Social value is the key to unlocking urban transformation

The article emphasizes the critical role of social value in urban transformation, particularly in the aftermath of the COVID-19 pandemic. Many urban areas are grappling with growing inequality, urban decline, and challenges that have been exacerbated by the pandemic. Mark Edward Rose, the Chair and CEO of Avison Young, discusses how the private sector is increasingly recognizing its responsibility in addressing these pressing issues through transformational urban regeneration.

Urban neighborhoods are facing unprecedented challenges such as online shopping trends, flexible working arrangements, affordable housing shortages, and rising crime, leading to a heightened sense of inequality. The article notes that the real estate sector generally responds quickly to redevelopment opportunities where a clear financial case exists. However, in areas with entrenched problems, this is often not the case, necessitating a focus on social value to drive investment.

The article highlights a significant shift in corporate attitudes towards social value, particularly in light of environmental, social, and governance (ESG) considerations. Companies are now interested in the social outcomes of their projects rather than merely the financial outputs. For instance, Nuveen Real Estate aims for $15 billion in real estate assets under management by 2026, while Schroders Capital targets social deprivation through its place-based impact investment strategy. Legal & General plans to invest £4 billion in urban regeneration and housing in the West Midlands by 2031, reflecting a broader trend of over 60% growth in the impact investing market since 2020, now valued at $1.2 trillion.

Private sector interest in public-private partnerships (PPP) is growing due to their capacity to unlock large-scale development projects. These partnerships involve public authorities often contributing land or other assets, which can help de-risk projects and stimulate further investment from private sources. The article stresses that the benefits of these partnerships extend beyond financial contributions; government involvement can also facilitate additional funding avenues.

Despite the increasing collaboration between the public and private sectors, three significant challenges remain. First, the timeline for delivering urban regeneration projects can be hindered by political changes, which may affect government support. Second, achieving a balanced shared risk and return model is crucial, as private companies still require a commercial return for partnerships to be viable. Lastly, capturing non-financial social benefits poses difficulties, especially for long-term projects aimed at improving health, living standards, and social integration.

The article concludes that while there are no one-size-fits-all solutions, a range of alternative partnership structures is emerging to channel investment into urban regeneration. Avison Young is collaborating with the World Economic Forum to create a task force aimed at identifying strategies for local governments to successfully partner with the private sector on regeneration projects. The initiative seeks to address the challenges faced by communities and deliver the social value outcomes necessary for sustainable urban transformation.