Data snapshot: The budding market for real estate impact

The universe of impact real estate funds is growing, says bfinance, but allocators must be mindful of a very specific set of risks.

The market for real estate impact fund offerings is blossoming, but it presents allocators with a very specific set of risks, says investment consultant bfinance.

As of April this year, 54 social impact real estate funds have been brought to market since 2013, with a fifth of these – 11 funds – having a 2022 launch date. bfinance noted the findings in a paper released this week that summarises a manager search it conducted on behalf of a UK local government pension scheme. As such the findings refer specifically to funds investing in the UK real estate market.

This budding market has changed its complexion, bfinance notes; until 2017 it was dominated by social housing strategies. During 2021 and 2022 the fund launches have been “considerably more diverse, with PRS [private rental sector] and multi-tenure strategies dominating on the housing side and a particularly marked move in favour of community regeneration strategies”.

This shift is influenced, write the report authors, by the arrival of more financially motivated investors who “unlike some of the earlier impact investors, cannot tolerate a trade-off in returns”.

bfinance identifies five investment risks that require special attention when investing in impact real estate. While these risks, with the exception of “impact delivery risk” may be familiar to conventional real estate investors, “they carry nuances that are specific to impact approaches”, the report states.