Create a framework
Every real estate project is different, its own prototype with its own challenges. Take a glance at today’s successful large-scale, real estate developments in Europe (e.g. London’s Nine Elms, Milan’s Porta Nuova, or even smaller-scale development projects). To be successful and sustainable, each of these projects needs to bring out tangible long-term benefits for all stakeholders, not just the developers themselves.
One of the development formats that has been very successful so far and we are all familiar with is the shopping mall. While most established, large regional centres in prime locations continue to perform well, offering a balanced mix of shopping, food, and entertainment, some out-of-town, mid-scale centres are at risk of decline, a phenomenon under the spotlight referred to as the 'dead mall'.
But what delineates a successful real estate development project, from a so-called dead-one? With so much competition between existing and development projects, within and between cities, property itself is becoming a “product” and, as with all products, the goal is meeting the demand and the brand promise - and the risk is commoditization, lack of authenticity and attractiveness, something all brands and product managers actively avoid.
Given the modern rate of change and the need for accelerated design and speed - what can property development learn from other sectors when they plan, design and develop their products? As with products (and services) also for property, the goal should be to craft a vision and a strategy that allow the creation of unique, exceptional customers’ (stakeholders’) experiences.
Approaching 'property' development with a 'product' development mentality can bring about valuable lessons. We can break this approach down to a standard, practical process consisting of five main steps. Throughout the process, the best opportunities to create long-lasting value can be created at very early stage when stakeholders’ needs and project’s strengths are assessed and a long-term vision is crafted.
STEP 1: Understand stakeholders’ needs and expectations
Property development involves a multitude of stakeholders including people, businesses, and authorities. Stakeholders should be considered as 'customers' whose needs and expectations have to be successfully met, exceeded, or potentially, created in a 'blue sky' scenario.
The objective of Step 1 is to understand customers’ deeper motivations (their inner drivers, 'the why'), desired outcomes (experience, not just project’s technical features) and major issues (complexities they have to face) and figure out how these should be assessed and incorporated into the project’s vision. Developers should look at the project with the eyes of the stakeholders, understanding and focusing on what is important to them.
Consumers expect authenticity, unique experiences, and freedom of choice. Citizens look for inclusivity, opportunities for personal interaction, and professional growth. Communities expect sustainable urban districts, sense of place and respect of local culture. Elderly people need proximity to primary services. Young mid-income earners expect affordability, high-net look for luxury, families look for open green areas, students and young workers need vibrant modern social spaces and people-oriented smart technologies.
Companies look for easy access to growth drivers such as high-quality services and infrastructure, markets, technology, high-quality office buildings, and an environment that help attract and retain talents. Some global businesses look for landmark, iconic locations. Retailers expect great destinations offering great experiences for their guests and brands, and increasingly leveraging on multimedia technology. Investors expect a stable, competitive regulatory environment, together with risk-adjusted superior returns. Foreign investors look for opportunities in a transparent, business-friendly environment.
Policy makers and regulators look for social prosperity, compliance with codes and alignment with their political agenda. Sometimes they need to address issues such as lack of funds, shortage of natural resources, rapid growing demographics and immigration, pollution, or the need to improve socio-economic conditions in distressed suburban areas.
Stakeholders’ needs and expectations are dynamic, multifaceted, and interdependent - striking the right balance among them is a very complex task, requiring a long-term, holistic, multidisciplinary approach.
The goal of this initial step is to understand the problems, tasks, and issues stakeholders are trying to solve, the objectives they are trying to achieve, going 'deep under their skin' and figuring out how better real estate products could be developed in order to serve or anticipate their needs.
STEP 2: Assess project’s core strengths and competitive advantages
This step is a 'deep dive' into the project and should be carried out in parallel with step 1 to identify project’s core strengths and competitive advantages assessing their potential to become long-term solid fundamentals for the development. Well known areas that should be explored at this stage include location, history, and heritage of the site, current land-use, urban planning, and socio-economic environment.
Every location is different, but the history and heritage of the site count. Strengths and advantages can originate from proximity to business growth drivers, valuable natural morphology, landscapes, unique visual axes, valuable historic housing stock, strong traditions, culture, and identity.
