Sustainability, SFR Among the Trends Driving Investment This Year
A new survey from Realty Mogul finds that 70% of investors are more likely to invest in real estate ventures that include a positive social or environmental impact.
Sustainability is moving beyond operational cost savings. Investors are more likely to target and commit to real estate ventures that have a positive social or environmental impact, according to recent research from Realty Mogul.
The report surveyed the crowdfunding platform’s community of investors, with more than 850 responding to the survey. According to the results, 70% of investors are more likely to invest in strategies that include sustainable technology upgrades, and 46% of investors are even willing to accept a lower return if the investment includes a positive environmental impact.
Environmental change wasn’t the only thing attracting investors to alternative investments. Investors participating in the survey also showed a preference for affordable housing. Overall, respondents ranked multifamily and single-family build-to-rent as the top investment asset classes. While the question didn’t break out affordable housing individually, 45% of investors said they were willing to accept a lower return on affordable housing investments.
Investors leaning in to social impact investment isn’t surprising. During the pandemic, ESG policies surged in popularity. A majority of investors and fund managers surveyed for Future of Alternatives 2025 believe ESG policies have a positive impact on returns, with 83% of fund managers expecting ESG to be more important by 2025. Only 20% of fund managers surveyed believe ESG policies have a negative impact on returns.
Firms have also bolstered their ESG teams. Last year, for example, Blackstone hired Eric Duchon as global head of real estate ESG, a newly created position. In this new role, Duchon is working with Blackstone’s global real estate asset management teams to build and scale existing environmental, social and governance efforts. He’s also working with portfolio companies on sustainability, diversity and inclusion issues.
The Realty Mogul report also looked at geographic investment trends. Investors are the most bullish on suburban investment opportunities, with 64% saying that they are targeting suburban markets. In addition, 60% of respondents said that red states offered the best buying opportunities in 2021. Investors believe that Texas and Florida present the best buying opportunities, while New York and California represented the least appealing buying opportunities.
Overall, investors expect real estate to perform worse under President Biden than President Trump; however, investors also plan to spend more money this year, with 77% saying that they will increase investment this year compared to 2020.