Property landlords need to heed wider social impact: Corio

Property landlords need to pay more attention to the social and environmental repercussions of the products they develop, according to Lara Muller, head of Corporate Social Responsibility at Dutch listed retail specialist Corio. ‘The social component is growing in importance and the challenge is to show what value a building can add to its environment. Sentiment is changing - it is no longer enough to focus only on profit and financial criteria. That is the biggest lesson from the financial crisis.’

Muller was one of the speakers during a panel discussion held in late March by Amsterdam-based Composition Capital Partners on how to secure sustainable long-term returns in real estate. The Dutch office market faces one of the highest vacancy rates in Europe and the number of vacant retail stores is also growing.

Muller said commercial property companies would not be successful in the future in a failing society and that they would be penalized for their wider impact on their physical and social environment - intentional and unintentional. 'The real estate industry has a responsibility to ensure that buildings meet the requirements of their users and that they have a positive impact on the communities and environments in which they are located. Environmental, social and governance is becoming broader,' she noted. 'And the gap between the pioneers and laggards is growing.'

Pointing to shopping centre landlords, Muller said they needed to carry out polls, not only to find out the opinions of visitors, but also of local residents and how the mall is affecting entrepreneurship in the area in a broader sense. ‘Landlords needed to look beyond the walls of their owns assets and organization. How we deal with tenants, visitors and people living in the area is key. Companies that want a licence to grow, will need to pay attention to ESG factors. And those that do will have easier access to capital markets.´

Citing the examples of Dutch pension fund giants APG and PGGM, Muller said institutional investors had a long-term perspective and a growing number were focusing on aspects of ESG policies. Earlier this year, APG ousted US supermarket giant Walmart from its portfolio due to its failure to implement adequate social policies for its workers. This despite the fact that Walmart has historically been the best-performing stock in the US and also has its environmental policies in order.

As investors become more critical, landlords will need to do more than ensure that their assets are well-maintained and perform well if they wish to set themselves apart from the rest, Muller continued. ‘Risk management will become business as usual, simply a prerequisite for receiving a licence to operate,’ she predicted.

Institutional investors are also scrutinizing more carefully how companies manage the productivity of their own staff, Muller added. ‘Landlords need to factor in the repercussions in their investment decisions and look more closely at segments where there is demand.’