A 2019 study by consultant McKinsey & Company showed that diverse firms are 25 percent more likely to have higher returns than their peers. Real estate has long been accused of lacking diversity of thought, but the industry is looking to change that.
Hiring to deliver a more diverse workforce is a slow process; budgets, skills gaps and conflicting requirements mean that hiring directly to increase diversity is not always the best approach. As a result, many real estate investors have been using their unique position in the local community to encourage employment and also encourage their broad range of suppliers to do likewise.
London-based eveloper Socius, for one, tries to only work with suppliers and contractors which are willing to work the same way as it does. Doing this, says Barry Jessup, managing director at Socius, means policy decisions have an exponential impact. He explains: “If we make one change, and then get all of our suppliers to make that change, it has had 100 impacts.”
According to Socius, the scheme is very popular with its partners and highly effective at delivering a significant impact across the community affected by the development. The scheme also delivers an impact beyond and in all areas where Socius’s partners work.
The variety of partnership-driven schemes is also innovative and thoughtful about the available workforce and providing opportunities for often overlooked segments of the population. An example of this is Socius’s supplier deal with a street furniture manufacturer in Oxford. Jessup explains the company already made the type of furniture that fit in with the environmental concerns for Socius, but also ran a socially-conscious business by incorporating ex-offenders in their workforce.
Providing employment in the developments is also providing significant social benefits. Some companies are taking this idea a step further and providing skills training for those they come into contact with, to help them gain new opportunities.
As Cristina Garcia-Peri, managing partner and head of corporate development and strategy at Azora Capital, the Madrid-based manager, notes: “One of the programs we invest in is to take one or two young people from Honduras, and we bring them to Spain to train them in accounting and administration, and we are beginning to give them employment opportunities in our hotels.
“We tend to be large employers in the community, so we like to think about what we are offering. We think about how we employ young people, or how we can improve access to the workforce for people with disabilities.”
The effects of employing local people are not just about creating a sense of social wellbeing within the community. It also delivers a feedback loop to the developer and landlord. Ideas are generated in ways to improve the local services and facilities and feed back into future developments run by the investors.
This is neatly summed up by Garcia-Peri. “It is only when you are working with the communities and working with the employees that you can spot the opportunities,” she says.
Olaide Oboh, director at Socius, agrees that the ideas generated by the communities of ongoing developments add huge value to the schemes of the future. These ideas can’t be placed onto the next community without considering their own specific needs, however. This means that the local community needs to be consulted on their needs, including employment needs.
“We tend to be large employers in the community, so we like to think about what we are offering”
However, creating a more diverse team is going to generate stronger social effects and has become a bigger goal for many in the industry. To do this the industry has to be attractive and better understood among prospective employees, but for many students real estate is not an obvious career path. To remedy this, real estate developers have begun programs in schools and universities that aim to raise awareness.
London-based manager Europa Capital works with Sheffield Hallam University to encourage the best students to consider real estate through a scholarship program.
Managing partner Rob Sim says: “Our scholarships are £3,000 ($3,500; €3,400) a year and help [students] support themselves. The university selects three students, and it runs for three years. We’re planning to double that next year.”
Sim also highlights Europa’s work with schools. “I got involved in Urban Plan, a program run by the ULI, which is an outreach workshop originally developed in the US. It provides an opportunity for students at state schools to work on a hypothetical regeneration project to give them a taste of what the world of real estate is about and tries to link in with the curriculum,” he says.
His involvement in the program has continued at Europa. “Some of the work we do is offering students guidance and advice on careers in the real estate industry,” he says.
Beyond the books
Working in schools does not need to be all about teaching students about real estate. NREP, the Copenhagen-based manager, works in schools to mentor underprivileged students and help them achieve better results. Aviva, Hines and Europa Capital are other companies that encourage volunteering in the education sector. It is a highly effective means to increase social mobility and expand the skills base within underprivileged areas.
Few organizations say the primary intention is to deliver more people into the real estate industry; all describe the volunteering as staff being motivated to offer more to the community. In the longer term, though, volunteering is highly likely to increase the diversity of staff coming into the industry as a result of the exposure given by investment professionals at schools and universities.
None of these programs are simply looking at younger carbon copies of their existing teams. They are seeking to create genuine diversity, in both the social make-up of the team and also in thought. As a result, there is a push to look at programs that work with underprivileged communities.
Socius’s Jessup highlights his team’s efforts. “We are doing work around integrating varied voices and encouraging more cognitive diversity into the real estate decision making team; this in turn ensures that the decision making processes on how our cities and towns will be laid out and used are much more inclusive,” he says.
Organizations like London-based careers and experience platform Uptree have also been working with the real estate industry to raise awareness among minorities and the underprivileged about career opportunities in real estate and how to access them. The organization conducts outreach with these students, introducing them to its clients and developing work placement and internship programs.
Europa’s Sim has encouraged involvement in the program among his staff. “We run twice-yearly workshops for about 25 students who were interested in finance, but wanted to do a bit more. What we have done since the beginning is offer two or three from each group work experience, to give them a week’s insight into real estate,” he says. Sim hopes this will lead to Europa taking some onto its investment teams.
Oboh adds that the benefits are universal. The investment teams achieve higher returns for their partners but also better spaces are created. “[If] we come at decisions from different perspectives, and that is important, we are responsible for creating new spaces and those new places will have a wide variety of people, and if we come at it from one perspective, we are creating dull lifeless places,” she says. Oboh believes the product is made entirely better by engaging with the local community and hiring more diverse thinkers.
Hattie Charlier-Poole, senior development manager at Henley Investment Management, suggests firms are more engaged with the community when they have their interests at heart. “Embedding it into the placemaking strategy creates a much more robust product and the longevity of that product should be assured. And the risk of not meeting people’s needs should be reduced,” she says.
Providing these opportunities provides a whole basket of benefits, and not just in the social impact on the local communities. The social impact of modern developments has quantifiable benefits. According to the city council of Manchester, UK, redevelopment schemes helped the number of jobs increase by 17.2 percent (or 59,000 roles) between 2014 and 2018. With a dedicated focus on ESG and in particular the social element, the chances that employment will increase in and around developments seems likely.
Commencing projects that employ minority groups and the underprivileged has nothing but beneficial effects on the developments and the work of the investment teams. It may be a slow process, but everyone seems to agree it is worth it.