It’s 2020 and here at RealService we’re celebrating our 21st birthday ……..the perfect time to dust off some past predictions.
When we launched the business on 2nd January 1999, we were greeted by the industry with a mix of encouragement and incredulity. “Advising on how to treat tenants as customers – how are you going to make money doing that?” asked one doubtful Prop Co CEO. Fortunately, others were less sceptical.
We’ve proudly made a name for challenging the industry with disruptive thinking and ten years ago published our 10 point “2020 Vision” for the future of customer service in the property industry.
How times have changed since then! Just look at this ringing endorsement of the customer-focused approach from Stephen Hubbard, CBRE’s chairman, retiring after 43 years in the business (source: Estates Gazette).
I would counsel against anybody getting into capital markets without having gone through the occupier side of the business…. unless you understand how an occupier thinks, how are you going to reflect it in what’s going to be a decent long-term investment?”
At RealService, we’ve proudly championed the simple notion that occupiers drive value and we’re excited to be entering a new decade. Let’s see how our 2020 predictions (made in 2009) have stood the test of time.
RealService Vision 2020 predictions
1. Property companies will become recognised brands
Ten years ago there were no real estate owners in the top 100 global brands and, in truth, there still aren’t any. https://www.ft.com/content/3a3419f4-78b1-11e9-be7d-6d846537acab
But what this list doesn’t reveal is a considerable effort that property owners have taken in the past 10 years to build their reputations. Today’s property companies and investment managers recognise that reputation matters to occupiers, investors and the wider community.
At RealService we help some of the largest property owners and managers in the world to track and benchmark their customer loyalty through our RealService CX Index which gives them in-depth insight into how their brands are perceived.
For further evidence of the importance of reputation just look at the growth of GRESB over the past 10 years. Back in 2009 APG, PGGM and USS came together with the University of Maastricht to design a real estate survey. They wanted more transparency on the ESG performance of their real estate investments and closer engagement with their managers. The inaugural Real Estate Assessment was launched in 2009, and GRESB was born. In the years that followed, an entire industry has come together to develop a common language and consistent approach to measuring and reporting on ESG performance. Today, more than 100 investors, representing over USD 22 trillion AUM, encourage their managers to report to GRESB, and the resulting Real Estate and Infrastructure Benchmarks cover more than USD 4.5 trillion in real asset value.
RealService is proud to be a GRESB partner and you can read about our recent joint event hosted by The Crown Estate here.
RealService has been tracking how Europe’s leading investors and listed property companies are presenting their brands to their customers and investors for the past 8 years. We have trawled their websites and their report and accounts documents and will be publishing our findings shortly.
At a micro level it’s fascinating to see how emerging sectors like Build to Rent residential are working on brand building. There is an active battle to build a consumer facing brand. Businesses like Get Living, Essential Living, Tipi, liv, urbanbubble and Go Native, are striving to win brand recognition.
2019 was the year of brands in the office sector with our clients Landsec launching new flexible office brand, Myo, offering leases ranging from 12 months to three years for businesses that need space for between 15 and 80 people. British Land continued to expand Storey, and The Crown Estate launched its first flexible office space at One Heddon Street.
Of course, 2019 will be remembered as the year that emerging global brand, WeWork, flew too close to the sun. A salutary reminder that a sustainable reputation must be built over time and on a firm financial footing.
Vision progress score: 6 out of 10
2. Property businesses will be better understood and valued for their consistently high level of service
There’s some progress here too as we move from a passive to operational style of asset and property management. You’ll hardly find an analyst presentation that doesn’t make reference to what a propco is doing to enhance relationships with occupiers and how it is working to create “great places”.
A good number of our clients like The Crown Estate, SEGRO and Great Portland Estates publish their customer service performance based on independent feedback gathered by RealService. But there’s still some way to go before commercial real estate is valued not just based on income and bricks and mortar, but also on the loyalty of its customers. We expect loyalty indicators such as Net Promoter Score (NPS) to become even more widely adopted in the coming year.
