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RealService Founder, Howard Morgan, recently spoke at the Navigator Forum organised by  CGA 

A report of his presentation is available here and reprinted below with thanks to Chris Garthwaite and Carla Hall at CGA for the invitation.

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Introduction

Cities around the world have seen a fundamental change in the way we use property and real estate. As with many of the seismic shifts since March 2020, this was a trend that was already in motion pre-pandemic, but Covid-19 has escalated the evolutionary process.

While change presents challenges for commercial property owners and those in businesses that hinge on real estate (not least UK pensions, which are underpinned by property), it also presents opportunities as well. So, how can businesses adapt their thinking to create a customer experience worth paying for in 2022 and beyond?

What’s changed in real estate?

The overarching change is that we simply are not using commercial property in the way we were five years ago. Remote working is perhaps the most obvious change that has occurred, with digitisation opening opportunities for people to live and work beyond the overpopulated and highly priced realms of major cities.

Remote working was a creeping trend that has leapt forwards, with many wishing to continue working from home all or part of the time going forward. It opens all kinds of opportunities, ranging from ‘levelling up’ income and local spending across the UK to providing more job opportunities for anyone who can’t travel into the likes of London and Manchester on a regular basis.

While there may be some friction between businesses and employees as to how the remote working model plays out in the long-term, as of September 2021 50% of British employees are still working from home at least some of the time. That’s up from 37% before the pandemic. The change has prompted technology to advance in order to improve the remote working experience. Last month alone we saw Facebook showcase their haptic glove prototype, allowing you to feel objects in virtual reality.

It’s not just offices, however, that are seeing changes. The high street has been under ‘threat’ since the dawn of the internet, and the challenges of the last two years have meant that anyone who hadn’t changed their shopping habits to the digital realm has now been largely forced to. As a result, shopping centres and brick-and-mortar stores are suffering.

Even rented housing and apartment buildings are facing enormous change in cities (linked back to remote working). As people realise that they are not bound to urban areas, landlords find themselves competing for tenants in a way they have never had to before.

We are at a moment of profound change and for lots of businesses that’s a daunting prospect, but it’s not a situation that has never occurred before. For example, one might see both an industry and society parallel in the colliery closures and ensuing miners strikes in the 1980s. They, too, were a way of life, impacted entire communities, were linked to the very essence of how the country was run, and had the capacity to make entire businesses irrelevant in a very short space of time.

Reimagining the proposition for commercial property

Against this backdrop we need to change the way we think about commercial property. What is it for? How is it used?

Since 2002 Barclays has been selling off its office buildings and leasing them back. Large city apartment buildings have been plagued by scandal and a loss of trust post Grenfell, and shopping centres are floundering. For example, Bluewater’s 30% stakeholder, Landsec, is currently in talks to buy Lendlease’s 25% stake for £200m. That would represent an overall value drop of around £800m over the past three years.

That said, we are seeing a repurposing of those buildings and the way they’re used for work, life and leisure. What businesses need to think about is how to provide services that enhance experience in these environments.

Space as a service

In offices, stats show that typically just 2 out of 10 corporates are satisfied with the services they get from landlords. So, the old is being outshone by the new, as ‘space as a service’ providers like WeWork capture the mood and gain 9 or 10 out of 10 in customer satisfaction surveys.

The shift in our approach to commercial property comes down to two things: service and experience. Office and apartment buildings are shifting from a focus on ownership to the monetisation of services. That includes physical space as something people consume according to need. That might be in the likes of WeWork or student accommodation providers like Unite Students. These are no longer places to simply crash for the night, they provide tea, coffee and services that enhance the experience.

The tenant as the customer

In apartment buildings, landlords are being called out for abusing power (only recently, Luke Johnson wrote his piece ‘Time to end the abuse of tenants’ for The Times). There’s also a rise in pressure groups like Guardians of the Arches, calling for tenants to be treated as valued customers.

One example that Howard highlighted, was from Quintain Living. Their lifestyle focussed rental company has been developing an area outside Wembley, producing something colourful, imaginative and experience focused. It includes a rooftop community space on the 14-storey residential tower, as well as two floors of office space which tenants can use free of charge. What they’re delivering as a result is not just a roof over your head, but a community that’s nice to live in. There are camper vans on the roof, which can be offices for the day, colourful post boxes and hot tubs – the emphasis is on the experience.

In many ways this is forward thinking. However, one contributor pointed out that in other ways, this emphasis on community is a throwback to the way continental Europe structured its communities in the past, with commercial premises on one floor and housing on another. There is inspiration to be drawn from the past as well as imagining the future.

