Social Value in Real Estate, 7 April 2022

The effects of the pandemic and the onset of high levels of inflation are raising the importance of social value, noted Matt Soffair of L&G, who led this webinar. But real estate is still working out the role it should play in this area.

In the first of three presentations at the event, Mariana Goncalves of Savills identified three main drivers for real estate organisations to embrace social value: creating value for stakeholders, shareholder expectations and employee satisfaction.  But despite this impetus and a mass of publications that have been generated on the topic, there is still little agreement on how it should be defined.  Even so, there has been some consensus around a process that in the first instance involves identifying local needs and then establishing what social value outcomes might be targeted, after which a strategy can be implemented and monitored for success. She stressed the particular pressure for achieving social value in construction, an activity often perceived to have negative effects in this area, but it is also taking hold on the operational side of real estate.

Ellandi, which undertakes retail asset management across 28 UK town centres, is one such organisation implementing a social value agenda.  According to board member Tim Cornford, the objective is to create ‘more sustainable and inclusive communities’ by making centres more attractive places to visit, in turn generating a stronger sense of worth among local populations. This ambition has gained growing interest from investors over the past five years or so, and Ellandi has also placed increasing emphasis on the need to measure outcomes, for instance in seeking to put a monetary value on the benefits gained by the local bodies and firms with which they partner.  These are considered in alignment with the TOMs (National Themes, Outcomes and Measures) framework developed by central government for measuring social value. In another example of a business that is looking to enhance social value within communities, Gareth Jones described the objectives of his organisation Town Sq as ‘building communities of like-minded people across the UK’. With a focus on creating co-working spaces to foster an eco-system of entrepreneurs in ten locations around the country, they provide start-up clubs and accelerators as well as admin support, in effect achieving a broader defined version of co-working that can help people, places and communities to thrive.  The firm has recently gained B Corp certification, which means that it has been verified as meeting high standards of social and environmental performance, transparency and accountability.

In the panel discussion that followed, Jones suggested that real estate investors are starting to understand the importance of creating social value in local communities as part of the requirements of a successful investment, but that they still have a lot further to go.  Cornford agreed that investors are starting to see alignment between their own and social objectives, but that it is often difficult to persuade them to make a commitment in some of the locations where Ellandi work. These may not be the most fashionable places, but making this kind of social impact can bring a lot of value in time.

The difficulty of measuring how investment can affect social value is clearly a concern for investors, and each of the speakers agreed that this is a problem.  Goncalves said that one reason is that communities have different needs, while social effects tend to be longer term and less tangible than environmental ones.  But Soffair proposed that investors shouldn’t see problems with measurement as a reason not to be active in this area; Cornford agreed, stressing that the ability to measure social effects should improve over time.

Tim Horsey