Vision progress score: 5 out of 10
3. The property industry’s customers will be more knowledgeable with information at their fingertips to help them make informed decisions about which suppliers are best
It’s more than ten years since review sites like TripAdvisor began to get real traction and peer reviews taken seriously. In the USA, websites such as www.apartmentratings.com, founded at a similar time to TripAdvisor have become the must go to site for renters.
The UK market has traditionally followed the USA and the launch of HomeViews www.homeviews.com in 2019 in the UK is further evidence of increasing transparency. As Homeviews says “One of the biggest decisions we ever make, financially and emotionally, is choosing a home. Our mission at HomeViews is to share useful, trustworthy insights about residential developments to support you in making that decision.” The site has gained impressive traction in its first year.
Another rapidly growing indicator is WiredScore whose certification helps occupiers find office space that will fit their current and future connectivity needs.
Vision progress score: 5 out of 10
4. Service quality and performance will be measured on a consistent basis across the world
The last 10 years has seen huge progress in terms of the standardisation of performance measurement in the areas of sustainability, wellbeing and workplace. At RealService we see the potential to extend this approach to evaluate the service quality and performance of buildings in all sectors. In 2017 we launched the RealService Customer Experience Index which is designed to enable our clients to compare their performance with best in class. We’re motivated by the vision of a worldwide standard for service performance and see this emerging as global investors become more demanding of information about operational service performance.
We’re excited to see the GRESB benchmark extend its reach into the measurement of social impact and looking forward to collaborating as partners.
RealService is also working with industry network group, Experience Makers www.experiencemakers.com to develop a series of new indicators to help measure the return on investment in customer experience (ROX). We believe this will help our clients make better decisions about where to invest to make the biggest impact of customer experience and loyalty.
Vision progress score: 5 out of 10
5. The products and services offered by the real estate industry will become more clearly defined and differentiated as opposed to an amorphous mass where one size fits all
Looking back 10 or 20 years the typical property owner or developer was opportunistic and with notable exceptions, not sector focused. The last recession highlighted the dangers of dabbling in sectors where you have no specific customer knowledge. Since then we have seen the emergence of sector and sub-sector specialists in the mainstream product areas like offices and retail and also in new sectors such as healthcare, student housing, self-storage and even caravan parks. The residential sector has led the way with a whole range of new products – live-work, co-living, retirement etc.
As real estate transitions from a brick and mortar business to a customer experience industry we are seeing this trend accelerate.
Just when you think you’ve heard it all, how about this innovative new property sector from California. Bisnow is currently promoting an event called “THE SOCAL CANNABIS CRE EVOLUTION – The event explores “ where are institutional investors looking as California continues to cultivate innovation centers, coworking cannabis spaces, and trends in cannabis retail offerings?” https://www.bisnow.com/events/los-angeles/the-socal-cannabis-cre-evolution-3359
Vision progress score: 7 out of 10
6. Relationships between property suppliers and customers will prosper in line with other industries i.e. founded on a partnership style of doing business where mutual understanding/symbiotic relationships exist
A couple of years back I visited the John Lewis National Distribution Centre at Magna Park, Milton Keynes. I quickly learned that the graduated blue and white cladding is just a wraparound for the automated handling systems provided by JLP’s Austrian equipment supplier KNAPP. It was the most impressive example of supplier partnering that I had seen in ages: a symbiotic relationship that serves the ultimate customer brilliantly.
Our vision remains that occupiers and their property suppliers will one day have a similar degree of mutual dependence. We increasingly hear occupiers tell us that they have a preferred list of landlords / developers / property managers that they like to do business with. Our clients are spending far more time and resources researching the needs of occupiers and of the end users of buildings.
We expand on our vision in this article authored with Jon Lovell of Hillbreak. https://real-service.com/the-civil-partnership-solution/
Our research with major corporate occupiers indicates that they are finding its far easier to forge partnership relationships with the new style flexible office businesses like The Office Group, Fora, IWG and WeWork than with traditional office landlords.
