_Adapt or go home: Customer centricity is the future of commercial real estate

Commercial Real Estate is Changing – Why? 

Computing power has been increasing by twofold every couple of years. This has created exponential leaps forward in the amount of data that can be processed. At the same time the Internet of Things (IoT) is digitally connecting the physical world in such a way as to enable almost anything anywhere to be measured and controlled, creating a multitude of big data opportunities.

Artificial intelligence will increasingly mean that humans are not even required to give instructions to computers in order for them to discover the next patterns and correlations from the data they are processing, so our ability to derive insights will also accelerate. With these frequent new insights, businesses will need to adapt quickly, and constantly. 

Businesses are therefore restructuring to be more agile - some proactively, to get ahead, others reactively, just to keep up. Digitally minded, creative, niche technical talent, which aligns to the new opportunities presented in this era of digital transformation, is in high demand and in increasingly short supply. 

For the modern worker there is no longer such a thing as a ‘career for life’ – people have a portfolio of careers, connected by their individual learning and experiences and transferring these unique insights from one role to the next in quicker succession.

Workplaces that facilitate agility and that are fundamentally attractive places to be, will succeed. 

Niche skills are valued, but equally short lived as the business landscape continuously evolves. But new skills are quickly gained and new niches emerge, constantly. As moving more frequently becomes more commonplace, the workforce becomes choosier and competition among employers to attract the best talent intensifies. 

For organisations whose priority is to attract such talent, they must create environments where that talent would choose to congregate and that maximises their productivity. 

Workplaces that facilitate agility and that are fundamentally attractive places to be, will succeed. Agile workplaces are easy to source, quick & easy to transact and make operational, are flexible in terms of commitment, and also in configuration. Attractive workplaces are places where people choose to be - they deliver a great experience. 

Knowledge clusters

A central argument for coming to work, which is central to being productive in an innovation driven economy, is to share knowledge and collaborate synergistically – this is what ‘knowledge clusters’ are all about.

These knowledge clusters can be small, or large – between individuals, teams, departments, coworkers, startups and corporates, or increasingly corporates and corporates. For space providers, curation of effective knowledge clusters will supercharge the value of being in that cluster for the target user. Add to this great service, hospitality and a sense of community and you create a compelling reason for people to travel to a place. 

So how has commercial real estate adapted to this new dynamic? 

Modern providers of coworking/serviced space have led the march towards what can be broadly termed ‘space-as-a-service’ – space on demand, with a strong service and community element. 

The space-as-a-service model is customer centric and therefore helps to provide a significantly better overall experience, which in turn attracts and retains customers/tenants (and resonates equally well with their people/talent).

Space owners/providers actively seek ways to better engage - focusing on creating trust, not just on transactions; and building relationships, rather than just collecting rent. 

Buildings are staffed with hospitality in mind - community managers help to curate an experience which goes beyond the provision of space and more towards the curation of a loyal community. These workplaces are agile and attractive and they deliver on human experience. They are also knowledge clusters in their own right. All of which is positive for the people that work there and the organisations they work for.

The recognition of value in providing space-as-a-service has caused landlords to re-evaluate their strategies too. Those who had once been disparaging about the modern coworking providers, citing that they were no more than better looking serviced office solutions for freelancers, contractors and startups, have had to reconsider their offer.

Not least because we are seeing a growing number of corporates embracing flexible serviced solutions too, in preference to the conventional lease. It seems almost inevitable that the appetite for space-as-a-service solutions, in all its various forms, will make up a growing proportion of commercial real estate landscape for the foreseeable future.

To the space-as-a-service provider, tenants/members are customers. Space owners/providers actively seek ways to better engage - focusing on creating trust, not just on transactions; and building relationships, rather than just collecting rent. 

So that’s the story so far, but where do the trend lines point towards?

