With ESG having such a strong hold on the real estate sector globally, we all know the importance of it. We know it is helping drive accountability in the sector, across all asset classes, and drive towards decarbonising real estate around the world.
But so often we concentrate on the E – environmental and the G – governance. We discuss sustainable living, greener building design, and green funds are prioritising real estate with strong green credentials. But according to JLL research, only 10% of global respondents said they were ‘addressing all 7 elements of social value in their real estate strategy.’
So, are we socialising ESG but forgetting about the ‘S’ in the context of real estate?
What is Social Value:
“In the context of the built environment, social value is created when buildings, places and infrastructure support environmental, economic and social wellbeing, and in doing so improve the quality of life of people. Exactly which environmental, economic and social outcomes create social value will depend on the best interests of the people most impacted by the project or built asset.” (UK GBC)
Social value outcomes include tackling economic inequality, driving equal opportunity, improving health and wellbeing, community integration, fighting climate change, reducing waste and, more recently, supporting COVID-19 recovery. Social value ultimately enables building owners, property managers and occupiers to understand and improve the impact of their buildings and activities and enables investors to factor these benefits into their investment decisions. (BBP)
Why is Social Value Important:
“There is a need for a shared understanding of social value across real estate actors and a shared commitment to maximising social value across the lifecycle from planning to occupancy.” (Savills, Driving social value through real estate.)
Social value can take many forms, but because it is people-centric, developments with social value at its core can benefit neighbourhoods hugely and see a thriving community then increase asset value and enhance resident occupancy. The idea is giving back to society, and in enhancing the health and wellbeing of those local communities, see that circular economy then pay dividends for your real estate.
This could take the form of reducing waste in an area, it could include integrating a new office building into a neighbourhood by making the green spaces open to the local residents. It could include increasing the level of public transport into an area, so a new development doesn’t inflate a local community too much. It could be aligning with local restaurants or retail stores to encourage the success of local enterprise. Ultimately, if you ask the questions ‘who will this benefit’ and ‘what can we do to benefit these people’ – you’re on the right track.
The benefits of social value also help drive economic benefits according to JLL research:
“Over five years, it calculated that every £1 invested equated to £6 of social and economic impact, generating £36m (USD $44.3m) of total benefit. Activities included providing affordable rents and mentoring support to local small businesses, while creating jobs for more than 1,600 local London residents – over 900 of whom were previously unemployed.” (JLL, How companies are baking social value into their real estate.)
Social Value at Work:
According to JLL research, ‘By 2025, 40% of corporates plan to complete biodiversity projects with 33% intending to create green spaces for public use.’ So, the movement is starting to take shape in the private sector!
Even in the public sector, social value is becoming a key area of tendering for work:
“For all investors and land and property owners, defining social value is imperative. The UK Government has introduced legislation which requires social value to be evaluated as part of the tender process when outsourcing all contracts over £100k. When scoring bids, under the Public Services (Social Value) Act 2012, the Government will award up to 20% of marks for social value.” (BNP Paribas, Realising the potential of property and land through social value.)
But the responsibility for championing social value has to go beyond asset owners and investors looking to profit from this real estate. Alongside asset managers, the occupiers of a property often have an interest in generating social value;
‘Property managers can then play a valuable role in ensuring that occupiers social value activities align with the local context and stakeholder needs as well as, potentially, the social value programmes undertaken by the asset manager and other property stakeholders.’ (BBP)
Being closer to the ground and knowing their residents on a personal level will always strengthen a social value strategy and ensure its deeply rooted in its community context.
It’s important to note, residential asset classes (BTR, Co-Living, Single Family Housing, and even Care Homes) have arguably the strongest approach to social value to date, which makes sense considering ‘the strong relationship between the quality of housing and the built environment with the health and wellbeing of people and communities.’ (Savills, Driving social value through real estate.) The likes of other asset classes like commercial can also add huge value to local communities by prioritising social value, because ultimately all social value creation requires is ‘putting local people at the heart of decision-making.’ (Savills)
Some noted benefits of having a solid social value strategy include:
- Attractiveness to Residents: Rental yields increase by 16-25% on ESG aligned assets.
- More potential for Planning Consent: There is £15bn of potential additional value to unlock if social value and UK planning systems are integrated.
- Increasing Footfall: There has been a 22% increase in interest from investors in real estate assets with ESG credentials.
- Improving Employee Satisfaction and Wellbeing: 75% of works wants their employers to make a positive contribution to society.
Where to start with Social Value:
- Partner with Thought Leaders: Work alongside social value experts like Utopi’s ESG Advisory Services team to create bespoke social value strategies for your real estate assets, and better understand the ways you can use real-time ESG data to assess success and map positive changes that can be made. We can even assist with social calculations, to quantify your social strategies and how best to deliver the change you need.
- Sustainable Certifications: Look into achieving Fitwel Certification, a people-centric certification for both new builds and existing assets. This demand-driven certification is dedicated to ensuring ‘every building is enhanced to support the wellbeing of its occupants and support healthy communities’. So having a Fitwel stamp of approval showcases your real estate’s commitment to social value.
- Practise Responsible Procurement: According to JLL, ‘Procurement in the built environment can play a key role in creating social value, with the adoption of responsible procurement practises helping to minimise risk and generate positive impact when sourcing services, supplied and works.’
Ultimately, real estate owners and operators should be taking a holistic approach when formulating their ESG strategies and addressing ALL aspects of social value; because what gives back and benefits society, benefits us all in the long run.
For more information on Utopi and how we can help improve your social value strategy, get in touch!
Author, Chris Martin – Head of Direct Sales (UK & Europe) at Utopi.