2 min read 6 Oct 21
Manufacturers have long known that providing a service can be more profitable than making the original product. The aeroengine maker Rolls Royce, for example, generates most of its profits from maintaining engines, rather than building them. Now, the transformation of real estate from product to service is underway, supported by technology and accelerated by the COVID-19 pandemic, which has precipitated seismic shifts in the way people live and work.
Certainly, the merger between workplace and home – combined with an increasing focus on healthy and flexible living – has altered the requirement from real estate. Buildings must provide services and experience, beyond simply desk space in an office building, for example.
In Seoul, our Centropolis Towers provides the tools people need to work at their best, while nurturing creativity. This includes collaborative working space; wellness areas, where workers can exercise and recharge; a nursing room; roof terrace; coffee bars and a food market. Occupiers are increasingly focused on sustainability, so recycling services and electric car charging points are also paramount.
Landlords are therefore required to become more hands on, and are looking to smart technology solutions to enhance customer experience, and improve buildings’ performance. Sensors, for example, can be deployed to perform simple tasks, such as turning off the lights in an empty room. Artificial intelligence can be exploited to manage heating, ventilation and air conditioning systems. At Centropolis, an air cleaning system kicks in on demand.
Facial recognition software provides secure, hands-free access to Centropolis’s multiple storeys. Post-COVID, we believe that services like this have the potential to become more widely adopted. Technology that allows employees to reserve desk and meeting space is also helping to facilitate new ways of working, as people are drawn back to offices.
The transition from product, to service provider will require landlords to evolve their skill set to understand occupiers’ needs, and respond quickly. Investing in occupier-experience platforms, which host a building’s occupier-facing technology, services and amenities all in one place, can provide a valuable resource, by gathering fundamental information about a building’s use.
Landlords can optimise this business model by building a team of strategic partners with operational expertise, to deliver a premium experience. Developing a strong brand can also help to define a service provider’s competitive edge.
We believe that the synergy between service and real estate denotes an integral, long-term feature of the market, and will be an increasingly pivotal factor in attracting and retaining tenants.
The views expressed in this document should not be taken as a recommendation, advice or forecast. The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance.