THE REAL ESTATE INDUSTRY MUST FIND NEW GROUND TO SATISFY CHANGING TENANT DEMANDS. Chan Kim, Co-Director INSEAD Blue Ocean Strategy Institute

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1 THE REAL ESTATE INDUSTRY MUST FIND NEW GROUND TO SATISFY CHANGING TENANT DEMANDS. Chan Kim, Co-Director INSEAD Blue Ocean Strategy Institute

2 Drive for Sustainability THE WORLD IS CHANGING Technology Advances Urbanization Need for Well-being Political Shifts Economic Pressures

3 KEEPING PACE WITH CHANGE

4 THE BEYOND THE BRICK TREND COMMODITIZED ME TOO OR TRUE DIFFERENTIATOR? AMONG COMMERCIAL DECISION-MAKERS 56% AGREE TRADITIONAL BRICK AND MORTAR OFFERINGS ARE NO LONGER SUFFICIENT TO DRIVE RELOCATION, RETENTION AND RECOMMENATION

5 TO SUCCESSFULLY OUTPERFORM THE MARKET CURATE THE RIGHT TENANT EXPERIENCE We are no longer just designing physical environments. We are designing the workplace experience.

6 WHAT DOES THIS LOOK LIKE IN PRACTICE? FROM MARKET SPACE TO PREMIUM PLACE

7 CREATING THE TENANT EXPERIENCE MORE THAN AN ACT OF WILL, INTENTION OR EFFORT It is a matter of: 1. Determining what tenants actually value; 2. Consistently delivering those services and experiences in relevant and differentiating ways; and 3. Communicating effectively to ensure the right audiences are aware of them.

8 THE INPUTS DATA NOT GUESSWORK QUALITATIVE: Expectations, motivations, perceptions and desires which drive behavior What extraordinary means in the minds of tenants Elements of a world-class experience QUANTITATIVE: Validated growth segments based on behavioral and perception malleability Engagement impact of experiential programming and messaging Attributes which drive preference, loyalty, premiums and long-term vibrancy

9 THE GOAL: FROM MARKET SPACE TO PREMIUM PLACE Why tenants will willingly pay above market rate What tenants really care about and what drives their behavior Benchmarking is the best way to get to average

10 EXPERIENTIAL BUILDING BLOCKS FROM SPACE TO PLACE DIFFERENTIATION: Point(s) of experiential distinction (relates to demand and premiums) RELEVANCE: How an experience maps to tenant wants and needs (relates to market preference) Experiences are built in a specific progression ESTEEM: How tenants regard the experience (relates to perceptions and beliefs) KNOWLEDGE: The extent to which tenants understand the experiential benefit (relates to retention)

11 WHY DOES THIS MATTER? EXPERIENTIAL POSITIONING CHANGES OVER TIME STRENGTH STATURE

12 What do you NEED TO KNOW AND DO that you DON T know and do today? 13

13 KNOW THYSELF HAVE YOU: 1. Identified your ideal tenant profile? 2. Defined a brand promise that differentiates you in your market and aligned the organization around it? 3. Mapped your tenant experience and determined how your promise should be delivered across each stage? 4. Outlined the specific employee behaviors your tenant experience requires and do you regularly reinforce them? 5. Measured the quality, strength and stature of your tenant experience?

14 KNOW THY TENANTS DO YOU KNOW: 1. What your tenants want, need and expect? 2. Your market differentiators and how to demonstrate them? 3. How tenants rate the experience you provide relative to what they value most and what the competition offers? 4. The key interactions tenants have with you and what is expected at each point? 5. The factors that are predictively shown to drive tenant preference, loyalty and rent premiums?

15 ACTIONABLE INSIGHTS How might such insights affect risk profiles, lease-up timetables, rent premiums, retention rates, advocacy levels, and overall asset value?

16 REAL ESTATE BLUE OCEAN Drive demand among most desirable tenants Programming shapes markets, secures loyalty and commands premiums Mitigate controllable risks across lifecycle Assets valued as the finest of their kind (and the fullest) REAL ESTATE RED OCEAN Full of competition, special deals, whimsical amenities, unmet expectations, and empty buildings Decreasing retention and profitability as markets become more commoditized

17 TENANT EXPERIENCE A GOLDEN RULE VARIATION Creating a valuable and valued tenant experience is built on a simple principle: Create for others what they would like to create for themselves In other words, know what your tenants want, need and expect and, then, deliver it in meaningful, memorable ways.

18 MOVE FROM WORK PLACE Focus on people Curate signature touchpoints Create communities Improve well-being Ensure work-life balance Deliver a differentiated experience TO WORK HOW

19 UNDERSTANDING TENANT TYPOLOGIES

20 TENANT CULTURE THE DNA OF WORKPLACE STRATEGY

21 PUTTING CULTURE TO WORK

22 GIG ECONOMY AND MICRO-WORKERS SHARING ECONOMY CROWD SOURCING EXPERIENCE OVER THINGS ECONOMY CORPORATE ACTIVISM POPULISM AND NATIONALISM

23 HUMAN-CENTRIC FOCUS LIFE STAGE SHIFTS ISSUES OF AGING GO-BILITY

24 UX CORPITALITY SPACE FUSION: RETAIL & HIGHER ED COWORKING AS A NEW AMENITY COMMUNITY MANAGERS

25 PREFERRED TYPE OF WORKPLACE EXPERIENCE TRADITIONAL FOUR WALLS When searching for space I am interested in a traditional office environment with good service and amenities for a reasonable rent. BEYOND THE FOUR WALLS I am looking for a beyond-the-four-walls experience including workplace and wellness programs, business services, networking, etc. UTILITY (HIERARCHICAL) TASTEMAKER (WEB)

26 TOUCHLINE FRAMING QUESTIONS CREATING OPPORTUNITIES FOR DIFFERENTIATION 1. What are the key touchpoints across the recruitment-torenewal lifecycle? 2. What would tenants typically experience elsewhere at each touch point? 3. What are competitors not doing/delivering at these defining moments?

27 TOUCHLINE FRAMING QUESTIONS INTEGRATING INTO THE LIVES OF YOUR TENANTS 1. How can you differentiate your tenant experience at each touch point? 2. Where can your organization help in new and different ways? 3. What can you do in each interaction to expand your value? 4. What design features, experiential elements or signature touch points will your tenant experience employ? 5. What employee behaviors, communication practices and/or business processes are required to deliver your tenant experience?

28 CUSTOMER TOUCHLINE EXAMPLE

29 WHAT THIS MEANS TO YOU BUILD A TENANT EXPERIENCE BASED ON WHAT THEY VALUE MOST PROVIDE CLARITY OF TASK; FOCUS BEHAVIOR ON KEY PRIORITIES, DIFFERENTIATORS AND METRICS SAY AND DELIVER THE RIGHT THINGS TO THE RIGHT PEOPLE DRIVE CHOICE, SECURE LOYALTY AND COMMAND PREMIUMS ESTABLISH PLATFORM FOR SUSTAINABLE GROWTH AND EXPANSION 30

30 CONTACT INFORMATION BRIGHTLINE STRATEGIES Michael H. Broder President & CEO 44 Canal Center Plaza, Suite 300 Alexandria, VA Office: x101 Cell: HOK Kay Sargent Senior Principal Director of WorkPlace 3223 Grace Street, NW Washington, DC Office: Cell: