marketing strategies real estate

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Business and marketingstrategies in responsible

property investmentUlrich Kriese

Schopfheim, Germany

AbstractPurpose The purpose of this paper is to give an overview of business and marketing strategiespursued by responsible property developers, funds and investors in the USA and to draw conclusionsfor future activities in that sector from a transatlantic perspective.Design/methodology/approach Personal interviews are conducted with 42 developers, fundproviders and managers, institutional, nonprot and major private investors representing more than

US$60 billion of responsible property assets under management. The data are complemented by ananalysis of promotional documents. A cluster analysis is performed to classify the strategies of theparticipating companies and institutions and to explore any commonalities and differences.Findings Business and marketing strategies in responsible property investment (RPI) can bedescribed and characterised within the three dimensions of location, building and people. RPI activitiesand investors in the USA usually transcend pure green building and aim to contribute signicantly tosmart growth, to sustainable urban development and revitalization.Research limitations/implications The results in this study are not fully representative of theUS RPI community, with the study focussing on the core network of developers, real estate funds andlarge investors. Furthermore, issues of corporate governance and nancial performance are omittedfrom this study. Interviews are conducted in autumn 2008, i.e. at a time when the major nancial crisisreached a global scale, potentially inuencing participants perspectives and subsequent responses.Practical implications The ndings may help RPI practitioners reect on business and

marketing strategies. European developers, real estate funds and investors can benet in manyrespects from US experiences.Originality/value The research approach, applied to RPI focussing on business and marketingstrategies for the rst time, provides new insights for practitioners on both sides of the Atlantic. Aboveall, the ndings may initiate further research to deepen the understanding of the RPI business.Keywords Social responsibility, Sustainable development, Regional development, Real estate,Corporate strategy, United States of AmericaPaper type Research paper

1. IntroductionIn recent years, public awareness and government activity has increasingly focussed

on the connection between buildings, urban form and sustainability. Transit oriented,walkable, mixed use and mixed income communities, browneld and high-density

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1463-578X.htm

The author is most grateful to the American Council on Germany, which generously supportedthis research through a McCloy Fellowship. Thanks also to Gary Pivo and several experts fortheir advice nding through the US RPI community, to all interview partners for theirparticipation, and to Claire Roberts and two anonymous referees for their valuable comments onprevious versions of this paper. After all, the author would like to thank Roland W. Scholz forwhat he has learned from him to conduct this research.

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Vol. 27 No. 5, 2pp. 447-4

q Emerald Group Publishing Limite1463-57

DOI 10.1108/14635780910982


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development and green buildings attract more attention both within the real estateindustry and the socially responsible investment (SRI) community, particularly in theUSA, Australia and Great Britain (Dixon et al., 2006; Flynn et al., 2007; FundersNetwork for Smart Growth and Livable Communities, 2004; Newell, 2008; Ritter, 2008;RREEF, 2008; WWF-UK, Housing Corporation, Insight Investment and UpstreamStrategies, 2007). Professional real estate magazines have featured sustainabilityissues with unprecedented intensity and property valuation experts have becomeaware of the connection between the social, environmental and nancial performanceof buildings (Lorenz and Lu tzkendorf, 2008; RICS, 2005)[1].

Responsible property investment (RPI) as dened by Pivo and McNamara (2005)refers to the more general concepts of SRI and corporate social responsibility (Koellneret al., 2005; Rapson et al., 2007). It means:

[. . .] maximizing the positive effects and minimizing the negative effects of propertyownership, management and development on society and the natural environment in a waythat is consistent with investor goals and duciary responsibilities (Pivo and McNamara,

2005, p. 129).First, this denition covers social responsibility directly connected with the building,which may be green, mixed use, high density, etc. Second, it includes socialresponsibility related to the buildings location, which may have been contaminatedand may be transit oriented, inner-city or suburban, etc. Third, it refers to socialresponsibility related to people, i.e. the development in question may, e.g. includemixed income housing or provide jobs (Kriese and Scholz, 2009).

In recent years, some developers, fund providers and investors in the USA, the UKand some other countries introduced RPI as a major component in their businessstrategy (Pivo and UNEP FI Property Working Group, 2008; RREEF, 2007). RPIs andinvestment vehicles are either of a xed income (debt based) or equity real estate type;

they can be used to generally de-risk a portfolio or add value and generate an alpha, if the investor is able to identify and tap widespread market inefciencies. Hagermanet al. (2007), Lamore et al. (2006), Steiger et al. (2007) and Willis (2004) point to thecrucial role of both nancial intermediaries, i.e. funds to link institutional investors tourban revitalization, and community intermediaries (e.g. community developmentcorporations) to ensure the achievement of the social goals of investment. The fund andthe institutional investor come together in a symbiotic relationship and provide eachother with scale (Hagerman et al., 2007, p. 24). The fund, with the aid of the communitypartner, delivers urban development projects large enough to both make an impact onthe community and produce nancial returns. The institutional investor delivers largeamounts of capital that allow the fund to scale-up its investments.

