Urban Regeneration and Real Estate Development: Turning Real Estate Assets into Engines for Sustainable Socio-economic Progress (PoliMI SpringerBriefs) 3030676226, 9783030676223

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SPRINGER BRIEFS IN APPLIED SCIENCES AND TECHNOLOGY  POLIMI SPRINGER BRIEFS

Andrea Ciaramella Marco Dall’Orso

Urban Regeneration and Real Estate Development Turning Real Estate Assets into Engines for Sustainable Socio-economic Progress

SpringerBriefs in Applied Sciences and Technology PoliMI SpringerBriefs

Editorial Board Barbara Pernici, Politecnico di Milano, Milano, Italy Stefano Della Torre, Politecnico di Milano, Milano, Italy Bianca M. Colosimo, Politecnico di Milano, Milano, Italy Tiziano Faravelli, Politecnico di Milano, Milano, Italy Roberto Paolucci, Politecnico di Milano, Milano, Italy Silvia Piardi, Politecnico di Milano, Milano, Italy

More information about this subseries at http://www.springer.com/series/11159 http://www.polimi.it

Andrea Ciaramella · Marco Dall’Orso

Urban Regeneration and Real Estate Development Turning Real Estate Assets into Engines for Sustainable Socio-economic Progress

Andrea Ciaramella Department of Architecture, Built Environment and Construction Engineering Politecnico di Milano Milano, Italy

Marco Dall’Orso Milano, Italy

ISSN 2191-530X ISSN 2191-5318 (electronic) SpringerBriefs in Applied Sciences and Technology ISSN 2282-2577 ISSN 2282-2585 (electronic) PoliMI SpringerBriefs ISBN 978-3-030-67622-3 ISBN 978-3-030-67623-0 (eBook) https://doi.org/10.1007/978-3-030-67623-0 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

“Intelligent” urban regeneration can be an extraordinary driver of social and economic progress for communities. In addition to enhancing the quality of buildings and infrastructure in the public realm, “intelligent” urban regeneration also contributes to the bridging of cultural and social gaps—increasing accessibility and affordability of public services and education, creating opportunities for people and reinvigorating distressed communities.

The Objective Is it possible to define a “standard” approach that guarantees sustainable success of urban regeneration programmes in terms of social and economic output? Moreover, is it possible to turn an unsuccessful initiative around, alter its trajectory, “overcome gravity” and direct it towards a positive outcome? In an increasingly selective, rapidly changing and unpredictable market context, these are some of the most pressing questions in the minds of private and public stakeholders and, increasingly, of the general public. The book authored by Marco Dall’Orso and Andrea Ciaramella offers answers to many of these questions guiding the reader through a series of structured reflections. The stated objective from the authors is to provide a friendly, evergreen and flexible “thinking methodology” that can serve as a reference guide to address a wide range of initiatives. The result is an original contribution in which academic and business experiences are combined to reveal an innovative approach to value creation.

The Context The book starts with a sharp analysis of the main trends and disrupting events that are driving change across communities and industries. The authors highlight how demographic shift, urbanisation, rapid developments in technology, changing consumer v

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habits, stringent environmental and human health requirements are having significant implications on the alignment, or misalignment, between supply and demand of urban regeneration programmes. The consequence is a desire, or better a need, to anticipate and meet stakeholders’ expectations by designing and delivering innovative, agile, better programmes, which are flexible, sustainable and resilient over time. The scale of this challenge is such that the successful delivery of urban regeneration schemes often requires the creation of extraordinary alliances between public and private partners. Furthermore, the magnitude and rapid rate of change underway are so significant that, in the years ahead, long-held standard approaches adopted in the past will no longer serve future purposes.

The Challenge When we put urban regeneration into the wider context, we realise that global trends and challenges, including unforeseeable disruptive events, force an alternative and agile thinking attitude. One key complication that must be resolved is the substantial gap between the (lack of) speed of delivery of large regeneration schemes and the unprecedented high speed of change. The book is rich with examples and full of thought-provoking ideas on how to mitigate this gap. Industrialisation of processes is one of the strategies that can help improve time-to-market—it is not, however, enough. To ensure the sustainability of a regeneration programme in the long term, it is mandatory to adopt principles of flexibility in all phases of the initiative. Flexibility must be part of a sound leadership culture and should be pursued very early in the process. As business conditions shift from familiar territories to difficult-to-predict, rapidly changing scenarios, the main challenge going forward is to guarantee better alignment between supply and demand: creating innovative, flexible programmes that can evolve over time to meet the changing needs of the various stakeholders involved.