It will be interesting to see the impact of the initiative by LGIM Real Assets (Legal & General) to establish a new innovative operating model for managing its buildings, which it claims will “help disrupt the property industry, maximising the performance of investments and developing stronger occupier relationships.” https://www.legalandgeneralgroup.com/media-centre/press-releases/legal-general-shakes-up-property-management-industry-with-new-operating-model/
Another example of the partnership approach is The Crown Estate appointment of JLL as managing agent to its entire Central London portfolio. Commenting on the appointment James Cooksey, Director of Central London said:
We believe that working closely in partnership with a single managing agent will enable us to better collaborate and drive efficiencies to improve quality, consistency and encourage innovation.”
Vision progress score: 5 out of 10
7. The property industry will become more transparent about the way it does business and the costs of doing business
Feedback from occupiers tells us that the industry still has a long way to go before it is as easy to do business with or as transparent as other sectors. We’re excited to see some real innovation coming out of the PropTech sector and it’s refreshing to see many new entrants challenging the traditional way that, for example, real estate transactions are conducted. There’s also been a lot of progress in the residential sector to streamline the process of renting an apartment with a new law banning the charging of letting fees to applicants, with paperless leasing and pre-qualified financial checks.
Service charge costs and a perceived lack of transparency continue to be the bug bear of many occupiers. This is particularly acute in the retail sector where even the likes of John Lewis & Partners have signalled their distrust in the system with a threat to take unilateral action if costs are not reduced. There is continuing concern about insurance commissions too.
Vision progress score: 5 out of 10
8. The property industry will move from being self-focused to being obsessively customer inspired
At RealService, we’re fortunate to work with many of the most customer focused property investors, developers and managers. The fact that our business is growing is evidence that the industry is investing more in customer research, improving skills and changing cultures.
In the last 24 months, we’ve seen the focus of our clients’ attention move from simply satisfying customers at a “business to business” level to providing a great customer experience to all those who shop, work and live at or around our clients’ real estate. In essence the real estate customer challenge has become no different to any other “business to consumer” industry. This calls for new skills and talent and we’re excited to be helping our clients to make this exciting transition.
This change in business focus requires our industry to make a huge cultural shift. We have identified a significant skills gap and explore this in our latest report for British Council for Offices https://real-service.com/alchemists-hold-the-key/
Vision progress score: 6 out of 10
9. The property industry will play a leading role in demonstrating how industry in general can minimise its impact on the environment and actively work with its customers to minimise their impact too
This is a particularly strong area for our sector and we have seen some outstanding examples of best practice. A quick look at British Land’s website shows the wide range of environmental initiatives and targets that are typically being followed.
RealService is a GRESB partner and we are looking forward to working with GRESB to increase the focus placed on occupier engagement as part of a responsible approach to property ownership and investment.
An important industry commitment was unveiled by the UK Green Building Council (UKGBC) in 2019 including a framework for the UK construction and property industry to transition new and existing buildings to become net zero carbon by 2050, in line with the ambitions of the Paris Climate Agreement. https://www.ukgbc.org/news/uk-green-building-council-presents-industry-framework-for-net-zero-
Vision progress score: 8 out of 10
10. The property industry will develop a clearer understanding of the link between adopting customer service strategies and performance
This has always been one of the Holy Grail topics for our industry. While the intuitive case for treating tenants as customers is strong, we can now point at the academic research by Dr Danielle Sanderson for quantifiable evidence. This PhD research co-sponsored by RealService and the Lord Samuel Memorial Trust has identified a 1.9% total return loyalty bonus which can be achieved by increasing customer satisfaction by one whole point on a 5 point scale.
Dr Sanderson is a consultant at RealService and we are working with clients to use big data techniques to better understand this important link and to be able to use customer feedback as a predictive tool of occupier behaviour at future lease expiry or break.
The next stage of our work is to be able to more accurately measure the return on customer experience (ROX) at an individaul asset level.
Vision progress score: 8 out of 10
How are we doing? – 2020 and beyond
If you add up the progress scores you’ll see that the industry is close to 60% of the way to achieving the 2020 Vision we set out 10 years ago.
We’re very proud of our work over the past 21 years and would like to thank all our loyal clients, colleagues, collaboration partners and industry friends for your support.
We’re looking forward to playing our part in the real estate customer experience revolution in 2020 on beyond.
Can we help you?
If you’re interested in chatting about how you can capitalise on these trends in your own property business please give us a call +44 20 3393 9603.