Besides, both direct and indirect nancial benets of sustainable real estate(Eichholtz et al., 2009; Ellison et al., 2007; Fuerst and McAllister, 2008; Lorenz et al.,2007; Pivo and Fisher, 2009; Roper and Beard, 2006), RPI possesses the potential formajor reputation and brand growth (Mistra, 2008). In short, RPI has a strong businesscase. With regard to the current global nancial crisis caused by the property andnance industry itself, RPI appears to be a good part of the solution. As part of thispotential, green buildings should now be able to extend their competitive advantage(RREEF, 2009). In many places in the USA, Leadership in Energy and EnvironmentalDesign (LEED) certication[2] has already become a precondition for granting a loan.

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To date, general thoughts on business and marketing strategies in RPI have beenoutlined, however, without providing empirical ndings on them (Hermes Real Estate,2006; Institute for Responsible Investment, 2007; Kriese, 2008; RCLCO, 2008; RREEF,2007). Financial stakeholders views regarding RPI criteria, market perspectives andacceptance have been investigated (Bu gl et al., 2009; Mistra, 2008; Pivo, 2008b; Sayceet al., 2007; Schafer et al., 2008). Browneld development, as a business approach, hasemerged and has been described in the literature (Dair and Williams, 2006; Dixon, 2006,2007; Tiesdell and Adams, 2004). The same applies to the new urbanism business(Gyourko and Rybczynski, 2000), to urban housing (Lang et al., 1997; MORI, URBED &School of Policy Studies at the University of Bristol, 1999), to mixed income housing(Fraser and Kick, 2007) and to urban revitalization (MacFarlane, 2007). In the USA,browneld development, green building, transit-oriented development, and urban inlland revitalization have all been realised by RPI market actors (Pivo, 2008a).

In the authors view, both for European developers and investors considering anyRPI activities and the European SRI community there is much to learn from USapproaches and experiences with RPI. With more than e 2,600 billion in SRI, Europe isthe worlds largest SRI market (Eurosif, 2008). Yet with only 4 per cent SRI in property, itis obvious that European socially responsible investors in particular are very interestedin the real estate asset class for the purpose of diversication of their portfolios (Eurosif,2008). However, up to now, this demand could not even nearly be satised, which ledboth European investors to ask for respective products in the USA and US fundmanagers to introduce investment vehicles such as real estate investment trusts (REITs)in the USA in order to facilitate investment by foreign investors. Although the largemarket potential for RPI has started to be recognised by the European nance industry,a link to SRI is not always seen (Credit Suisse, 2009). In the authors view there are stillunderserved market niches for responsible property funds in most European countries.In Germany, no responsible property fund yet exists, although both closed-end and

open-end real estate funds are well established in this country.In the next section, the following ve research questions will be explored:

RQ1. What are the main ideas and principles in US RPI strategies?

RQ2. Who asks for this kind of property and investment?

RQ3. Who are key business partners?

RQ4. What are the market niches developed so far and occupied by the industry?

Here, connecting with Kriese and Scholz (2009), we particularly seek to explore how thebuilding, its location and the people using and inhabiting the built environment arecombined within business and marketing strategies:

RQ5. Which conclusions can be drawn for future activities and businesses in thatsector from a transatlantic perspective?

2. Data and methodIn an exploratory study, semi-structured personal interviews were conducted withdevelopers, fund providers and managers, institutional, nonprot and major privateinvestors throughout the USA. The companies and institutions represented more thanUS$220 billion in commercial and residential property assets under management


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(AUM), among them US$60 billion or on average 27.5 per cent responsible propertyAUM, according to their own estimates (Table I).

2.1 The sampleCompanies and institutions were sampled through extensive literature and internetresearch, e.g. via the Responsible Property Investing Center[3] and the Principles forResponsible Investment[4], partly complemented by a snowball procedure based onexpert advice. The ve types of stakeholders have been chosen to cover keystakeholder groups in RPI along the development and investment chain.

Out of a total of 61 companies and institutions engaged in RPI and approached bye-mail, referring to the McCloy Fellowship of the American Council on Germany,42 (69 per cent) agreed to an interview. Reasons for non-participation were either ageneral lack of interest or, in a few cases, general company policy precluded interviews.The geographical distribution of the participating companies and institutions was asfollows: 40 per cent were located in the north/northeast; 31 per cent in California;17 per cent in the south/southeast including one in Denver, Colorado; 12 per cent in thenorthwest (Seattle and Portland). For the sectoral proportion see Table I. Mostinterviews were conducted with executive personnel, i.e. 23 interviews with CEOs andother board members, 11 interviews with head of departments, eight interviews withvice presidents and similar in the eld of RPI.