The Opportunity Building upon the observations on context and challenges, the key concept that inspires the entire book is that human-centred regeneration can be an engine that drives growth of urban areas and a key supporting factor behind socio-economic revitalisation, whilst also increasing broad-based prosperity and attractiveness. The book explains in detail why purely physical attributes of cities and urban areas are only some of the components needed to trigger successful urban regeneration. As would be expected, a prosperous community consists also of other crucial ingredients such as social, cultural and behavioural aspects. One of the key reflections offered by the book is the opportunity of considering the “built environment”, individual buildings and urban areas, as not only mere “square meters”, not even “places”

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but as useful "means" to promote socio-economic progress and environmental protection. The authors shed light on the opportunity to craft unique urban regeneration programmes that are an integral part of a wider socio-economic ecosystem and deliver shared value to all stakeholders. In addition, the authors encourage the built environment sector to bridge the gap with other industries, invest in research and development, and seize opportunities through innovation by adopting an "open" approach based on collaboration, sharing and technology transfer.

The Approach What is the most effective approach to seize this opportunity? The authors propose a logical seven-STEP framework that, mediating “design thinking” and business strategy concepts, represents a useful guide when dealing with urban regeneration programmes. One of the key findings is that creating a vibrant urban ecosystem—an inclusive, diverse and lively community where people want to live and lay roots— requires a gradual shift of focus from “built-environment investment” to “socioeconomic output”. The authors suggest that rather than merely pursuing oftenunrealistic growth targets directly through major, capital-intensive infrastructure and real estate projects, cities, towns and villages should concentrate on their local culture, heritage, traditions and unique strengths and define strategies to turn them into valuable assets. With this approach, the built environment is a means—one of the ingredients needed to achieve superior returns—and not an end in itself. Focusing on local competitive advantages and pursuing socio-economic outputs can potentially deliver a more resilient, long-term exponential benefit. This is feasible because of the positive impact generated by the creation of a virtuous context that drives sustainable social and economic progress. The authors conclude by analysing other complementary “soft” factors vital to the success of urban regeneration programmes. One factor is the need to embrace a modern leadership style and set up a highly effective multidisciplinary team. The other is the need to create—and effectively communicate—value propositions that meet the expectations of key stakeholders as well as deliver tangible benefits that positively influence the lives of entire communities.

Acknowledgements To my colleagues and students, from whom I learn something every day. — Andrea Ciaramella To my family, with love and gratitude. — Marco Dall’Orso

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About the Authors Andrea Ciaramella is an Architect and Associate Professor in Architecture Technology within the Department of Architecture Built Environment and Construction Engineering at Politecnico of Milan; since 2003, he is fellow member of the Royal Institution of Chartered Surveyors. He carries out research and consultancies in the field of management of buildings and real estate assets, with particular reference to re-development strategies. He is director of the Master “Real Estate Management” at Politecnico di Milano and co-director of Executive Program in Real Estate at MIP Graduate School of Business; he is also managing several postgraduate programmes and continuous professional development programmes for executives and professionals. Marco Dall’Orso is highly experienced and entrepreneurial in designing and executing innovative urban regeneration and real estate development strategies that drive sustainable socio-economic progress. He can effectively liaise and negotiate at the highest levels in complex multiple-stakeholder environments. Marco has over 20 years of C-level experience with leading real estate development and asset management organisations. He holds a Civil Engineering degree from the University of Genoa, a Master’s of Science from the Imperial College in London and an MBA from IMD in Lausanne. He is author/co-author of several papers and two books, lecturer at postgraduate university courses and member of the Royal Institution of Chartered Surveyors. Milano, Italy