Training and behaviour

The missing link between reimagining the way we use commercial property and executing those plans successfully is a combination of skills and strategic capabilities.

A mindset change

In the first instance, it’s about a mindset change. For a long time, those who have owned or managed property, have had the luxury of not really thinking about the customer and their experience. Property has been in demand, so landlords have been able to command high fees without providing any service. Now, commercial property owners find themselves in a position where it needs to give people a reason to come to them – they need to think about the customer experience.

It’s a way of thinking that the hospitality industry has understood for generations. CGA’s Graham Ryan recalled living in an apartment building in the USA, where the concierge added enormous value to each tenant by knowing everyone’s name, always saying ‘hello’, and being engaging. The community loved him, and 26 years later, he remains a positive memory of that experience. That individual and his customer service created value for that asset.

It is a mindset that forward thinking businesses are seeing tangible benefits from across the board. For example, researcher Dr Danielle Sanderson investigated the determinants of satisfaction amongst tenants of UK offices. She found that if you can increase satisfaction by one unit on a 1 to 5 scale, you can increase total returns by +1.9%.

New skills and training

For many businesses this will require a change of perspective, but ultimately that’s driven by introducing different skillsets at a top level, and training to make sure that those values are then reflected through the different customer touch points in the business.

A contributor noted that it’s essential for teams as well as leadership to be inspired to this new way of thinking. She said that staff need to be taken on the same journey as leaders through appropriate training and mentoring. It was felt that if teams are not involved in that transformative process towards customer experience, then they will naturally pivot back to what they know.

It was highlighted that traditionally, the recruitment process into the property industry has focused on chartered surveyors, but those qualifications and courses don’t cover customer service or customer experience. They are transactional. Unless those individuals are naturally inclined to service, they won’t have the necessary skills to address customer experience. They must be generated, taught and trained.

With that in mind, we are now seeing more and more jobs available for a Head of Customer Experience, and training providers are catching on. For example, UCL has launched a short course titled CX in Real Estate – Future Leaders Programme.

One contributor, whose company is in property investment, said that they have moved from a one size fits all approach to a one size fits one experience approach. They have pivoted the business so that everything is consumer centric. Where a landlord might have traditionally only had contact with a tenant when a three-year tenancy agreement came up for renewal, there’s now a property management layer that’s about knowing the customer and ensuring they want to stay. The question they ask themselves is ‘how can we be Ritz Carlton for living, office space and logistics?’ The Ritz Carlton has its own centre of excellence, so they are creating a similar capacity in-house to ensure staff training.

The gap in strategic capabilities

In addition to training, there’s the question of what a more experience focused approach to the property industry looks like and what businesses need to factor into their budgets and capabilities to make that happen.

Pastries and ice creams

One contributor works with a landlord who had worried: ‘We can’t supply enough milk to our office building!’ It’s a new issue for landlords, but as they are now providing tea and coffee making facilities, the logistics around milk and how much they needed becomes something to think about. The same landlord had questions about their Danish pastries – were they too big? Should they be providing them at all?

Whether it’s pastries or luxury toiletries, in many ways such an issue seems trivial, but when it’s done to scale it is both a budgetary and logistics consideration, the likes of which hoteliers and brand consultants have been thinking about for decades. There’s a need to decide what’s required, when, how much, how it’s being delivered, how waste and cleaning are to be managed. It’s also about measuring the impact of these small details on the customer experience so you know what to change, increase or decrease.

Historically, no budget would have been put aside for these experiential factors, even if the thought had been there to implement them. Now, the property industry needs to incorporate them into its thinking. The service charge system in the UK has meant that’s where the budget is set. Most properties have a budget line for letting but they don’t have a line item for customer retention.

One contributor remembered suggesting to the owner of an office building that they give ice creams to all the occupants if the air conditioning system went down. The response was ‘we don’t have the budget’. Today, new operators are coming into the market, and they are more attuned to a service-based way of thinking. In short, the pastries and ice creams are accounted for.

Marketing and measuring satisfaction

Even how we ‘purchase’ space is changing. Increasingly, online portals are playing a role in how we search the market for property. Outside property you can purchase in one or two clicks, but can’t with property – is that part of the future? At the moment, pricing isn’t dynamic either, but is that going to change? If we’re renting offices by the day, will we see surge pricing? Will there also be more TripAdvisor style review platforms for property?

What do each of these things mean for skillsets required within the property industry? What partnerships would create a competitive advantage?

The conversation raised several interesting avenues for exploration as well as exciting prospects for the future of the property industry. Key trends were identified including:

  • The rise of property management
  • The tenant as the customer
  • Space as a service

All of these warrant further exploration within themselves.

