demand drivers for urban amenities.

Perceived economic risk  – here also, the early data show otherwise. The 13 case studies in Building for Wellness provide clear evidence of pricing premiums and strong market response. But, we need more cost-side evidence to show that the benefits are worth the risk.

Regulatory barriers – in many places walkability is essentially illegal—our traditional planning and infrastructure design standards and tools are ill-equipped to support active transportation. However, this is changing; an urban design street guide recently published by the National Association of City Transportation Officials is a good example of enlightened public policymaking.

Lack of Metrics – we have a good analog in “green” sustainable development practices. Providers of capital need to understand building for health and make it a priority, just as they have with other corporate social responsibility goals, such as sustainability and energy efficiency. The WELL building standard is an important early step. Acceptance by the capital markets will take time, and hinges on our ability to demonstrate impact empirically.

These are barriers that can be overcome. We as the real estate industry and urban policy community need to build effective bridges to physicians and public health professionals, continue to educate and inform public policymakers, trumpet best practices and encourage innovation, and continually demonstrate the role of real estate and land use professionals in the health of individuals and communities.

The World Health Organization provides us with an uplifting and inspiring standard for health. It says it is simply not enough to reduce the incidence of physical disease. We should aspire to create environments that foster a more holistic and comprehensive state of well-being. We obviously fit into a social, political, and economic milieu that shapes health outcomes, but as Dr. Jackson notes, buildings and communities exist far upstream, where decisions we make can and do have profound and long-lasting effects on well-being.

Building for health provides opportunities for us to have fun and exercise our creativity.  For example, we can use low-cost and innovative ways to expand access to healthy food with a mobile market, or we can create engaging and playful ways to make the healthy thing the easy and even fun thing to do – for instance painting a drab stairwell with colorful murals, or replacing a traditional stairway with one that lights up or makes music when used.

In the end, of course, individual actions have a lot to do with how healthy we are, and, for some people, being proactive about health and fitness can be hard.  But, we can start by making health a primary consideration in what we do, by including health as a component of our industry’s standard decision-making tools, such as highest and best use. We’ll all be better off for it.