On 23 May 2019 Howard Kennedy hosted an Economic Breakfast Briefing focusing on social value & commercial property. The discussion was chaired by Chirag Rao, Senior Associate from our Commercial Development team. Set against the traditional background of real estate measured purely in terms of financial return, Chirag explained the increasing shift in mind-set as developers and investors look at social outcomes as part of their developments, investment agendas and decision-making processes.
A big thank you to our expert panel comprising:
- Pete Gladwell, Head of Public Sector Partnerships at Legal & General
- Ann Marie Aguilar, Director of Operations, International WELL Building Institute
- Kristy Unger, Founder of Upperworth Studios
Set out below are their thoughts on whether social value can be a driver for investment returns.
What does social value mean and why is it so important within the Real Estate sector?
Kristy began by describing social value as the added benefit brought to the wider community by a development, not only to the property itself.
Pete went on to describe this as a social role of identifying long term needs and matching the need with investment, leading to stable returns over a longer period of time. Pete emphasised the need to attract investors aiming for returns over time, who are likely to have a consequent desire to bring sustained, long-term social value to a development.
Ann Marie focused on our human health, emphasising that we spend 90% of our time indoors, and 90% of the cost of a building is met by the occupants. We therefore need to take health seriously, and find ways that our buildings can contribute positively towards it.
How can we measure the return on investment?
Ann Marie began by stating she believes that you need metrics at the beginning of a development for accountability – to ensure that developers have something to align themselves with and to try to stick to. She highlighted the Social Value Portal, which sets out 5 measurable factors – jobs, growth, social factors, environmental factors and innovation – and the need to try and see how well a development can stack up against these metrics.
Pete spoke of the wider trend in our society towards data. Pete mentioned a project Legal & General worked on, which was a housing project for homeless families in Croydon. How, he asked, can you measure the improved human experiences and wider social benefits that this project brought? Data on £’s of social value doesn’t truly capture the impact on someone’s life from giving them an address to put on a job application, or their child a kitchen table to do their homework. It is the fundamental human experience that such a project creates that is important.
Ann Marie added that whilst the general trend for investors has been data driven, there has been a movement towards caring for people's lives, which is certainly a good thing.
How are people exhibiting social value?
Using the example of the hotel sub-sector, Kristy emphasised the importance of owners and developers collaborating from the beginning to understand what they wish to achieve, focusing on the modern end user who seeks greater tailoring to their health and their environment.
Ann Marie agreed, emphasising that there is a different mind-set now to what a building is supposed to offer – and that people are expecting more. The way that we look at assets is different now – are we going to have to retro-fit amenities in order to add social value and make it what people expect, or is it already built in to the project? She reiterated that employees' and residents' perspectives are changing – people are becoming more health conscious, both personally and environmentally.
Ann Marie went on to add that the WELL certificate focuses on health factors such as air quality, acoustics, light and water. The question for stakeholders is: what does a person feel like here? If they feel good about a building and their environment, this will lead to a decrease in absences, a decrease in insurance health claims and better staff retention. Buildings that make people feel better leads to happier, productive people. As a result, people can become a happiness brand for those companies creating socially valuable developments.
What returns on investment are you seeing?
Pete described his project with Homes England – regenerating cities where the market was struggling to deliver the investment that was promised, in places like Salford and Canning Town. Whilst there is still some debate about measuring social value, the key takeaway for Pete was that there will be consequences if social value is not considered, and it is very much an inescapable trend.
Ann Marie concluded the discussion with a look to the future: it is going to be obvious who does invest in social value and who doesn't. There are multiple metrics out there, and of course consolidating these into one unified set is going to be a challenge. However those who won't consider social value are likely to be left behind as the modern mood embraces improved social outcomes for our communities. By turn, those who do embrace social value are going to stand out in the market and position their brands well for the future.