The speed of change in customer expectation is dramatic and the way in which customers are feeling and behaving when it comes to commercial property is entirely different to a few years ago. Is there enough industry awareness of that change, or is it just the enlightened few who are making a difference?

Howard concluded that as a mentor within the property industry, he often asks those who have newly completed their professional training, ‘have you thought about your tenants as customers?’ To date, no one has responded in the affirmative. It’s a skills gap and a huge opportunity – it’s just a question of harnessing it.

 

By Sophie Hazeu

A WHILE ago I conducted a post-occupancy study with a number of managing directors.

I was exploring their reasons for choosing the prime real estate into which they had recently moved and the majority of respondents, bar a few who mentioned bike racks and lockers, stated location, rent, rates and square footage as their top priorities when acquiring that particular property in central London.

Sophie Hazeu

Sustainability was on the list but not the top five. No surprise there then.

However, research RealService has carried out recently suggests that seems to be changing and the Road to Cop26 – the UN Climate Change Conference, which Glasgow is hosting in November – is being paved by property companies who are full of good intentions.

That is great, but alongside those who are champing at the bit to refurbish their stock with green credentials are those who feel these costly changes are unfair and unfeasible. Nick Leslau, Chairman of Prestbury Investments, highlighted this in his Property Week article Our Industry is being set up to fail.

‘Carbon neutrality or we will leave’

Nick may have a point, especially when it comes to retro-fitting old buildings. But there’s still an opportunity here and it’s one every property manager should take because during the aforementioned research, on how loyalty impacts on the likelihood to re-occupy, we found that despite good relationships with the landlord and high loyalty to the location/estate, some occupiers stated categorically they would leave at end of their term if their goal of carbon neutrality was not supported.

Consequently, I then began to think about how this high level of ‘Defection Risk’, despite high loyalty, could be identified and then mitigated without having to scramble to achieve the costly changes Nick identified.

We already know that the impact of Covid has produced rapid change in the property market, mainly bringing in hybrid working plans far earlier than previously anticipated. An immediate desire to restructure offices into ‘collaborative spaces’ over desk-based business is, and will continue to be, a huge disrupter for property owners.

A further challenge on the horizon is the increase in weight given to the sustainability of a building as being a prime factor in leasing real estate. This factor is being set out by customers as a clear benchmark – which needs delivering and appears non-negotiable. For some, it’s overtaking the traditional drivers of rent, rate, square footage and service charge.

Create a ‘sustainability champion’

So, it seems property managers have a choice.

They can do nothing and run the risk of losing occupiers for whom carbon neutrality is an important aim.

Or, they can capitalise on this new driver (along with a more flexible lease offering in the short term), by developing sustainable buildings which, in the long run, may enable a higher rate to be demanded.

This is the time to take the sustainability advocate out of the corner, raise their status and create a ‘sustainability champion’ who has a voice.

This champion has a hugely important role in understanding customer perception, and setting their expectations.  This person needs to be able to multi-task.

  • Environmental reports need to be delivered to customers on time (most take six months to deliver an electricity invoice)
  • Reports must be customer-friendly, usable for investors and appropriate for delivering board-level results
  • They must be a trend spotter; what are the latest customer ‘must haves’?
  • They must be able to engage with customers and learn from them whilst managing a realistic sustainability plan. This last point is vital.

So, if the sustainability champion is the means of mitigating ‘Defection Risk’, how can this risk level be identified in the first place?

Defection risk matrix

Working for a major global client, we carried out a number of in-depth interviews and assessed the responses in a Defection Risk Matrix.

This matrix evaluates how effectively ‘loyalty creators’ – like demonstrating empathy and engendering trust  – are being delivered.

We then looked at the ‘loyalty indicators’, to establish whether the customer’s commitment to the landlord, or the property, was strong enough for them to re-occupy against all other factors, such as achieving carbon neutrality in 2030.

Essentially, we were determining whether the customer’s loyalty was enough to mitigate against all the reasons they may wish to leave.

The results enabled the client to identify priority customers where loyalty needed to be enhanced, and therefore the risk mitigated. And, this is where the sustainability champion also comes in; to partner with each customer on their intentions and needs.

We can help you spot customers who would be on your Defection Risk High list. But you can start supporting those for whom sustainability is a key issue right away.

Create the sustainability champion, make sustainability a deliverable goal and keep your loyal customers loyal to you.

If you would like more information on how we can assess your customers’ loyalty, please contact us at info@real-service.co.uk.

