Leading the New Narrative.Dan Innes
Twelve months ago, the narrative – the way we would talk about real estate – was to change forever. The phrase “adapt or die” never seemed so timely and appropriate.
But ‘die’ was exactly what some doomsayers were predicting, as the pandemic-enforced changes in our personal and professional habits, led rise to questions being asked of the relevance of real estate – “it’s a shrinking market!”, “there’s another retailer going bust!” and “there’s another CVA!” echoed round the empty shopping mall precincts. And, as development projects turned the tap off and construction ground to a halt, the future certainly didn’t look rosy.
But roll forward twelve months, as we start to emerge from under the cloak of lockdown, are we now seeing ‘the crocus of hope’ daring to peek its head above the parapet?
How has society changed?
What happens in our society impacts what happens in our urban centres. So where are we currently?
Politically we’ve dealt with seemingly knee-jerk reactions and policy changes – such as relaxations to planning laws or protections for tenants – but some have presented enormous opportunity as laws are relaxed.
Economically, everyone’s reporting low GDP forecasts and there’s decreasing consumer spending (something that revenge shopping simply won’t make up for). We’ve seen a savings growth with some customers prospering. Consumers are focusing on price and value. There are investment constraints and there could be long-term economic scarring, not just for real estate but for several industries with spend curtailed and widespread cost scrutiny.
Socially, there’s a new set of values in town — and it’s all about what you do, why and where? Environmental and social values have become more important — working from home, or a new blended approach to work is the “new normal”. The rise of the community, diversity, equality and a sense of place is evident, but this is tempered by the potential of unemployment, the awareness of personal risk, hygiene and safety. And our purchasing habits have changed, with groceries becoming more important than a new pair of trainers.
Technologically, the move to digitise customer and sales journeys, cyber security, accelerated automation, e-commerce – all have put pressure on supply chains, with an emphasis on data integration. We have seen a rapid adoption of digital platforms, and for many real estate companies, there is still a reluctance to fully implement these platforms, mainly because they are daunted by the cost implications, and they still think of themselves as an analogue business.
Here are the 4 key real estate trends we’re predicting for 2021
Firstly – The Economic Impact – with catastrophe and recession already upon us, companies rightsizing and optimizing costs in a kneejerk fashion is expected to add to our economic woes. If they haven’t already, organisations need to quickly gauge the economic impact of COVID on their stakeholder, investor and customer bases, to identify risks and opportunities, and to measure the impact on values. Initiatives such as research reports, sector classifications and benchmarking values are important, especially the best practice recommendations from EPRA (October 2019), European Public Real Estate Association EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value (NDV).
Secondly – Trust – this has become a real issue as trust in brands is eroding, and the reputational risk is especially precarious if your corporate values don’t meet those of your customers and investors. Companies should promote a sense of purpose, meeting the safety needs of customers and employees first, while also sharing their commitment to ESG – environmental and social governance policies.
Thirdly – The Inexorable Rise of Digital – propcos should rapidly adopt digital if they hadn’t already. The tide has well and truly gone out – and you could say it’s time to see who’s wearing their (arm)bandwidth. Digital has been filling the gaps to reduce costs and meet customer demand in e-commerce for years, and yet we are only now reading about real estate investment into digital services – which is sluggish at best. 45% of customers predict digital channels will be their main way of contacting brands in the future – making the integration of digital and physical as vital as ever before.
I remember sitting in Michael Gutman’s office in 2011 talking about real estate embracing digital – and now finally in 2021 we see an Amazon “just walk out” grocery store open in Ealing last month. It really is the retailers who are leading that narrative, and it is contingent on real estate owners to support them. We have much to learn.
Lastly – Driving In-Home Experiences – how are we, the real estate sector reaching customers and stakeholders now that our universe has changed? It was great to see Completely Marketplace and REVO announcing a joint event in REAL LIFE this September! Can there be more of these?
Leading the New Narrative
So, what do I mean by leading the New Narrative and why is it so important for future progress? It’s critically important to speak out about the direction for real estate because the property market is cyclical, as are consumer trends.
As we know, there are Four Phases of the Real Estate Cycle – Recovery, Expansion, Hyper Supply, and where we are currently, Recession.
The New Narrative needs to talk clearly to and address key sector challenges, demonstrating to stakeholders how the industry is meeting those objectives, whilst responding with critical preparedness to stop uncertainty and emotional disruption to businesses.
What can be done?
We all need to explore and tap into the true growth of ‘community’. Let’s try to be less myopic about the impact of Covid – communicate clearly, focus on convenience, accessibility and safety as the key drivers that make us more appealing to our stakeholders. Businesses need to reorientate their strategy, supply chain operations and their narrative to take into account this de-urbanization.
We need to recognize the changing role of the home as well as a shift away from urban areas as working from home becomes mainstream – driving new conurbations, new communities – and change our narrative. The benefits for those companies leading that change will be huge.
It is critical to Know Your Customer (KYC) and their circumstances – understand the financial segments of risk and opportunity. The role of social listening can be utilised here. Be clear on segment messaging and what is needed to help stakeholders protect themselves against financial uncertainty, risk, and personal safety.
Reassess traditional business costs – revenue and margin are under pressure; the shift online requires investment; cost to serve needs to be reduced. However, it is not just about cost-cutting – costs need to be removed from some areas and redeployed in others. Provide digital solutions to employees so they can work from home safely. What is the future role of digital within your organisation?
Examine business models, partnerships and determine how customers will interact with you in future. Does e-commerce feature within your business strategy? How should your supply chain adapt? How are you marketing the opportunity? What partnerships and alliances are required?
Demonstrate your purpose and the source of differentiation – what does your company stand for over and above profit? The provenance of finance, materials, food miles and localization are a rapidly growing concern. What is it about your brand and social and environmental purpose that means consumers and employees should buy into you and not others?
Together we can drive this New Narrative. The path ahead certainly won’t be smooth but now is the times to seize opportunity and do away with doubt.
Will you join me in the New Narrative?