Current land-use and urban planning regulations have a well-known impact on development’s time and cost and also offer opportunities. The combination of 'lean urbanism' with the availability of existing derelict areas, abandoned, burn-out buildings and land, in good locations, offer great potential for quick adaptive regeneration.
Some locations are positioned as 'natural gateway' to specific markets and regions because of their highly competitive tax regime for corporations and individuals, stable and trustworthy political and regulatory environment, affordable high-quality social services, infrastructure, and mobility.
External factors such as fast population growth, new emerging trends, and scarcity of natural resources in specific locations can drive innovation, the development of unique local know-how and clusters.
STEP 3: Meet stakeholders’ needs & expectations (creating platform & conditions for innovation)
Based on the outcomes of steps 1 and 2, opportunities can be identified when a project’s strengths and advantages are leveraged to meet stakeholders’ needs. As with product development, a 'scientific', well-structured, iterative, research-and-review approach should be adopted. Opportunities become 'real' when assumptions and decisions are positively checked with local culture, timing and the ability to deliver. Following the initial round, this iterative process should be carried out periodically at various stages throughout the life of the project as conditions change over time and plans have to be adapted accordingly.
While identifying real opportunities, our customers and the stakeholders should be put at the forefront balancing and integrating multiple resilient strategies that are well grounded in local aspects and culture.
There are some notable examples of real estate developments that are successful in meeting stakeholders’ needs and expectations. Some are based on the opportunity of reconciling rapid urban growth with affordability and inclusivity, offering freedom of choice creating diversity of accommodation, business space, and amenities. Other projects are grounded on the opportunity to preserving valuable historic housing stock, creating citizen-focused public spaces, pedestrian areas, and cycle tracks. In some cases, successful recovery from civic bankruptcy has been driven by lean urbanism applied to under-utilized buildings, land, and infrastructure. Successful retail destinations have been created bringing together top quality fashion, food, leisure, and entertainment, providing vibrant places for operators and consumers.
Likewise, some projects failed because they 'simply' aggregated standard real estate formats - which proved to be successful in the past or in other locations - without going through a structured process of understanding the specific local needs and strengths. Some projects failed in the integration of humans, the creation of social capital and sense of place. Other projects were driven by a clear vision for the future and a strong strategic plan but were poorly executed and failed in delivering great operations, marketing, and communication.
STEP 4: Craft long-term vision and strategic plan (creating future-resilient real estate assets)
When real opportunities are identified and tested, the project’s vision and strategic plan can be created. The vision should be bold, clear, and simple, able to communicate compelling value propositions for each stakeholder. The strategic plan should describe how the project is best positioned to meet or exceed each of the individual stakeholders’ need and expectation. The plan should integrate the various opportunities identified, balancing the interests of all stakeholders, defining success and exit strategies. Well-balanced alliances among the various components of the project should be created, addressing the external and internal socio-economic factors. The strategic plan should be flexible, 'alive', and able to evolve along with changing needs. The plan should factor in soft strategies - 'the human experience' - with hard strategies - 'built assets and technologies'. Thinking long-term, planning for on-going adaptation and committing to greatness in every aspect of the project should be the guiding principles at this stage.
STEP 5: Structure execution plan and partnerships (creating conditions for adaptability & collaboration)
The objective of this final Step is to identify and pull together all the ingredients for a successful execution of the vision and strategic plan. These include shareholders’ structure, master plan, sizing of the various uses, key partners and 'anchor' operators, infrastructure needs, economic and financial viability.
A culture of accountability and a high-performing, multidisciplinary team should be built to orchestrate the development process and dynamically adjust its trajectory as conditions change over time. Stakeholders should be kept proactively engaged from the beginning in order to forge a widespread consensus and support from consumers, citizens, communities, businesses, interested groups, and officials. Unique, innovative contents, and experiences should be integrated into the project, forging alliances with top quality 'anchor' operators and sponsors that contribute to create offer and demand for the project. The power of great architecture should be unleashed creating recognizable attractive buildings, great public spaces, areas for socialization, and high-quality public realms - vibrant places for retailers, sustainable cost-effective green buildings and infrastructure, human-centered smart technologies.
Operational, marketing and communication excellence, outstanding services programs and events, stakeholders care and involvement should also be incorporated in the execution plan to guarantee success of the project during and following completion of the development phase. As with products, great 'after sale' care is key also for property.