Institutional investors recognise they must treat real estate tenants as “customers” or risk diminishing their returns, it was revealed today at a closed-door investor summit at MIPIM today.
A live poll of 53 representatives of sovereign wealth funds, pension funds and other institutional investors found that 58% strongly agreed that a focus on customer experience in buildings will be critical to achieving successful investment outcomes over the next five years. Another 40% agreed and the remaining 2% were not sure.
Andy Pyle, the head of UK real estate at KPMG, told delegates at the annual RE-Invest summit in Cannes, France, that understanding the commercial real estate customer and giving them more of what they want will improve user experience and increase returns for investors.
He said traditional leases were evolving to give customers a different experience and accommodate changing needs, such as flexible working environments.
Data provided by Pyle showed that brands that improve customer experiences see revenue increase as much as 10% to 15% while also lowering costs by 15% to 20%.
“Economic value is lost when experience fails to meet expectations resulting in missed revenue and increased costs,” Pyle said.
On the upside, economic value is maximised when customer expectations and experience are in alignment, he said.
In order to benefit from the increasing returns, organisations need to consider what shapes and defines today’s customer purchasing and experience requirements by knowing, for example, what drives consumer behaviours and expectations, and understanding the trade-offs customers make.
Organisations that consider customer’s purchasing and experience requirements have proven to yield “enhanced outcomes, grow quicker and deliver shareholder value,” Pyle said.
Pyle said commercial real estate will have to mimic the hospitality franchise model and focus on becoming more customer-centric.
It will need to mine data to understand how buildings are used and what customers want most from their working experience, he said.
The industry should also maintain brand consistency and ensure every building delivers a unique look, feel and expectation.