in

FRESH TAKES ON BIG IDEAS

Historically, residential real estate hasn’t been known for strong, recognizable brands—but that’s starting to change. A variety of hotel, luxury-car, and fashion brands have entered for-sale residential property. And now, there are developments branded around entertainment, big-box retail, and gym concepts, both for sale and for rent.

Why do brands matter in real estate? If buyers or renters have faith in the brand, it can derisk their purchase or rental because they have a better understanding of the quality and experience that comes with living in that building. For real estate owners and operators, strong brands can help them attract residents who are more likely to love living in this branded property and also more likely to stay or, if they move, remain within the brand family out of a sense of loyalty.

When I talk about quality and experience, I mean finishes and amenities, of course. But this also extends—crucially—to the kind of customer experience (CX) that promotes loyalty. One essential part of customer experience is great digital infrastructure. Are maintenance requests easy for tenants to make through an app, with fast response times, for example? Can an apartment be customized with smart-home technology so that a fresh pot of coffee is ready when the tenant wakes up and the water heater is timed to the tenant’s specific usage? Experiences—and the operations that underpin them—will be informed by specific brand promises and the expectations they raise.

The brand promise will also determine how to balance technology, such as the power of AI, with the warmth of personalization and emotional intelligence. Some brands will be more self-serve, while others will have a more human touch. But overall, providing first-in-class customer experience doesn’t require a brigade of additional personnel anymore. We’ve seen real estate companies automate more than 70 percent of interactions with residents, using AI companions and other tools, with good results.

Real estate companies can also think deeply about what their brands represent in terms of community. People want to live somewhere that fits their lifestyle and values and that provides a sense of belonging. Real estate companies tell us that one of the biggest contributors to tenants staying in a leased apartment is if they know other people in the building. As companies think about brands, they can contemplate how to facilitate bonding in the communities they build.

The need for social outlets and activities may be even greater in a work-from-home world. We worked with an operator that was thinking about how to bring services that people usually get in an urban center—such as haircuts, dog grooming, and lunch from food trucks—to their suburban locations now that more of their tenants were working from home. The residential community can become a place to derive meaning and forge social bonds. That sense of belonging can engender loyalty that transcends points schemes. In a way, it’s the ultimate loyalty program.

“We’ve seen real estate companies automate more than 70 percent of interactions with residents, using AI companions and other tools, with good results.”

To get started on building strong real estate brands, the first step for owners and operators is to ask, “Whom am I actually trying to serve?” The answer should go beyond “a renter” or “a buyer.” It should drill into lifestyle preferences and values—of course, in a way that is suitable and feasible for the location.

The second step is to think deeply about what matters to this type of resident. What problems can the building owner help solve, and where are the opportunities to delight the resident in ways that really resonate?

The third step is implementing a system of data and measurement. Real estate companies need to understand the ROI of each investment. For example, were tenants with 200-square-foot bedrooms more likely to renew than those with 180-square-foot bedrooms? Getting this data is one of the biggest challenges for the real estate industry today. If you don’t measure it, you can’t act on it.

In ten to 15 years, the market is going to see more new developments with national or international real estate brands, and many will be linked to existing retail, wellness, or fitness brands. There will also be more brand synergies, where residents receive targeted offers or deals because they live in a building within a brand or brand family. Strong brands will attract like-minded residents, the most satisfied of whom will spread the word, creating a marketing flywheel. In a competitive environment for capital, assets that improve the tenant experience will stand apart.

All of this will depend on modern tech stacks and data infrastructure that cannot be built overnight. Leading companies are thinking through brand architecture, asking questions such as, “Do I have multiple products under my umbrella brand?” And they are investing in tech stack transformations. Look out for some exciting, boundary-pushing built-environment experiences ahead!

ABOUT THIS AUTHOR

Alex Wolkomir is a partner in McKinsey’s New York office.

MORE FROM THIS AUTHOR

McKinsey insights for the fall

What questions are CEOs asking about generative AI? What does it take to be a digital leader? What might the future hold for the space economy, the travel industry, and organizational health? McKinsey’s experts will rethink these and other crucial business and leadership topics when this column returns in September.