2.2 Interview process and topicsInterviews were held between September and November 2008. Several days before theinterview meeting, interview guidelines were sent to participants for their preparation.Five of the 42 interviews were conducted by phone.

According to the exploratory nature of the research, the interview guidelines andthe interview itself were mainly qualitatively complemented by some quantitative

Property AUMParticipants Frequency % Total Thereof RPI

Developers 10 23.8 Sum billion US$ 13.356 13.285Mean 1.336 1.329SD 2.640 2.644

Fund providers and managers 10 23.8 Sum billion US$ 38.825 21.260Mean 3.883 2.126SD 4.165 3.351

Institutional investors 12 28.6 Sum billion US$ 136.350 21.430Mean 11.363 1.786SD 15.258 1.928

Nonprot investors 4 9.5 Sum billion US$ 2.638 1.732Mean 0.660 0.433SD 0.779 0.779

Major private investors 6 14.3 Sum billion US$ 30.250 3.280Mean 5.042 .547SD 8.909 .489

Total 42 100.0 Sum billion US$ 221.419 60.987Mean 5.272 1.452SD 9.732 2.332

Table I.Basic sample data

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components. After the rst ten interviews, three sub-questions that appeared to berelevant for the research were added and one qualitative component was transformedinto a quantitative one. The research sought to cover the following topics:

. individual RPI funds or developments, denition and basic understanding of responsible property investment, three most common RPI characteristics;

. business strategies and market niches, core competence, key business partners,perceived market potential and market risks;

. market segments: investor and residential target groups; and

. marketing strategies with respect to people, location and building,environmental and social issues, personal and public nancial andnon-nancial benets; emotional strategies, branding and storyline.

Regarding the main quantitative component, participants were asked to mark theappropriate spot on arbitrary scales designed to show their business foci (e.g. far left, if solely society focused, or centred, if society and environment are equally relevant):

. strategic focus: society vs environment;

. location : inner-city vs greeneld; contaminated sites vs non-contaminated sites;

. property type: existing buildings vs new buildings; non-housing vs housing;higher income vs low income; and

. property diversity : mixed use vs single use; mixed income housing vs one incomehousing.

Attribution of green building standard policy (no LEED or similar requirement vsmaximum standard) is based both on interview responses and content analysis(see below).

2.3 Data analysisThe marks on the arbitrary scales have been measured as a value between 0 (one endof the scale) and 100 (the other end of the scale). Cluster analysis, a statisticalprocedure to assign similar objects, in this case, RPI strategies, with variouscharacteristics into groups, was performed with the data. The quantitative analysiswas complemented with qualitative interview data introduced above and by anelementary content analysis of promotional documents (internet, presentations, printmaterial), both provided by interview partners and via the internet before and after theinterview. On average, three documents per case were analysed as well as eachcompany web site. This analysis was reective of the interview topics described above(market segments, marketing strategies and green building standard policy) and was

undertaken by searching for both written and illustrative key texts.

3. FindingsReferring to our RQ1 , we found that interviewees, as a main idea and principle,articulated a strong belief in, if not explicit commitment to cities and inwarddevelopment. It was stated that the most important supporting trend for RPI is thetrend back to the city. One fund manager put it simply: urban equates to core.Transit oriented, higher density development appeared to be the common denominator


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or minimum requirement for any kind of RPI. Transit oriented combined with mixeduse and mixed income development was estimated by many to be the most promisingRPI business strategy.

Another main principle was that RPI was usually undertaken in majormetropolitan areas. In such regions investments reach a certain scale, which wassaid to be a prerequisite for acceptable or even superior market returns. However,several companies and institutions pursue a business and investment strategy asidefrom those areas, although they almost invariably focus on larger cities or regionalcentres.

As repeatedly raised by respondents, the emergent market logic, applied to urbanproperty investment, appeared to be a shared RPI philosophy in the USA. Manyinvestments are undertaken in edge neighborhoods, transition zones, fringeareas, i.e. areas typically avoided by conventionally thinking developers andinvestors. In many RPI strategies location is in fact the leading concern. The largemajority of companies and institutions in this study aim to signicantly contribute tosmart growth[5], to sustainable urban development or even revitalization. Greenelddevelopment is usually excluded either explicitly or because it is just not part of an inward development strategy. The building, green or not, becomes a means toan end.

In answering the RQ2 , who asks for this kind of property and investment?According to respondents, for certain investments (see below) high net worthindividuals (HNWI) and professional private investors play an important role. Amonginstitutional investors, public pension plans and individual labor union funds, due totheir patient capital, clearly led the way, followed by insurance companies, againfollowed by corporate pension plans. Banks play a special role due to CommunityReinvestment Act (CRA) requirements[6]. Main residential target groups forpredominantly urban developments, as consistently stated by respondents, are low

and moderate income households on the one hand and middle to higher income youngpeople (singles, couples without children), empty nesters and suburbanites movingback into the city on the other. Families, as a target group, were also mentioned, thoughmuch less often. Respondents almost unanimously argued with the perception thatschool quality in cities impedes the expansion of urban family living.

Third, interview partners across the board highlighted community developmentorganizations (CDCs) and other community intermediaries as key business partners.Without their local knowledge, relationships and on the ground experience, manyinvestments, particularly in the larger metropolitan areas, would have been impossible.They bring deals to the table, and their involvement usually leads to quicker andcheaper entitlement, less opposition and easier upzoning. Some respondents alsoinclude (e.g. through planning charettes) the public and local interest groups in theplanning process to better account for local needs. Public authorities were mentionedas another important partner, because they are major property owners, provide bothplanning and nancial incentives towards sustainable urban development and, as it isincreasingly the case in major metropolitan areas, they require certain standards, e.g. aminimum LEED certication.

Our RQ4 sought to identify market niches so far developed and occupied by theUS RPI industry. After a rst round of cluster analyses four cases were excludedbecause of their individual character with respect to the sample. This concerns:

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(1) a fund specializing in the redevelopment of contaminated sites or brownelds;(2) an institutional investor aiming to rehabilitate and green its multi-family

housing stock;

(3) a greeneld traditional neighborhood (new urbanism) development with LEEDcertiedbuildings(in this case thesocial responsibilityappears tobedebatable); and(4) quasi meta level RPI, a REIT conducting environmental and social analyses of

potential investments, assuming strong links between environmental and socialperformance on the one hand and management quality on the other.

We believe that these cases actually represent additional typical business approachesin RPI.

Having performed cluster analyses with the remaining 38 cases, the seven clustersolution using Wards method (i.e. a clustering method seeking maximum homogeneitywithin groups) describes best the RPI business spectrum (Figure 1). Other methods led tovery similar solutions with no less than 5 per cent of variation, i.e. only one or two cases

were allocated differently. For statistics see the Appendix. It should be noted that someoverlap exists between the clusters in such a way that, although the statistical procedureallocated each case to a certain cluster, some companies and institutions actuallypursue morethan one RPI strategydescribed below. It alsohappens that thedeveloperandthe investor of a certain project are allocated in different albeit related clusters. Therefore,the cluster analysis only provides a rough and simplied idea of US RPI strategies. In thefollowing, the quantitative results are only used to facilitate full understanding andinterpretation, which are just as much based on the qualitative ndings.

Urban affordable housing (Cluster 1)This cluster is dominated by nonprot and institutional investors. In fact, all fournonprot investors in the sample are allocated here. Investors of this kind of RPImainly invest in and provide loans to low and moderate income housing (i.e. householdincomes ranging between 25 and 80 per cent of area medium income) both for rent andfor sale. The inclusion of middle income households (with 80-120 per cent of areamedium income) is not an unusual (supplementary) strategy. One respondent occupieda market niche by providing market rate affordable housing. Typical target groupsmentioned include the working poor and workforce households. Other target groupsare single parents, elderly or people with disabilities.

A long-term ground lease that allows leveraging of assets for further investmentsthat can be transferred to subsequent occupiers plays an important role in thenonprots business approach. Another approach consists of grants to buyers of existing homes (to avoid social housing construction with all its disadvantages), tied toa purchase option for the benet of the nonprot once the owner wants to resell. Suchmeasures aim to ensure permanent affordability[7].

The tendency to avoid contaminated sites is certainly interesting from anenvironmental justice point of view. Although one nonprot within this cluster hasdeveloped green criteria and propagates their widespread use[8], most companies andinstitutions in this cluster do not apply LEED or other green building standards.Where green building is an issue, marketing concentrates on healthy living andcost-reducing appliances. Marketing usually highlights social arguments, i.e.affordability as such, improvement of housing standard and of quality of life,


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Figure 1.Clusters in RPI

Rescaled distance cluster combine

* * * H I E R A R C H I C A L C L U S T E R A N A L Y S I S * * *Dendrogram using Ward Method

CASE

Label

NP INST

NP INST

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FUND

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INST

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PRIV

DEV

INST

INST

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INST

DEV

DEV

DEV

DEV

FUND

INST

DEV

FUND

INST

PRIV

DEV

FUND

FUND

DEV

PRIV

INST

PRIV

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PRIVNotes: DEV Developer; FUND Fund supplier/manager; INST Institutional investor;NP INV Nonprofit investor; PRIV Major private investor

1

2

3

4

5

6

7

2520151050

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provisions of community and social infrastructure, accessibility to public transit, jobsand schools.

Regarding investor types addressed for investment most successfully byrespondents, institutional investors among them in particular are banks with CRArequirements and nonprot investors, e.g. foundations, were regularly mentioned.HNWI and professional private investors are only important in some respondentsopinions.

Revitalizing commercial property development (Cluster 2)Investors and developers in this cluster aim to foster the local economy and tocontribute to urban revitalization. They typically invest in an underserved area at thefringe between inner-city and suburb or at a high density suburban location. In suchareas, population and income density can be substantial. Consequently, commercialdevelopments aim to satisfy real, aggregate demand and to skim the respective buying

power. Where housing is included, it is usually of a mixed income type. Thoughinvestments of this strategy can be rather opportunistic, they are not pioneering. As oneinterview partner put it: community development organizations go into very badareas, failing communities, and start development. After that we come in.

LEED or other green building standards are not necessarily applied. Marketingfocuses on social issues, such as job creation and diversity; however, some companiesgo well beyond that, towards comprehensive social responsibility. In conjunction withsocial responsibility, location and smart growth, particularly transit orientation, aretreated as more important than building related issues. One company attracts investorswith the slogan We saw urban center when others saw inner city. For a companyadvertisement see Plate 1.

Regarding investor types successfully addressed, institutional investors againbanks with CRA requirements, but also public pension plans and insurancecompanies are considered most relevant.

Urban living (Cluster 3)This RPI business consists of creating centrally located, new, ambitious housingprojects. One company slogan states: innovative urban living, revitalizing urbanneighborhoods, creating special places and meaningful relationships. Other thanresidential uses, particularly retail, are included, but they must not conict with theresidential use and may be required by zoning. Affordable housing units may beincluded. Some investors also target families for the urban living experience[9].Contaminated sites tend to be avoided.

Location as well as societal and personal aspects and benets, e.g. urban diversityand health, are prominent in marketing (Plate 2). Any kind of convenience, service oramenity by reason of the central location also provided by third parties areparticularly emphasised. Promotion often refers to the urban lifestyle and thecultural creatives. Green building aspects are relevant, but the development is notalways required to comply with a particular (high) standard. For furthercharacteristics, see Cluster 4.


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Revitalizing mixed use development (Cluster 4)Cluster members are unied by the idea of revitalizing urban centres through mixeduse developments, where mixed in this cluster is understood as more than twouses. Typical company slogans are Developing urban space in style and Creatingsustainable and inspiring places to work, learn and live. By all means, thedevelopment of contaminated sites is an option. The usually ground-up projectsregularly contain housing of a mixed income type with the larger part of apartmentsand/or condominiums in the middle to higher income range (Plate 3 and [10]). Greenbuilding aspects are a relevant, sometimes a prominent[11], issue, but most cluster

Plate 1.Advertisement for anurban revitalizationproperty fund

Source: Reprint with kind permission of New Boston Fund Inc., Boston, MA

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Plate 2Urban livinSource: Available at: www.alcyoneapartments.com, accessed 6 April 2009, reprint with kind permission

of Harbor Properties and Vulcan Inc., both Seattle, WA

Plate 3Revitalizing mixed us

developmeSource: Available at: www.sosevenfortworth.com, accessed 6 April 2009, reprint with kind permissionof Hughes Development LP, Dallas, TX


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members do not regularly strive for particularly high standards. Marketing resemblesCluster 3. Regarding investor types successfully addressed for this sort of RPI(including Cluster 3), in the view of respondents, HNWI and professional privateinvestors are equally relevant to institutional investors.

Green buildings in urban setting (Cluster 5)This type of RPI strategy leans towards new buildings and appears to be somewhatless ambitious with respect to mixed use and mixed income, if compared with clusters3, 4 and 6. On the other hand, contaminated sites are less eschewed; in some cases theredevelopment of a contaminated site is only taken as the starting point for developingits surroundings. Cluster members seek to achieve high green building standards, andin marketing while focussing on the building and environmental aspects theymore or less raise all relevant issues and point to a holistic approach (Plate 4 and [12]).Often, green building standards are prominently used in marketing even byinstitutional investors. Interestingly, from a marketing view, some companies establishthe manifest connection between inward development and landscape preservation[13].As for investor types successfully addressed HNWI and professional private investorsappear to be at least equally relevant to respondents as institutional investors.

