Alex Edds: The Client of the Future – Innovating around the Client Experience
The changing needs of the real estate customer
Writing an article on the changing needs of a real estate customer is tough. Namely because it is difficult to define who a real estate customer is.
Basically it is anyone or any company that uses a building. Not a particularly helpful place to start.
Real Estate is such an amorphous term that covers any activity related to providing or using space – from design, construction, maintenance, operation and of course use. When you further apply asset type, geography, market and financial interest, then you quickly understand how complex the industry is, and why it is difficult to define and understand a real estate customer.
For the real estate service professional this poses a challenge. In the ever-changing world in which we all now live, the needs and wants of all these stakeholders are evolving very quickly. For an industry that is used to long term decision making and risk adverseness, this can be uncomfortable.
Nevertheless, in an attempt to stick to the script and provide some light on how the real estate service industry needs to adapt to its customer as a consequence of digital transformation (and associated macro trends), I have grouped the customer into two buckets:
- The providers of space (Landlords); and
- The users of space (Occupiers).
For this purpose, I group developers, investors and landlords together, across all asset classes in all markets.
One of the main emerging trends is that Landlords are increasingly focused on their customer – the Occupier. Their strategies and operational delivery models are shifting to offer greater value to the occupant of the building. A great example in the office sector is co-working or short-term flexible lease models. This operational model is growing fast, initially driven by disruptors, and now by traditional landlords such that it is reshaping the market and the services required. The consequence of this strategic shift means that service providers must demonstrate value add to the landlords’ customer – which is a significant departure from nature of the relationship in the past. This is manifesting itself in many ways – from the provision of concierge style services provided in buildings to the creation of new style leases and online marketplaces offering choice. Fundamentally the feedback loop is quickening meaning that landlords, and as a result their service providers, must be equipped to react faster to changing demands to remain competitive. This puts a big strain on existing business models, and we’ll likely see winners and losers over the next few years as the new norm emerges.
The other main change for Landlords is the way data is used. This can be linked to the point above – for example using IoT data to understand occupier behaviours to improve services – but it goes way beyond this. Data is everywhere, and new technologies and data sources are emerging all the time. Soon we’ll see more and more decisions being made based on data modelling – from the way buildings are designed, constructed, fit-out, operated, bought and sold. The obvious consequence of this on the service sector is the need to use and make sense of data, and to provide it to clients in a way that adds value. We are still at the beginning of this journey, with most data still unstructured and unused. To stay ahead, the service sector really needs to get serious about investing in the skills and tools to understand real estate data.
An Occupier could be an office-based company – large or small, a retailer, an industrial or logistics company, a hotelier… the list goes on, and so does the list of requirements. It is very difficult to group all of these together, and clearly there are many trends impacting these businesses including sustainability, cyber security, operational efficiencies to name a few.
In the hyper-competitive world we live in, and with the well documented behaviours and needs of millennial and Gen Y employees, Occupiers are faced with offering more and more hard and soft amenities and services to attract and retain the best talent or customers. This means that the building, i.e. the place of work or the retail /leisure destination, is increasingly important to support the corporate identity and plays a crucial role in creating the ‘experience’ for the user. This has obvious implications on the way buildings are designed, fit-out and run, and it challenges the frequency by which the look and feel needs updating to remain relevant. This means that Occupier clients want buildings that are ‘equipped’ and that support business outcomes – in this case staff productivity and wellbeing or customer attraction. With this pressure, against a backdrop of greater choice and greater lease flexibility, the industry must up its game to demonstrate value-add outcomes to Occupier clients.
Alex Edds, Director of Innovation, JLL UK