Success in Real Estate Development Extends Beyond Profitability: 3 Reasons How
“Over 17 years of leading over $1B in complex, mixed-use real estate development, I have picked up a few key lessons of why this is critical.”
Carla Guerrera, CEO & Founder
A recent Globe and Mail article on optimizing business success states "Beyond the bottom line, we all win when companies embed corporate social responsibility into strategy and the core business. Consumers have already caught on; now it’s time for businesses holding out to do the same. When they do, they’ll realize that business success beyond profit will benefit them, the economy, our communities and the environment, demonstrating that every corporation can be a powerful force for good in the world." (see below link)
No where is this more true and more under-utilized than in the real estate development industry.
Social responsibility is a demonstrated powerful driver for successful real estate development, but is a highly under-utilized tool to drive success for projects in the development planning phase. If you look around at some of the MOST successful real estate development projects, those strongest returns and the ones with lasting legacy/community impact, you will see that these projects have achieved success on a profit AND a social responsibility front. We only need to look to the Urban Land Institute's Global Award of Excellence projects to see some of those successes. In 2018, winners included PCI's Marine Gateway (Vancouver) on that list as well as the West Don Lands (Toronto) that I helped to lead through masterplanning and first phase of development. These projects have clear values that extend beyond profit that were identified and planned early in the development process including: transit-orientation, public parks and open space, public art, rental and/affordable housing mixed with market condos, and are sustainably designed and built with highest LEED standards of the day. They clearly were driven by values that extended beyond profit alone.
In the case of the West Don Lands, with Waterfront Toronto at the helm as the master developer, those values were identified and clearly articulated as an organization early in its development and those values became the drivers to every decision-made by the organization and the project team. Values around design excellence, public engagement, sustainability and of course, profit targets. In my experience this is something that is often either missing or not done well for many companies in the real estate development industry, and as a result can often be detrimental to projects, business, and the company overall, and in essence create projects that do not achieve their full success potential. Let's unpack this.
So how does adding social responsibility to real estate development optimize success and profit for projects? Over 17 years of leading over $1B in complex, mixed-use real estate development, I have picked up a few key lessons of why this is critical. Below are 3 key thoughts to consider as you launch your next project
Building social license for project. Getting alignment and approvals for real estate development is one of the biggest challenges for projects today in most markets and those processes are only becoming more complex, more time consuming and costly. Political landscapes are changing, community members and groups are becoming more sophisticated and more organized and in some communities, even more resistant to change. Municipal requirements and expectations for engagement are growing more and more intense. Aligning politicians, city staff and stakeholders around components of a project that are bringing social and environmental value and benefit is the absolute best way to gain their support and approval. I have painstakingly learned this over almost 2 decades of leading development projects- through trial error, and I have learned this fine skill of identifying what those critical social values are and how to align all of the necessary groups around those values to gain social licence for project to move forward by building project champions vs. project opponents. It is so worth investing the time and resources to get this right the first time to save time, money and build certainty and confidence into the development process.
Build positive reputation and new opportunities. When development companies incorporate social responsibility into their brand as a company and into their projects, they essentially pave an easier path for future dealings with local communities and municipalities. Those socially values and benefits are key aspects that local government and communities can align around because they care about them, they do not care about how much profit you are making or have made. So having a strong focus on social responsibility for your company and in turn your projects, ensures that future business dealings will be smoother and the municipality or other local partners may seek you out specifically for future opportunities or land purchases because your values are better aligned. Developers reputations precedes them everywhere they go, and local governments strongly prefer to deal with those whose values will help them achieve their own goals for social responsibility.
Stronger and Faster Marketing. We know that consumers are demanding more from the products they buy and want to feel good about what they are buying, how its made and who they are buying it from. Studies show that consumers are also willing to purchase from one company or product over another where there is clearly articulated social responsibility demonstrated. In the growing competitive marketplace of residential and commercial sales, a company who can market their brand and project as one that is underpinned by providing social and environmental benefit will standout in the marketplace - no different in real estate development as is being proven in any other industry. Over my career and the development projects I have lead, those projects which were planned with social and environmental values alongside profit targets clearly from the beginning and were integrated into the project through the approvals, design and marketing- sold faster and at higher values, than projects I have led that were driven by profit alone.
Of course, we know that a real estate development company can operate profitably without purpose or social responsibility, and many do. However, one of the key lessons that I have learned throughout my career and in my business, is that those companies are likely not maximizing their business success, corporate culture or the value of their projects and will be more challenged in future as project and market dynamics grow in complexity.
What have your experiences been with this? Would love to hear your comments!
For more information, questions or advice on how to optimize and add value to your company or projects by bringing these key strategies to them, we are here to help. carla@purposedrivenroi.com