Green, diverse and stock-oriented development (Cluster 6)Representatives of this type of RPI strategy seek high standards with respect tolocation, green building and the buildings usage and/or tenancy diversity. Companiesin this cluster favour rehabilitation over new developments and seek locations in(or close to) the inner-city. One cluster member occupies a market niche in urbanwaterfront (re)development. Marketing can be very comprehensive, prominentlycovering location and building, as well as societal and environmental aspects (Plate 5).Transforming Americas cities, neighborhood by neighborhood, Diversity,

environmental responsibility, livelihood, interdependence, impermanence and,Enveloping the community in a fabric of innovative, sustainable, inspiringpractices are cluster members rather programmatic statements. Companies in thiscluster want to create distinctive neighbourhoods and a sense of community amongusers and occupants, promoting the right place to be. For this kind of RPI, privateinvestors were particularly emphasised.

Green and highly efcient ofce buildings (Cluster 7)This cluster represents a very particular RPI strategy. It almost exclusively focuses onofce buildings, which are not necessarily inner-city located (greeneld developmentsare not explicitly excluded). Contaminated sites and multiple uses are avoided. Greenbuilding standards (LEED and Energy Star) are utilised. Respondents are convincedthat ofce buildings are best suited for any green measures, because compared tohotels, retail or residential buildings in terms of green technologies, ofce buildings arerather easy to control and to manage. In marketing, the building, its green features,maintenance efciency, productivity gains, energy and cost savings are mostprominent. No relationship is established with urban revitalization. A typical productslogan is High performance green. Institutional investors were always mentioned forthis type of investment. Nonprot investors were not mentioned at all and privateinvestors are of minor relevance in the view of respondents.

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Plate 4Green buildings in urba

settinSource: Reprint with kind permission of Vulcan Inc., Seattle, WA


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4. Summary of ndings and discussionThe results provide an initial overview of the US RPI business, focussing on the coreUS RPI network of developers, real estate funds and large investors, their degree of relationship and their investment activities related to building, location and people.First, as for main ideas and principles we retain developers, funds and investorsstrong belief in cities and in higher density, inward development, and even in urbanrevitalization, connecting with respective place marketing ndings and initiatives(Lang et al., 1997; Ward, 1998). Most RPI business is done by pronounced marketmakers (MORI, URBED & School of Policy Studies at the University of Bristol, 1999) orniche developers and investors (Ley, 1996; Psilander, 2004), applying the emergentmarket logic to areas typically avoided by conventionally thinking marketparticipants. Consequently, besides nancial performance, location and exerting aninuence on it towards a sustainable urban development is the leading concern.

Second, there is some evidence, that, besides developers, HNWI and professionalprivate investors play an important role in exploiting RPI potential and in occupyingnew market niches. Though usually not the driving force (Pivo, 2008a), someinstitutional investors, among them pension funds and life insurance companies inparticular (patient capital), have clearly recognised the various possibilities and moreor less have committed themselves to RPI.

Depending on the companies and institutions strategy, low and moderate incomehouseholds, middle to higher income young people and/or empty nesters andsuburbanites moving back into the city are main residential target groups. For somepart of RPI, gentrication should be a legitimate issue of concern (Fraser and Kick,2007; Lees, 2008). Although some developers and investors also target families,it becomes clear that a noteworthy expansion of urban family living would need drastic

Plate 5.Green, diverse andstock-orienteddevelopment

Source: www.clippermill.net, accessed 6 April 2009, reprint with kind permission of Struever Bros.Eccles & Rouse, Baltimore, MD

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improvement of school quality and/or its corresponding perception. It may seemsurprising that not even one respondent explicitly conned target groups to theenvironmentally aware spectrum. Respondents could in fact have received theimpression that the adoption curve for sustainable properties has surpassed its rstphase led by innovators and early adopters and is by now supported by the (early)majority (Rogers, 2003). Moreover, according to the authors estimate, RichardFloridas The Rise of the Creative Class (Florida, 2002) has probably much inuencedthe US RPI community.

Third, for implementing their business strategies, respondents highlighted theimportance of good relationships and partnerships with public authorities, CDCs andother community intermediaries. This conrms previous research and experience(Hagerman et al., 2007; Steiger et al., 2007; Willis, 2004). Beyond that kind of cooperation, though several regional and national environmental non-governmentalorganizations in the USA are engaged in green building and/or smart growth, notmany strategic partnerships have been established with them. One exception seems to

be the partnership between the Natural Resources Defense Council (NRDC) and theEnterprise Community Partners (both nonprot) in elaborating the Green Communitiescriteria (Enterprise Community Partners, 2008). Another one is the partnershipbetween US Green Building Council, NRDC and the Congress for New Urbanism inestablishing LEED ND, i.e. for neighborhood development. For funds and institutionalinvestors on the one hand and the environmental movement as an independent voiceon the other, there still seems to be some gainful but untapped potential for cooperationwith regard to credibility, reputation and branding.