Andrea Ciaramella Marco Dall’Orso

Contents

1 “Intelligent” Urban Regeneration: Global Trends and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Social, Demographic and Environmental Trends . . . . . . . . . . . . . . . . 1.2 Urbanization: Concentrate or Distribute? . . . . . . . . . . . . . . . . . . . . . . . 1.3 Built Environment and Emerging Needs: What Is Next? . . . . . . . . . . 1.4 Building Trust and Public-Private Alliances . . . . . . . . . . . . . . . . . . . . 1.5 New Challenges: Health, Safety and Sustainability . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Looking for Flexibility: Dynamic Real Estate . . . . . . . . . . . . . . . . . . . . . 2.1 Flexibility as a Strategic Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Context (R)evolution and Alignment of Physical Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2 From Predictive Models to Agility and Adaptability . . . . . . . 2.1.3 “Change” and a New Approach to Cope with It . . . . . . . . . . . 2.2 Flexibility in the Different Stages of Real Estate Development . . . . 2.2.1 Flexibility at Urban and Environmental Planning Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Flexibility: Guiding Principle in Design and Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.3 Operational and Commercial Flexibility . . . . . . . . . . . . . . . . . 2.2.4 Real Estate Assets and Corporate Performance . . . . . . . . . . . 2.2.5 Strategic Real Estate Management: Opportunities for All . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Adapting to Change… or Driving Change? An Open-Source Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 The Traditional Approach to Development . . . . . . . . . . . . . . . . . . . . . 3.1.1 Typical Traits of the “Traditional” Real Estate Sector . . . . . . 3.1.2 A Centralised, Know-How-Based and Closed Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4 7 10 12 14 17 17 17 19 20 21 22 23 23 24 25 26 27 27 27 28 ix

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3.1.3 Limitations of the Approach in the Current Market Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 A New Approach for a New Market Context . . . . . . . . . . . . . . . . . . . 3.2.1 How to Win in New Market Scenarios . . . . . . . . . . . . . . . . . . 3.2.2 Leveraging Data and Machine Intelligence . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 How Can We Drive Innovation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Innovation as a “Total Solution”: The Business Model Revolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Experimentation, Openness, Flexibility and Ambition . . . . . . . . . . . 4.3 Recognising Good Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Innovation: Putting People at the Centre . . . . . . . . . . . . . . . . . . . . . . . 4.5 Intercepting and Adopting “Good Innovative Solutions” . . . . . . . . . . 4.5.1 A Digital Ecosystem for Sourcing Good Innovative Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.2 Creating Conditions for Scaling up Good Innovative Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 Urban Areas: A Fertile Ground for Innovation . . . . . . . . . . . . . . . . . . 4.6.1 Creating a State-of-the-Art Innovation Ecosystem . . . . . . . . 4.6.2 Driving Progress in Communities Through Innovation . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 31 31 33 35 37 37 39 40 41 43 44 46 49 50 52 53

5 Balancing Physical and Socio-Economic Attributes . . . . . . . . . . . . . . . . 5.1 The Socio-Economic and Built Environment Dimensions . . . . . . . . 5.1.1 “Soft” and “Hard” Factors in Real Estate Development . . . . 5.1.2 Soft and Hard Factors in the Design and Construction Phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.3 “Soft” and “Hard” Factors in the Post-development Operational Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Virtuous Trajectories and Negative Spirals: Value Creation or Degradation in Urban Regeneration Programs . . . . . . . . . . . . . . . . 5.2.1 Prosperity and Degradation of Real Estate Projects and Urban Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.2 Creation of “Sense of Place” and Community . . . . . . . . . . . . 5.2.3 The Territory as an Ally for Real Estate Development . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55 55 55

60 63 65 68

6 Opportunities to Create Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Understanding and Integrating the Value Chain . . . . . . . . . . . . . . . . . 6.1.1 Value Creation Potential in the Development Stages . . . . . . . 6.1.2 Vision, Strategy and Product Design . . . . . . . . . . . . . . . . . . . . 6.1.3 Design and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1.4 Marketing, Services and Management . . . . . . . . . . . . . . . . . . . 6.2 Value Creation Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Prototype, Test and Review . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69 69 69 71 72 74 76 76

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6.2.2 Join Forces and Forge Consensus . . . . . . . . . . . . . . . . . . . . . . . 6.2.3 The Three “Cs”: Pursue High Quality on All Dimensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.4 Look for Gradients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Real Estate as a “Product” or “Service”: A Reference Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Creating the Vision and the Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1.1 A Possible Reference Framework . . . . . . . . . . . . . . . . . . . . . . 7.1.2 Why Do We Do What We Do? