Triple-bottom-line real estate investment

By: J. David Chapman/June 24, 2021

We have all heard the saying “the bottom line is…” Well, there is a new term or concept in real estate investment and the bottom line got a little more complicated. It is called triple-bottom-line. Actually, the concepts are not new; however, labeling a technique or idea sometimes places additional emphasis on achievement. Generically the triplets in the triple-bottom-line approach are “people, planet, and profit.” It becomes very interesting when applying the concepts to real estate investment incorporating social, environmental, and economic issues we deal with on a daily basis.

Let’s quickly get the first leg out there. Developers and real estate investors must make a profit. We need them. They provide a valuable service to our community and take a huge amount of risk and deserve to benefit financially from their work. Enough said.

The second leg on the stool is taking care of the environment and planet. We are seeing an acceleration in the adoption of sustainable strategies in real estate investment. This can be seen in housing and transportation options that reduce carbon footprints. A new consideration of density (especially in our suburbs), living in smaller square-footage homes (heating/cooling of buildings has the largest carbon footprint), and utilizing walk and bike options for transportation (transportation is second). There is much more to do here, but progress is being made.

Finally, and most important, is the consideration of people. It has always been our focus when developing the built environment, but the social aspect has taken on a more important role of late. What we are finding out as developers is when we consider people, and social behaviors, we are already taking into account financial responsibility and environmental considerations.

Developers, investors, and city municipalities must stand firm on their commitment to provide housing at prices that the local residents can afford. This means a variety of housing types for a variety of incomes, and sometimes they appear to make decisions contrary to the preferences of some citizens in the community who display the “NIMBY” mentality. What real estate developers and investors produce with tenant-mix and appropriate amenities have a huge effect of job growth, income, and city-building.

In the end, developers and investors can have a huge impact on a city reaching their goals and I believe they have a responsibility to do so. Please support them in this effort!

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).