Institutional investors expected to increase real estate allocation to funds offering social benefit

Written by Adam Cadle

16/11/2020

Eighty per cent of European professional investors now have social real estate firmly on their radar as an investment opportunity and over the next two years around 30% expect institutional investors to increase their real estate allocation to funds offering a social benefit. 

Alpha Real Capital’s research found that 93% took social benefits and impacts into consideration when assessing real estate investments and 96% now regarded the presence of social benefits as important to their investment decision-making process.

Adrian D’Enrico, head of social real estate at Alpha Real Capital said: “The recent UK government report entitled Investing in a Better World, revealed the growing demand from investors to ensure that their investments not only avoid causing harm, but they also want them to support people and the planet.  Alpha’s research clearly demonstrates there is a growing trend across all investors – institutional and retail – to actively look for investments that have a positive social benefit and we see this trend accelerating.

“There is a very strong, multi-factor investment opportunity emerging in social real estate.  A growing and ageing population will need access to more assets and services provided in social real estate, but the sector faces significant challenges around insufficient and inadequate stock. Any response from the public sector will be hampered by strained government finances at a central and local level, which have been put under increased pressure with the immediate costs of dealing with the COVID-19 pandemic.  This reinforces the opportunity for private capital to assist in funding and delivering assets - an opportunity we estimate would be well over £50bn.”

D’Enrico added: “There is little doubt that pension funds and other institutional investors are increasing their exposure to real estate investments offering clear and measurable social benefits.  Furthermore, our research suggests that the current Coronavirus crisis may speed up this trend.  It is also clear that many professional investors have a good understanding of what to look for when considering social real estate and feel confident in the decisions they make here.”

When assessing the ESG characteristics of real estate products, Alpha’s research revealed 16% of those investors interviewed said it is ‘very important’ to be able to track the benefits derived from the underlying investments of any social real estate fund, with 80% saying it is ‘somewhat important’.    

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