WELCOME to the third of our interviews in our CX Conversations series. Here, David O’Sullivan, director of occupier and property services at Great Portland Estates, emphasises the importance of gathering regular, independent feedback from customers.

David O’Sullivan

He talks about how ‘over-communicating’ during the pandemic has improved the relationship between landlord and occupiers and emphasises the ‘people-focused’ nature of the business.

Oh, and don’t do what the banks do. Definitely don’t do what the banks do.

Welcome to our series of CX Conversations.

If you are a property company unconvinced as to the value of customer experience, please listen to our series of interviews with key figures from different sectors. We’ll be posting over the coming weeks and our interviewees include:

  • THE CUSTOMER. The head of real estate for PwC speaks stridently about the levels of service and engagement he expects as a major customer and he offers up a future of the office as ‘business theatre’.
  • THE ASSET MANAGER. The head of sustainability, Europe, for a global REIT talks about the importance of retention and reputation as key drivers for revenue.
  • THE LANDLORD. The director of occupier & property services for a major UK landlord explains the value of communicating with customers and how building relationships will serve them well in what are likely to be tough times following the pandemic.
Chris Richmond

1. The customer

This first interview is with Chris Richmond, senior head of real estate for PwC.

We asked him about the services he expects as an occupier, the role of managing agents and their preparedness for post-pandemic office life. Oh, and we also touched on the future of the office itself.

Next time, Kaj Bakker, head of sustainability (Europe) at Cromwell Property Group, will talk about being the middle-man, the asset manager serving two masters – occupiers and investors. It’s understanding occupiers, he says, which will drive retention, reputation and revenue.

CONNECTING on a human level with the end user is the way the office sector will remain relevant as it undergoes the most radical change in decades.

So concluded CGA founder and managing director Chris Garthwaite as he wrapped up the first roundtable event to mark his organisation’s collaboration with RealService.

The event was the opening salvo in RealService and CGA’s series Revitalising Real Estate and the discussion revolved around the theme Reimagining the Office: The Customer’s Voice.

“The office is one of the last institutions which is now breaking down,” he said. “Covid is an accelerator, but a distraction. The office now can be a home, a coffee shop, it’s wherever the end user wants it to be.

“It’s the biggest change in 40 years and probably one of the last industries which is being fundamentally altered.”

Strategic partnership

RealService and fellow customer experience consultants CGA have launched a strategic partnership with the aim of giving clients the best of both worlds: RealService’s expertise in the property industry and CGA’s renowned knowledge of other sectors.

The launch event featured some of RealService’s valued clients and they were challenged by one of the industry’s biggest customers, Chris Richmond, senior head of real estate at PwC.

Those around the table impressed Richmond with their commitment to customer engagement although he said his personal experience was a patchy one.

RealService and CGA launched their formal collaboration with a roundtable online event which discussed the future of the office

“Maybe PwC are dealing with the wrong landlords,” he said, adding that while some had engaged with him during the pandemic, there had been little dialogue around a return to work.

David O’Sullivan, director of occupier and property services at Great Portland Estates, said his team had, if anything, over-communicated with occupiers.

“It’s disappointing to hear of Chris’s experience, because I can say with certainty our delivery of that type of response has been exemplary,” he said. “We went early, issuing a return to work playbook to advise occupiers.  We have kept every one of our buildings open, we’ve communicated throughout the process and run occupier clinics.

“Moreover, it has been a highly-valued process that has really improved our relationships. It has been the one constant thing we have been able to talk to them about in the last year and it has really cemented our relationships.”

While Richmond was preaching to the converted an even bigger question remains: what is the office environment going to look like in the future?

PwC have announced they will be embracing flexible working with its chairman Kevin Ellis saying he hopes it will be “the norm rather than the exception” and that “we want our people to feel trusted and empowered”.

Its workers can now work from home for a couple of days a week and start as early or as late as they want, which could have major implications for the space PwC currently occupies.

RealService founder and managing director Howard Morgan, who facilitated the discussion, wondered if space should be priced by the day? “Surge pricing is prevalent in every other sector,” he said.

Paul Rostas, founder of Plus X, the coworking provider, said: “We’ve tried to develop our product in a different way; we used to work at our desks and have an away day to think differently, maybe now, we work at home at our desk and come into the office to think differently.

We haven’t really tried a hybrid model

“Maybe Monday is for one company, Tuesday we set it up differently for a different organisation. From a cost-efficiency point of view that’s appealing; we reconfigure the space as and when people need it, driven by what the customer wants.”

For Dan Lovatt, head of property management and build to rent at Transport for London, the problem is two-fold.