Fourth, we outlined the comprehensiveness and diversity, and the varyingprofoundness and broadness of business and marketing strategies, connecting with thendings of Pivo (2008a). Specialised developers and funds have occupied severalmarket niches, meeting respective demands of all kinds of investors. In most RPI

strategies in the USA, at least two of the three dimensions of building, location andpeople play a signicant role (Figure 2).When developing their business and marketing strategy, the following strategic

questions connected with the building, its location and the people using and inhabitingthe built environment seem to lead responsible property developers, funds andinvestors in the USA and may inform future decision making in the business and itsmarketing:

. How much do we focus on design and performance of the building compared toits location? Is the building a means to an end or the main object?

. To what extent is the location of the building an essential issue in our RPIstrategy, and do we aim to make a signicant contribution to smart growth, to

sustainable urban development or revitalization?. What spectrum of people using and inhabiting the built environment do we

consider in our RPI strategy and activities?

Having answered those main strategic questions, the following secondary questionsremain to be answered:

. Referring to the building, do we focus on particular single uses (ofce, retail,residential, etc.) or is our business in mixed use? Do we specialise in rehabilitation


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and adaptive re-use, are we mainly engaged in new construction, or do we seek astrategic combination? Do we focus on energy efciencyor do we cover all aspectsof green building?

. With regard to location, do we focus on inner-city and on areas adjacent to it ordo we specialise in (sub)urban environments beyond the centre? Is thedevelopment of contaminated sites an option to us, or even a main part of ourstrategy?

. Regarding both building and location, do we handle green building standardsand ratings as one criterion among others or do they lead our strategy? Do weparticularly strive for high standards/ratings?

. In terms of people, do we provide one income or mixed income developments?Do we particularly try to improve the living and working conditions for and inlow and moderate income households and neighbourhoods? Do we actually seekinvestments in such communities or do we try to bypass them? To what extentdo we consider the needs of special groups such as children/families, elderly ordisabled?

Marketing activities mirror business strategies as they are highly differentiated, too.Depending on the business model and respective target group(s), marketing eitherfocuses on or combines issues related to people, location and/or building (Figure 2).User benets related to location and/or building are regularly specied. LEED provedto be the most widely used label for green building. With regard to RPI contributing tourban development, it is frequently described as smart growth. Some market actorseven argue with landscape preservation through inward development.

Figure 2.Business and marketingstrategies in RPI

Revitalizingcommercial

propertydevelopment

Greenbuildings inurban setting

Multi familyhousing greenrehabilitation

Brownfieldredevelopment

Green &highly efficientoffice buildings

Urbanaffordablehousing

LOCATION

B U I L D

I N G P

E O P L

E

Green, diverse &stock-orienteddevelopment //

Revitalizing mixeduse development //

Urban living

Urban revitalization

Job creation

Transit orientation

Accessibility

Community &social infrastructure

Affordability

Cost savings

Healthy living

Landscape preservationthrough inward development

Urban amenities,lifestyle & diversity

Healthy environment

Sustainable lifestyleat central location

Green building standard

Maintenance efficiency

Cost savings

Productivity & othereconomic gains

Energy savings, resourceuse & green features

Quality of lifeimprovements

Housing standard improvements

Community image

Urban diversity

Smart growth

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5. ConclusionAs for conclusions that can be drawn for future activities and businesses in RPI, thendings and questions presented here can be useful in designing and developingresponsible property funds, business and marketing strategies, and they may guiderespective acquisitions, investments and envisaged cooperation between developers,investors, nancial intermediaries and other stakeholders.

The RPI approach in the USA is in several respects instructive from a transatlanticperspective in particular[14]. The results presented here provide a strong case againstEuropean property funds and investors shying away from making a contribution tosustainable urban development at more challenging sites or from collaboration withother stakeholders, including nonprots and public authorities. Though a certainstandard in high density, mixed use and mixed income developments is set in Europe,there is still a strong movement out of the city towards land consuming single usedevelopments and one income neighbourhoods. A large portion of the standing stockconforms to users demands less and less, not to speak of necessities with respect toclimate and demographic change.

