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Loyalty and Customer Experience Moving Up the Agenda for Real Estate Investors

Large single-family residential (SFR) and multifamily residential (MFR) platforms now have the scale to build their brand

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  • Written by  Buyside Exchange staff
 
 
Loyalty and Customer Experience Moving Up the Agenda for Real Estate Investors

Economic returns from real estate investments are increasingly relying on customer experiences and loyalty, requiring investors to pay greater attention to their brand.

McKinsey’s real estate team identified superior customer experiences through evocative brands, memorable moments, and low-cost operations would be crucial to improving returns on real estate investment in 2024.

The team noted that while customer experience has long been associated with putting more money and personnel towards a property, new low-cost options are now available for investors to save money and improve returns.

The rising prioritization of branding and customer experience has impacted both the residential and commercial market, as the way commercial properties are constructed, designed and leased is being influenced by providers prioritizing valued customers rather than tenants.

The team identified three paradigm shifts in the consumer landscape, with investors focusing on segment-specific community factors over commodities, moving from a one-size-fits-all to a personalized mindset and making use of AI and other technologies to improve customer experience.

New Technology

Using new technologies such as generative artificial intelligence (AI) and digital marketing platforms to improve branding without increased costs can stimulate willingness to choose a given property, higher renewal rates, and lifetime loyalty, according to McKinsey’s team.

PwC highlighted that this need for real estate investors to improve their customers’ experiences through new technologies is predominantly due to the needs and demands of generation Z (gen Z), those born in the late 1990s and early 2000s, who are now joining the workforce and renting and buying homes. As a tech-savvy generation, gen Z have high digital expectations and investing in a more personalized customer experience as part of a longer-term relationship is key to building customer loyalty.

Management activities including leasing, renewals, and completing service requests can be automated to reduce delays. McKinsey’s research has found companies already automate more than 70% of interactions, using AI companions and other tools.

McKinsey’s real estate team also noted that this shift has become more pronounced following the COVID-19 pandemic, as consumers increasingly prefer a proactive self-service that concretely answers specific questions over speaking directly to a sales representative.

The COVID-19 pandemic’s impact on the number of people working from home has also influenced consumers’ expectations of their residential complexes. The increase in people working from home has led to residential complexes replacing workplaces as a hub of interpersonal connection, McKinsey’s team noted

Community and Connection

Investors who prioritize providing a sense of belonging to residents and invest in shared spaces within their properties are more likely to attract long-term customers, as residents who know someone else that lives nearby or in the same community are more likely to renew their tenancy.

Tailoring experiences to specific market segments rather than commodities will help residential players take advantage of communities based around shared values, interests or priorities as opposed to goods and services.

Branding is also crucial to appeal to a particular segment of interest, McKinsey’s team found. The market for name-brand luxury condominium units is projected to grow 12% every year until 2026, The New York Times reports, attracting residents seeking a community of like-minded people.

Similarly, tenants are willing to pay a premium for a more sustainable living situation. Research from the American Council for an Energy-Efficient Economy found renters are willing to pay between 1-5% more for a higher level of energy efficiency.

KPMG predicted that this shift will have far-reaching effects on the real estate industry, as landlords who ignore changing workplace and residential dynamics and rising customer expectations will lose out to new players in the market.

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