He said: “First there is a technical side – help me with PPE, signage etc but then it’s, ‘I’ve got this space, help me understand what I am going to do with it’. The second lockdown has been a lot harder on people and there is less of a desire to work from home.

“Presenteeism plays a part. We talk about a hybrid model but we’ve either all been in or all been out, we haven’t really tried a hybrid model.”

From his perspective outside the property industry, Chris Garthwaite said change was inevitable.

“I remember working for Kingfisher when the internet arrived. It’s the same here. Your customers will have access to anything they want, on their terms. The focus must be on considering what are you selling? Is it productivity? Flexibility? This is about brands selling environments and this is where it starts to become really interesting.”

 

*RealService and CGA would like to thank Dan Lovatt (TfL). Michelle Laramy (The Crown Estate), David O’Sullivan (Great Portland Estates), Paul Rostas (Plus X), Rowan Packer (Mapp) and Raj Rajput (Hines) for responding to Chris Richmond’s challenge and to Chris Richmond (PwC) for being the provocateur.

 

CX Conversations: Listen to Claire Middleton’s interview with Chris Richmond here.

There’s a joke about outrunning a bear that Benedict Cumberbatch (as Alan Turing) tells in “The Imitation Game”:

There are two people in a wood, and they run into a bear. The first person gets down on his knees to pray; the second person starts lacing up his boots. The first person asks the second person, “My dear friend, what are you doing? You can’t outrun a bear.” To which the second person responds, “I don’t have to. I only have to outrun you.”

In the first blog in this series I looked at the ‘Stages of Change’ model and our reaction to change, which our body perceives as a threat.

This blog looks at whether, faced with the Covid-19 crisis, it’s better for the property industry to pray or lace up its boots!

From bricks and mortar to hospitality

It’s more than 25 years since I returned from the USA with a vision for our industry founded on the principle that we are “no longer in bricks and mortar business but part of the hospitality industry”. An industry inspired by the best hotels, seeing our tenants as guests rather than an anonymous income stream. It’s seems common sense now but it was close to heresy back then!

Some in our industry saw this idea as a ‘scary bear’, and prayed it would go away. Fortunately, others ‘laced up their boots’ and they’ve become our clients and friends.

Last week Property Week launched a campaign to “Save the Office!” encouraging the industry to lead from the front on the return to the office. Of course, it’s sensible to ‘underline why workplaces are so important and showcase best practice so employers can help their people return to the office confident that the appropriate Covid-19 safeguards are in place’. But I can’t help feeling that if this campaign is to be successful it needs to look beyond saving “bricks and mortar” and at “saving our customers”. Let me explain.

Offices will be saved not because developers like to build them, investors to own them and corporate leaders to enjoy their corner offices, but because people choose to work in them. Employees of the past had no choice where they worked but that’s different now. Covid-19 has broken the dam and given employees the taste for a different workstyle. The rows of empty desks in our cities and business parks are the strongest reminder that it’s employees who are our ultimate customer.

The latest data from Leesman doesn’t give much comfort to the “pray’ers”. 82% of 127,000 employees surveyed agreed with the statement that “my home environment enables me to work productively”. That is 19% points higher than the 63% of employees who say they have a productive workplace.

Insight

At RealService, we believe that the future of the office industry lies in getting in-depth insights into what motivates both the 82% “productive at home’rs”, and the 18% who looking for a different solution.

But if only it were that simple! There are a lot more than two types of customer, and the task of creating a new vision for the future workplace requires a granular understanding of the needs of the close to the 30 million people who form the UK working population. You can then scale that up to include the 1.25 billion knowledge workers across the world (source: Forrester).

We can learn lessons from the hospitality industry (itself decimated by Covid-19) where the focus is on asking “what is the experience that our customers want?”. For the property industry, this means applying the tools and techniques of service design to our existing assets and future developments. The starting point for our asset management or development plans should be “who is our customer and what are there practical and emotional needs?” and not “how much space can we get on the site”.

Likewise, our customer retention strategies need to step out of the world of spreadsheets and into the world of loyalty and brand building.

At RealService we believe that the successful development, asset and property management strategies of the future will be shaped by standing in the customer’s shoes. It’s only by truly aligning ourselves with the ultimate customer, that we’ll be able to outrun the Covid-19 bear.

So, we’re campaigning to “Save our Customers” and their businesses, and hope you’ll join us!

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Howard Morgan is the founder and MD of RealService

If you’d like to understand ways that RealService customer research, consulting and training is helping our clients to get ahead in the Covid-19 era please contact

Howard Morgan howard.morgan@real-service.co.uk

 

www.real-service.co.uk