The World’s Biggest Developers Find Timber Buildings Outperform Steel And Concrete

Two of the biggest developers in real estate said this week that buildings constructed using mass timber are leasing up faster and commanding premium rents compared with those solely using standard building materials. 

Directors from Hines and Howard Hughes Holdings told the audience at the National Association of Real Estate Editors conference in Austin that the cost of mass timber buildings is also coming down and that the amount of carbon used in construction is significantly less than with buildings developed using more concrete and steel. 

“The velocity of the leasing is the market speaking to us,” Hines Senior Managing Director John Mooz said. 

He pointed to the 100K SF T3 ATX Eastside office and residential building the Houston-based developer completed in Austin in November, which is 47% leased. Given Austin has one of the highest office vacancy rates in the country, this was a good result, he said, adding that the rents the company is achieving there are equivalent to those at a new prime office building like the Texas Tower in Houston.

The building method involves gluing timber together at high pressure to create solid wooden replacements for elements of buildings that usually utilize steel or concrete, such as structural frames, walls, floors or ceilings. 

The examples given at the conference were all in Texas, but mass timber is increasingly being used across the world. Hines has built or is building 27 schemes globally using mass timber under its T3 program and is looking to undertake more. 

Mooz said the Austin development is the first to have included residential units alongside offices, and Hines plans to undertake more mixed-use timber schemes. 

Using mass timber has historically been more expensive than using conventional materials, but he compared it to flat-screen TVs — when they first came on the market they were expensive, but as the technology has improved and matured, the price has come down. The same trend is being seen in mass timber buildings, which are now about 5% to 10% more expensive on average than conventional peers, with the price still dropping. 

And then those buildings command top rents because there is demand for them.

“It’s experiential,” Mooz said. “People respond well to biophilic design.”

Howard Hughes is building a 49K SF mass timber office building called One Bridgeland Green in Cypress, Texas, about 35 minutes from the center of Houston, which development manager Riddhi Doshi said is not a typical office location. 

Despite that, the building is 80% leased ahead of completion, although the company is leasing 20% of the building itself. 

“A lot of people raised their eyebrows when we said we were building office there, but it has worked out great for us,” Doshi said. 

She said the building was being used as a kind of case study by the company, and if it is deemed a success, Howard Hughes will use mass timber in other schemes. 

She said that while costs are higher, using timber can make the construction process faster, and saving time saves money. 

“We'll be looking at all of those things, but also how tenants enjoyed that space and pre-leasing, which we know, thankfully, we've already proven that metric,” she said. 

“The other things that the company will look at from a case study perspective is how this timber fares — how seamless the construction truly is, how quick it truly is.”

On the sustainability side, Gensler Design Director Michael Waddell said using timber rather than concrete and steel typically emits about 30% less carbon, and the figure for carbon savings can be as high as 70% once carbon capture is taken into account. 

Put simply, trees take carbon out of the atmosphere, and using them in building materials then stores that carbon and means it can’t be released again. The theory holds good if the wood used to build is sustainably sourced, a process that is becoming easier as certification systems become more sophisticated.

The panelists were aware of the challenges facing the wider adoption of mass timber. Insurance can be tricky, and there is a perception issue around fire risk, not least with planning departments. But changes to building codes and centralized testing facilities for materials are helping to overcome these barriers, they said.