The real estate roundtable tackled two topics that are essential to improving performance in the sector: tapping into customer centricity and developing a new paradigm for construction.
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With global real estate markets becoming increasingly competitive and regulated, winning over customers is paramount. Customer centricity is likely to be the new differentiator—but the sector has significant room for improvement. Some of the key takeaways included the following:
- Start building relationships and trust with customers today. A McKinsey survey of global home buyers revealed an urgent need for the sector to improve brand affinity and loyalty.1 This rapport can be accomplished by focusing on customers’ end-to-end needs, refreshing the marketing approach and channels, and using new technologies to engage customers in the design process. Understanding and delivering on the specific needs of the buyer results in loyal customers who, by sharing their experience, create a multiplier effect for the developer.
- Use virtual reality to create a quantum leap in the buying experience. As demonstrated by the Squint/Opera production company, virtual reality is evolving fast and is highly relevant in the sector. Giving the developer and the customer an opportunity to imagine and experience the space, before it gets built, offers a win-win outcome.
- Use digital tools more aggressively in engaging both customers and channel partners. Property developer China Vanke shared its digital customer-decision journey approach, which includes four broad platforms: addressing potential buyers before the purchase; alignment with real estate agents; support for the internal sales force; and post-purchase property management services for customers.
- Involve customers in the design before the developer finalizes their plans. As shown in McKinsey’s customer research, customers want to be more involved in the design process. Consulting agency designaffairs stressed the importance of deep customer insight and subsequently, tailoring individual spaces like kitchens, balconies and bathrooms to build customer loyalty.
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- Use social media to connect with customers. Digitization is a necessity to interact with millennials and has fundamentally changed the business and interaction model. Social media has a unique and dominant place in real estate marketing—not only to advertise properties but also to build a connection with customers and brand loyalty. To measure this word-of-mouth channel, the ultimate metric is the number of “shares,” not “likes.”
Simultaneously, the application of high-speed construction and digital technologies has the potential to reduce the time and cost of construction, and change the entire real estate business model. Some of the key takeaways follow:
- Pre-fabricated, Pre-finished Volumetric Construction (PPVC) is a proven method for constructing residential towers and hotel structures, demonstrating cost and time savings. PPVC also unlocks value for owners by providing savings on maintenance costs. Global construction company Dragages-Bouygues shared that it built 100 percent of the interiors of the Crowne Plaza Changi Airport extension in a factory, assembling them on-site.
- 3-D printing offers tremendous precision, it is fast, and it requires significantly less labor than traditional manufacturing. Shanghai-based WinSun explained how it printed a villa in one day with a cost-savings potential of up to 50 percent. While rapidly becoming mainstream, 3-D printing offers a path to mass production of real estate, especially in markets where the cost of materials and labor is high or speed is of essence.
- Collaborative contracting is a solution to the dysfunctional design-bid-build (DBB) low-cost bidding culture in construction. Alternatives include, for example, integrated project delivery, which incentivizes collaborative behavior for all parties involved, with risks and rewards shared through a transparent and fair process. DPR Construction discussed a case study in which the project came in significantly under budget and ahead of schedule. However, for this to work, the owner must be convinced to evolve the bidding process away from DBB.
We closed the discussion by concluding that real estate developers need to adopt a two-pronged approach. First, they can experiment with these strategies by incubating a small new real estate company within their existing structure. Once these new ways of working demonstrate results, the next step is for developers to upgrade their entire core business.
- McKinsey research on global home buying experience, 513 total respondents across 10 cities, April to May 2017.