What is “social infrastructure”?
The term is being used as another description for “real estate” or “property” in the context of a growing demand for ESG focused real estate assets and changing perspectives on investment timelines for real estate assets.
Why is the term being used?
The ESG nexus: It is becoming apparent to the real estate industry that investors would like to have an impact with their investment. The PWC Emerging Trends in Europe 2024 report confirms that investors are looking at the added value to assets from having an ESG focus. Therefore, despite the additional costs that might arise from an ESG strategy, having such a strategy remains important for attracting investment to an asset.
As part of demonstrating the ESG element of a real estate asset, using the phrase “social infrastructure” allows real estate asset managers to capture in their branding of an asset both the environmental credentials (which will usually benefit the occupiers of the real estate) as well as delivering in respect of social benefits to the locality of the relevant asset (for example a carefully designed estate landscaping scheme will provide a green space for the local community and possibly a play area for local children as well as enhancing biodiversity and clean air within an asset's estate).
Living sector opportunities: Additionally, PWC's report noted real estate investors are considering new opportunities away from the traditional real estate sectors. The Living sector is a good example of an area that is grappling with issues such as an affordable housing crisis, an ageing population requiring appropriate later-living housing (in the 2021 Census 18.6% of the UK were over 65 years old) and a shortage of rental properties. Investment into the Living sector will be critical to alleviating these issues and is highlighted in the “Building more homes” pillar of the BPF's 2024 election manifesto. Furthermore, commentators, such as Simon Hodson at JLL (on Social's Impact Chat on 31 January 2024) have highlighted that longer term investment is needed and referring to the real estate involved (such as affordable housing) as “infrastructure" could help encourage public-private partnerships which look beyond election cycles (from the public side) and fund life cycles (from the private side). Infrastructure projects are generally understood to require a longer timeline to be delivered and to provide returns and if a similar mindset/expectation can be adopted for parts of the Living Sector this could help drive investment and solutions to the challenges outlined above.
What could this mean for real estate lawyers?
We have for some time seen an expansion in our repertoire of documents and provisions we are advising on. Now there are often operator or management agreement documents to negotiate with sophisticated operators who might provide a wider service than just a property management role or may be linked to a renewable/low carbon energy source for an estate. Additionally, there is greater diversity in lease provisions with “green lease” provisions for environmental initiatives and more recently “blue lease" provisions to address social initiatives at a building. These changes reflect that there is already a shift occurring for the real estate industry in having greater complexity to real estate assets and this aligns with the narrative forming around “social infrastructure”.
...real estate is increasingly seen by investors, governments and citizens as “social infrastructure”. It is an industry that is not just “creating a lease so we can collect the rent”, as one investor says, but investing in the space required to meet the most fundamental needs of society, in many cases fulfilling needs traditionally met by government...
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