Only in recent years has Europe rediscovered the strengths and advantages of theEuropean city model (European Member States, 2007). However, in Europe, RPI isstill in its beginnings (Montezuma, 2006; Rapson et al., 2007), and it needs denitionand strategy (Bu gl et al., 2009; Kriese, 2008; Kriese and Scholz, 2009). Some small andmiddle size companies have recognised the business case in RPI[15]. However, only afew RPI funds exist, such as the Igloo Regeneration Partnership in the UK, thesustainable real estate fund of Rabo Real Estate Group in cooperation with TriodosBank in The Netherlands, and the Real Estate Fund Green Property announced in early2009 by Credit Suisse Switzerland. Even in the UK, a country with a noteworthynumber of rms engaged in RPI, independent maverick developers seem to lead theway in generating creative solutions for the development of challenging sites (Guy et al.,

2002; Dixon, 2007; MORI, URBED & School of Policy Studies at the University of Bristol, 1999). UK and Swiss investors views related to social responsibility usuallyconcentrate on the building, much less on location or people (Bu gl et al., 2009; Krieseand Scholz, 2009; Rapson et al., 2007). In the rst version of the German sustainablebuilding label, instead of giving credit for investment in a neighbourhood with a badimage, the opposite is the case; location is even excluded from the nal rating (DGNB,2009). Yet, simplifying RPI to (green) building would certainly attract only part of theSRI community (Pivo, 2008b). Property funds and developers that are able to sell abroader concept of sustainability, including smart growth, cultural diversity, social justice and the promotion of sustainable lifestyles, should be particularly evidentiaryfor socially responsible investors.

In Germany, one of the largest (and doubling every two years) European SRImarkets, demand for a responsible property fund has been articulated (Scha fer et al.,2008). In addition to institutional SRI investors, a noteworthy SRI retail market existsin Germany; private individuals and investors of all kinds are insecure with respect tofuture-proof property investment; large portions of multifamily housing change hands;the building stock needs enormous rehabilitation to adapt it to environmental anddemographic challenges; social segregation in urban space continues, and many citiesshow edge neighbourhoods and transition zones; urban regeneration, inwarddevelopment and quality of life improvements are important concerns. At the same


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time, e.g. demand for urban living increases (Beckmann et al., 2008). Consequently,urban and green, mixed income and mixed use development, urban family living,green urban revitalization and rehabilitation, i.e. sustainable alternatives for theunsustainable but still prevalent patterns, would all be promising and necessaryextensions of investment activities not yet practiced on a larger scale.

6. LimitationsThese results must be treated carefully with respect to the small sample size. Owing toconvenience sampling, the results are not fully representative. The family homebuilding industry could only be touched upon. With regard to the broad concept of RPI,neither corporate governance issues, such as transparency, fair contracting, laborunion work, community hiring, community investment, etc. nor RPI beyond the builtenvironment, i.e. for landscape conservation reasons, nor questions related to nancialperformance were researched in this study. Moreover, interviews were conducted inautumn 2008, i.e. at a time when the major nancial crisis just reached a global scale,

potentially inuencing participants perspectives and subsequent responses. Finally,real behaviour may be different from interview responses and/or promotionalcommunication.

Notes1. Available at: www.greenbuildingfc.com (accessed 6 April 2009).2. LEED stands for Leadership in Energy and Environmental Design, the green building rating

system of the US Green Building Council (www.usgbc.org (accessed 6 April 2009)).3. Available at: www.responsibleproperty.net (accessed 6 April 2009).4. Available at: www.unpri.org (accessed 6 April 2009).

5. Smart growth means inward, mixed use, compact, walkable, transit oriented urbandevelopment as an alternative to urban sprawl. For an introduction see Beneld et al. (2001).

6. The CRA, a US federal law, requires nancial supervisory agencies to encourage banks tomeet the credit needs of the local communities in which they operate, which includes low-and moderate-income neighbourhoods. Banks adhere to the law by supporting householdsand the local economy, e.g. through job creation, community investment and investment inproperty serving peoples needs. For more details see Immergluck (2008).

7. Available at: www.champlainhousingtrust.org (accessed 6 April 2009).8. Available at: www.greencommunitiesonline.org (accessed 6 April 2009).9. As an example see www.livingonthepark.com (accessed 6 April 2009).

10. As an example see www.kalahari-harlem.com (accessed 6 April 2009).11. As an example see http://southwaterfront.com (accessed 6 April 2009).

12. As an example see www.alley24.com (accessed 6 April 2009).13. As examples see www.cyanpdx.com/ and www.cherokeefund.com (accessed 6 April 2009).14. Of course, factual needs and challenges in property and in urban development and, general

conditions in terms of nancing, taxes and subsidies in the USA are different from Europeancountries. The scope of this paper does not allow to recess these aspects here.

15. As examples see www.rhombergbau.at and www.interboden.de (accessed 6 April 2009).

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About the authorUlrich Kriese is a PhD student at ETH Zurich, Switzerland, Institute for EnvironmentalDecisions, Natural and Social Science Interface. His research covers lifestyle and sustainabilityideas in place promotion and property marketing, and market actors views on lifestyles andurban family living, and on sustainable urban development and property investment. Hisprofessional background and experience is in planning, economics and public management.Ulrich Kriese can be contacted at: [email protected]

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Appendix

S o c i e t y f o c u s

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