This report seeks to make the case that the greatest financial return on investment is achieved by creating buildings and places in which people and communities thrive.
For this to occur, we believe that real estate projects have to be both financially beneficial to the investor, and generate sufficient long-term societal benefit for those who experience the development. If both these factors are to be established, then societal value needs to be understood, measured and reported in a way that is transparent and understandable to all of those affected.
This report follows on from the 2016 publication ‘Highly Valued Hard to Value: Towards an Integrated Measurement of Real Estate Development’. The 2016 research identified key aspects of value in international real estate including cultural, design, functional, social, environmental, accessibility, brand and long-term benefits. It also investigated the ways in which these aspects were measured in the real estate industry and asked whether it was possible to create an integrated methodology for both financial and societal value. The report identified four avenues of action to achieve a better, holistic understanding of valuation in the built environment. These included:
- Inform industry about the tools to provide a broader understanding of urban quality and development
- Enhance current valuation methods
- Provide policy back-up and influence, and a refinement to planning policy in particular
- Introduce performance metrics that correspond to what is valued by stakeholders
The ultimate goal of our ongoing initiative has always been to help remove the barriers to creating better built environments by helping government and the industry to take a fresh look at valuation methods, review planning policy and to work towards better performance metrics. These measures will, we believe, help to change the way society views the true value of development.
In the process of our investigation, we explored a number of sub-issues, including the reasons why a more comprehensive or inclusive valuation method for real estate is not, as a rule, being adopted as common practice by the sector.
The recommendations are intended to have a positive impact on development and thereby alleviate some of the challenges currently being faced by those active in the real estate sector.
The report contains examples of practical tools, advice and sources to help those interested in doing more to understand, maximise, measure, calculate and report on the combined financial and societal value of development. This includes a number of case studies which help to illustrate the way pro-social and pro-environmental elements have been incorporated into designs to ensure inclusive benefits for a wide range of people.
We have also summarised current methods of property valuation. We look at financial returns and market valuations before moving on to an exploration of how alternative approaches to measuring the societal value of development is being adopted in the industry.