We believe that space-as-a-service solutions will become core requirements for any space owner/provider i.e. not just serviced/coworking providers but also traditional landlords. The space will become more tailored to the customer and customer segmentation will be increasingly considered in order to provide more targeted products and services. Targeted clusters will drive higher values. The underlying customer intelligence and targeted service delivery, will be powered by technology and digital insights, not just good old hospitality.

Technology is finally gaining traction within commercial real estate. Over the next few years, we expect the industry will quickly undergo the digital transformation that many of us expected over the last few years. 

As part of this digitisation, and in conjunction with the early stage adoption of customer centric strategies, we will see an acute focus on customer data as the key driver of insights, continuous improvement and, in turn, competitive advantage. We have already witnessed this in retail and particularly e-commerce where a forensic approach to attracting the customer has led to an obsession with improving the ‘user experience’ and the ‘user journey’.

There is whole digital industry honed on making marginal improvements to improve product, service to drive revenue. This will happen in real estate too.

We are seeing a surge in interest in how space providers can harness more data from within the four walls of their ‘control’. They want to learn how they can improve peoples’ experience. 

One of the emerging trends is the emergence of ‘experience apps’, which look to help space providers (whether they be coworking/serviced office providers, landlords, developers or corporates themselves), better engage with their customers for day to day comms, marketing, and promotion of local offers and events etc.

But most of these apps are only at the early stages of development and whilst their future value cannot be questioned, wide-scale adoption is still a challenge and the apps are yet to define themselves as essential to the users, which is key to their longevity. 

But where we see this all moving towards is more than just apps for improving hospitality and service. These functions only account for a small amount of the improved service and data capture opportunity. Combining these with access control, sensors, wifi and smartphone data can help deliver a richer picture of customer sentiment and behaviour in the workplace. Once analysed this can be used to improve workspace utilisation, productivity and overall experience. 

Using external data sources it is also possible to understand not just what your customers’ experience is inside the four walls of your ‘control’ but also beyond it – enabling creation of more holistic customer personas and tailored experiences and journeys/spaces to match. The richer the understanding of the customer, the better tailored the service that can be delivered to them. 

In a similar vein, we believe the potential to ‘super-charge’ the experience and hence the value of real estate will come from being able to control and curate experience over a greater quantum of space. If you accept that people will typically stay within a locality (or campus) most of the working week, being able to curate the broader scope of experience in that locality/campus during those hours has a potential to create  a higher value experience than the alternative - where you risk being let down by poor experiences provided by others in your immediate locale. 

We believe that this is a compelling reason for landlords and developers (and for large scale occupiers) to explore the potential value in curating whole places/campuses i.e. aspiring to curate and provide, what we are calling ‘campus-as-a-service’. Clearly this is simpler if you own and control the ‘campus’, but could also be achieved in collaboration with others (perhaps managed by one party on their collective behalf). This is the motivation of those major tech companies choosing to design and build new ‘cities’ from scratch – from the “internet up”. 

Space will become more tailored to the customer and customer segmentation will be increasingly considered in order to provide more targeted products and services. 

Of course, the reality of bringing smart places to fruition will be complex – but it makes sense to invest if you subscribe to the overall concept that creating higher value experiences for your customers leads to higher value places as a space owner/provider. 

Recognising this opportunity, we have built a team with the knowledge and experience to advise clients on how realise this customer centric vision – helping them procure the technology, harness and analyse the data and deliver actionable insights.

Our team comprises consultants, technology experts, data analysts and workplace experts to help clients design and create a bespoke solution that suits their ambition. We then manage the solution on their behalf providing advice along the way to continuously improve the product and service – this creates both value and loyalty. 

If customer centricity is the future of commercial real estate – data is the fuel to drive more customer centric strategies.

James Nicholson is a Partner in Knight Frank's Strategic Consulting team. 

If you have read this blog with interest and would like to learn more about how we can help you cater better to the needs of your customer, please get in touch. Knight Frank's Strategic Consulting team works with landlords and occupiers to align real estate with key business objectives.

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