How can the real estate sector contribute to a shift towards a socially sustainable society? It seems like a tricky question. Many people don’t associate ‘do-gooder’ with ‘developer’. But there are evermore examples in the world that demonstrate otherwise; in Amsterdam and Sweden for example.

This innovative concept is called: Impact Development. It is defined as project development that aims to have a positive and measurable impact on humans and nature, embedded in a feasible financial model. “To arrive at the most sustainable plan in this new form of real estate development, an optimal collaboration between users or consumers and investors is required”, says Thomas van Leeuwen, partner / director of design and development at studio D/DOCK. He has detected a positive global trend in the real estate industry. Van Leeuwen studied civil engineering in Delft and worked at ING Real Estate (now CBRE Global Investors) until 2012.

ING

With 100 billion euros in personal management, ING Real Estate was the largest real estate company in the world. While working there, Van Leeuwen noticed that the board of directors was merely focused on financial return. This revelation was a turning point in his career: “I came to the conclusion that crunching numbers and creating spreadsheets was not my cup of tea. I feel more fulfilled when I have an opportunity to make a positive impact in the world, no matter how small. Yes, financial return is important, but it doesn’t have to be the primary intention.”

Smart use

According to Van Leeuwen, a large proportion of the real estate industry is stuck in traditional rental models: “The business cases have been the same for decades, but don’t often match the current preferences and opportunities. Many real estate investors chase after three simple things: maximum amount of rentable square meters, maximum amount of rent charged per square meter and long rental period contracts. I completely get it. In fact: the feasibility of many of our projects is still dependent on these three principles, but we also see that so much more is possible now.” He unpacks his statement further: “Nowadays, shared amenities are widely accepted. If you take advantage of this notion, it can keep cost down and revenue up. An example: an office space is used from 9 to 5 on weekdays, give or take. If a nearby educational institution wants to use the auditorium of this office for evening classes it’s a huge advantage for both parties”, states Van Leeuwen.

Impact Investment

Unfortunately, the public has a ‘polluted’ opinion of project development because of the many mistakes the sector has made in the past. “When hearing the term ‘real estate developer’, most people think of men in suits who cut down forests and take acres of greenery to build ugly buildings for profit. However, real estate development could play a role in solving social or ecological issues.” Van Leeuwen and his company are completely onboard with the worldwide trend of Impact Investing. According to a recent study conducted by the Financial Times, the capital that is invested in impact investment has doubled in the last five years. Impact investing is investing with the specific goal to achieve beneficial social and ecological impact, alongside a financial return. An investors fund in England, for example, yielded a 6% return from a housing project for homeless people. “It is no surprise that many people wonder: ‘how can you make money from a housing project for homeless people?’”, says Van Leeuwen passionately. “But that’s exactly where it gets interesting, because sometimes you see financial return where you least expect it. In the case of this housing project it was because these renters took much better care of their home than regular renters, which reduced the maintenance costs significantly.”

Real estate as a solution

The multinationals are becoming more aware of the fact that they have a social responsibility. One of the conclusions of the 2019 World Economic Forum in Davos was that classic capitalism has reached its limits. Impact Development goes the extra mile, says Van Leeuwen: “We are asking ourselves the question: how can we contribute to solutions of social and ecological issues. This is an intrinsically different approach compared to gradually feeling a little bit more socially and ecologically responsible.”

Two pilot projects

An example of Impact Development is a proposed project in Amsterdam’s Geuzenveld district. The biggest problem in this neighbourhood is that 40% of its residents have low literacy skills. “We are working with professor Peter van Gool of the University of Amsterdam and the Amsterdam School of Real Estate. 120 students will be conducting research into this illiteracy problem and how real estate can help solve this issue. If research concludes that there is even the slightest possibility that we can help improving literacy in this district, we’re up for the challenge.”

A second pilot project is underway in Sweden. D/DOCK is collaborating with a Swedish team of investors and advisors about an urban planning project in the old harbour district. Van Leeuwen: “The groundwork of this project is to tackle a big social issue; the gap between immigrants and the local population in this city. We believe that our proposal can contribute to bridging this gap, while still gaining financial success.”

A social-sustainable society

“Almost all our projects deal with issues regarding our society, communities and sustainability. And this is a great source of fulfilment for me and my team”, says Van Leeuwen before wrapping up: “My ultimate dream is that clients come to us saying: ‘help us solve this particular social or ecological problem, but make sure we see a healthy financial return.’ Maybe this sounds too good to be true, and to be completely honest, we won’t be able to solve all cases, but practice makes perfect and we will always try.”

This article (written by Tessa Jol) originally appeared in The Optimist.