Following the success of 2021’s inaugural Student Essay Competition, EG launched its 2022 competition in the spring, inviting all apprentices, undergraduates and postgraduates in real estate to respond to the question: “What does long-term success in real estate look like – and how does the industry achieve it?”
To get the creative juices flowing, we suggested a few talking points: “Is it an industry that has fully embraced environmental, social and governance in its decision making and operation while maintaining profit? Is it a sector that has evolved pioneering approaches to diversity and inclusion? Or is it the industry’s ability to harness technology, artificial intelligence, and the metaverse to produce the business models and platforms of the future, that will be key to shaping its long-term success?”
Students were asked to explain in 1,000 to 1,200 words why they felt those – or other factors – were important, as well as detailing how success will be achieved over the short to medium term. For example, who should take the lead in driving forward change?
All entries were anonymised and sent to the panel for blind judging, based on agreed criteria and weighting.
Coming out on top was Max McLean from the University of Portsmouth, whose essay provided a clear argument on social value and which the judges described as taking a “pragmatic” approach to the question.
The runner-up was Elliot Steele from Oxford Brookes University.
In addition to having their essays published in EG, each will receive a year’s free subscription to the digital magazine, mentoring from one of the judges and, for the winner, £250 in vouchers.
Judging the entries
A five-strong judging panel, which combined a mix of industry and academic expertise, convened in early June to review submissions and determine the winner and runner up. The participants were:
- Sue Brown, managing director at Real Estate Balance
- Paul Collins MSc FRICS FHEA, senior lecturer at Nottingham Trent University
- Vivienne King, head of real estate social value at The Good Economy
- Jen Lemen BSc (Hons) FRICS, partner at Property Elite
- Paddy Allen, head of operational capital markets at Colliers
COMPETITION WINNER
Max McLean
BSc (Hons) property development,
University of Portsmouth
What does long-term success in real estate look like – and how does the industry achieve it?
Long-term success in real estate is the industry truly accounting for a measurable social impact and value in all decisions.
Environmental, social, and governance factors are non-financial considerations in real estate decisions – predominantly decisions regarding investment activities. In the wake of the climate emergency, the environmental factor has been at the forefront of decisions, with clear actions being undertaken, as evident by the movement towards net-zero carbon emissions in the real estate sector. However, this often results in the social factor becoming overlooked.
The meaning of social value
Social value is a broad term which encompasses the improvement of people’s lives, creating a sustainable legacy, and benefiting parts of society that require help. Indeed, 10 or so years ago the concept of social value would not have warranted such serious consideration in real estate, but it has increasingly grown in significance and relevance. This has in part been accelerated by the Covid-19 pandemic, highlighting the need for the promotion of health in public space and residence.
Accounting for social value in real estate would mean meeting the unique needs in a local community, improving health and wellbeing, creating a place that is part of the social fabric, and being sustainable in the long-term. These are not current considerations nor aims in most real estate decisions. Long-term success in the sector would account for such aims in operational decisions, whether it is through the design of a new-build, or asset managing a current building’s engagement with the local community. The businesses in the sector must create a clear approach to social value that derives from the core of their purpose. Buildings naturally hold a social component, thus to create a fruitful environment is at the hands of the industry’s decisions.
Achieving long-term success
On a fundamental level, ensuring that there’s “value in all decisions” is integral to the achievement of long-term success in real estate. Equally, any resultant success can be gauged by a measurable and positive social impact.
For the industry to achieve measurable social impact and value in all decisions, it must first identify the economic viability of considering that social value as social and economic success are interconnected. If a building provides a function that addresses locally-related social needs, the building becomes under less risk of falling into disuse and obsolescence as it will remain in demand, therefore providing the best risk-adjusted return for the investment.
Some real estate businesses have identified this. FTSE companies require a profit for their shareholders, but still partake in initial non-profit placemaking activities such as funding parks and social infrastructure as it is a long-term investment. This is because placemaking retains tenants and ensures stable returns.
Recent changes in consumer habits post Covid-19 have exacerbated the decline of urban areas. In 2022, a casual stroll through any town or city in the UK will provide confirmation that any former incremental decline increased exponentially in a comparatively short period. Additionally, affordable housing has a better risk return than build-to-rent as it is in higher demand and has a greater social value if maintained adequately. Therefore, the sentiment that there is no economic value to be gained in “responsible profit” must change and creating a sustainable environment should be viewed as an opportunity. Moreover, success in the industry will be achieved when it becomes an economic incentive for the market to account for social value in a similar way to environmental considerations through the changing EPC requirements, which ensure that it’s preferable to make a property energy efficient.
Avoiding a perfunctory approach
It is important that achieving measurable social impact and value in all decisions is not categorised as a tick-box exercise that is a requirement in developments, otherwise the mandatory minimum will be completed by some companies. It must involve the entire sector moving towards a similar mindset, much like the net-zero progress.
Accounting for social value naturally makes real estate activities more challenging. For example, it requires an increase in public consultations to truly listen to what the public want, as well as sometimes demanding co-creation partnerships that do not work harmoniously with classic procurement routes. Any reluctancies from the added complexities that social value considerations entail will be overcome as companies become influenced by their peers’ actions, as well as the additional marketing benefits that this would bring. Therefore, the sector should move towards accounting for social values together.
