Embracing mass timber: what’s real, what's a myth?

Lessons learned from successful mass timber developments

T3 Minneapolis in Minneapolis
Caption T3 Minneapolis in Minneapolis

What's the Point?

Large-scale mass timber development projects bring environmental and social sustainability to our workplaces, along with a uniquely beautiful aesthetic. But the conversation around today’s modern timber development can leave some developers and investors hesitant.

There is a desire for the industry to adopt more environmentally conscious practices and the potential for mass timber projects to influence the world's carbon output. There is no disputing that the adoption of mass timber indicates a noteworthy shift towards sustainable construction and lower carbon emissions, but what is the catch?

At a time when reliable data is lacking, it is important to review lessons learned from real projects that have come to fruition, to confidently answer the question, "Is it worth it?"

Education needed

Like many innovations, mass timber suffers from deeply held misconceptions. Investors and developers considering new projects face contradictory information that can cloud their decision-making and hold back scalability and widespread adoption. The best way to close these knowledge gaps is to better educate tenants, lenders, insurers, and others with real-world information from developers with significant background in its use.

Hines has 27 mass timber (T3) projects around the globe completed, in design, or under construction, resulting in a wealth of insights. With this many projects under our belt, we have a real-time lens into variables like total project cost, construction timeline, sustainability practices, insurability, and financing—in addition to less quantifiable insights like tenant sentiment—knowledge that is critical to bring these projects over the finish line.

Here are some of the lessons we’ve learned along the way:

Faster, but not by much

One of the oft-touted benefits of mass timber is the faster development timeline compared to traditional concrete and steel developments. It is our experience that while there can be some time savings achieved, it is typically about a one-to-two-week savings on a 250,000-square-foot office building. A condensed timeline, no matter the length, is good—but saving a week or two is not generally enough to influence an owner’s "yay" or "nay" on a project.

More expensive, but certain tenants understand the value

Mass timber project construction costs are roughly $20-$30 per square foot more, depending upon the location, to develop than traditional office buildings. Not every tenant will want the rent premium needed to cover the costs, but enough see the very real benefits of sustainability and beauty, particularly in the current environment where companies are competing for talent and implementing net zero targets. In many markets, timber projects deliver a significant competitive advantage. We expect some downward cost adjustment once the adoption of mass timber projects becomes more mainstream and production capacity grows in the market.

Insurance premiums will take a bite

With the effects of climate change taking hold, the insurance industry has suffered from outsized losses, possibly contributing to the industry taking a very conservative and cautious stance when it comes to mass timber projects. The industry has settled into an overarching belief that mass timber equals elevated fire risk, even though there is no real information to validate that belief. As a result, some investors and owners may be surprised by the higher (in some cases, tripled) insurance premiums versus concrete and steel commercial buildings of similar size and type. The reality is that there are no current examples of a mass timber building that has caught fire and burned, so educating the industry on current testing requirements and the high levels of timber safety is important to put future downward pressure on premiums.

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Preleasing can be challenging

Speculative mass timber buildings have historically attracted high-quality tenants, and there is no reason to believe they will not continue to do so. However, many cities do not have examples of mass timber buildings. As a result, it is difficult to communicate the differences and feelings associated with mass timber. It is difficult to get tenants to make the visual leap without these examples, so at times, it has required them to travel to other locations to see and experience the difference, which can add a degree of complexity.

Supplier proximity is not that critical

The availability of a supplier’s production line ultimately drives cost, not distance from the project. Hines has found that a majority of timber production occurs in small geographic areas of North America, and as a result, all timber products require a degree of shipping. However, these transportation costs have not been an economic driver. Instead, poor market timing or delays forcing a supplier to go out of order on their production slot adds significantly more premiums.

People care about the details

Mass timber is a sustainable, harvestable, ready-to-go product, whereas concrete and steel are taken from the earth and mined to achieve a raw material. Most manufacturers and providers of mass timber sustainably harvest their timber and can prove that they do. Why is this important? Investors and corporate tenants care about the details of how the trees are harvested, and they will ask. In the future, we may see regulations put in place to standardize the certifications associated with the harvesting process and help provide better visibility and understanding of the process.

The bottom line? It's worth it.

We have seen firsthand the viscerally positive reactions of people entering a mass timber building. The woodsy smell is usually the first thing to elicit a response, prompting many satisfied, deep breaths. Then comes an awareness of the appealing design elements. Timber projects featuring light-filled spaces, exposed details, hues, and tones that exude warmth, comfortable feelings, and a high level of craftsmanship. Design standards and quality have emerged as pivotal factors in mass timber projects' success. These are spaces where people want to be. By pairing great architecture with something that benefits the planet, we believe mass timber construction marries the two extraordinarily well and has led us to be a leader in the space.

Learn more about T3, our building model for positive change.