“Social value offsetting” should be avoided to achieve long-term success. It can be avoided through companies finding their individual corporate social role and creating a benchmark that can be used for all decisions, rather than socially damaging an area and “social value offsetting” through actions such as sponsoring a local school. This can be promoted through the local planning authority addressing a development’s social value and making it evident that it would assist with an application.
Addressing a development’s social value is tougher to quantify than environmental considerations, therefore it is necessary for the real estate industry to conform to a standardised framework to achieve social value success. The framework would ideally be of similar use and popularity as BCIS is to quantity surveyors. There are several frameworks from differing bodies in the sector, however, if a market leader or the government announced the use of a particular framework the industry should follow suit.
In conclusion
Long-term success in real estate is the industry truly accounting for a measurable social impact in all decisions. Social value in real estate assists with the improvement of a local community, which is currently not considered in most real estate decisions. Businesses in the sector must create a clear approach to their social value considerations in all operational decisions and identify the economic viability of doing so, while recognising sustainability as an opportunity. It is important that achieving measurable social impact and value in all decisions does not become a tick-box exercise and despite the added complexities, it is something that gains influence over the industry through local and national government, peer influence, clarity of quantitative measures, and a standardised framework.
RUNNER-UP
Elliot Steele
Property development,
Oxford Brookes University
What does long-term success in real estate look like – and how does the industry achieve it?
The definition of success is “the accomplishment of an aim for purpose”. In the real estate industry, success will be judged in a multitude of different aspects. And, in turn, these aspects will have to be constantly evaluated, evolved, and changed to ensure that the real estate industry is achieving success in the long term as well as in the present.
Diversity and inclusion
With the real estate industry employing 560,000 people in the UK, the sector is the fastest-growing workforce in the UK. Therefore, it must cater to people of all different ethnicities, genders, and social backgrounds to ensure that it is successful in the long term. The real estate industry is stereotypically a white, male-dominated industry that sees men from an, A, B, and C1 social class being among the highest percentage of employees in the industry. However, today in 2022, this calls for an evaluation and change. Having a diverse workplace increases innovation. With the industry employing people from a vast, diverse range of social backgrounds, ethnicities, and genders, it increases innovation in the industry, allowing it to move forward at a faster rate and allowing for the real estate workplace to become more diverse and inclusive naturally.
The real estate industry has been successful with inclusivity and diversity as it makes employability accessible to as many people as possible via graduate schemes and internships. This allows for young people with a passion for the industry to be able to come from their place of education and filter straight into the real estate industry. This boosts inclusivity and diversity because places of education such as universities allow and provide a wide range of opportunities for access to the real estate workplace for people from a wide range of backgrounds. Therefore the real estate industry is successful in making the workplace inclusive and diverse because it has started to increase the number of graduate schemes and internships to allow people of a young age, from diverse backgrounds to have the opportunity to work their way into the industry, and this will lead to long-term success as the industry starts to have a larger percentage of people from diverse backgrounds and ethnicities in the workplace.
Sustainability
Today, sustainability is at the forefront of the criteria for the real estate industry. The industry produces 30% of greenhouse gasses and consumes 40% of energy globally, therefore being such a large user of energy, and producing such a large amount of emissions, it is fair to say that sustainability is a key element of judging success in the real estate industry. However, measures are in place to ensure that these figures can be improved and to ensure emissions can be minimised to help to provide for a more sustainable and circular economy and environment.
An example of success in terms of sustainability in the real estate industry is King’s Cross Station in London. King’s Cross is a prime example of how space in an area as dense as London can be fully utilised to improve productivity, efficiency and connectivity. King’s Cross is a fully sustainable development that has its own, on-site energy centre. This on-site energy centre is able to provide heat, hot water, and electricity for homes and shops on the development site. Furthermore, King’s Cross is able to offset historic emissions using carbon credit schemes that are recognised internationally to help offset the emissions produced in the past. From this, it shows that King’s Cross has set a high standard for the industry to follow, showing industry-leading techniques and examples that other developments can imply to make the real estate industry much more successful. King’s Cross is a showcase of success in the real estate industry, and an example of the success to come.
Global development
The development of the industry is a factor that can show how successful real estate is. Developing UK-based business globally to become industry-leading shows success within the real estate industry. Many estate agents and property investment companies have sought foreign investment and to have trade with foreign countries and businesses. Knight Frank is an example that is probably all-encompassing in terms of how many divisions of the company are international and global. With many of the divisions of Knight Frank being global, it allows for foreign investment to reach the UK to enable more rapid expansion and increased productivity within the industry, thus making it successful in the present, but also allowing for the creation of business models to maintain and ensure success for the future.
Summing up
To conclude, it is clear to see that the real estate industry is successful, and in the long term, it will continue to be successful. Being the largest employment industry in the UK it can only go from strength to strength in terms of employability and in terms of inclusion and diversity. Furthermore, the sustainability aspect of the industry is improving vastly, with the industry evaluating and evolving methods of construction and design as quickly as they can to maintain success and to be at the forefront of global development to set a standard and an example globally as to what the UK can do in terms of innovative and sustainable development.
The sustainability aspect of the real estate industry is a major success, with examples such as King’s Cross providing an industry-leading model to study and work from. It will provide the industry with a majorly successful future that will make the UK an example to other nations of how vital sustainability is in the real estate industry. In turn, it will provide the research and information needed to achieve a circular economy and environment in the UK to achieve as little emissions produced, and as little energy used when it comes to the development of all sectors of property.
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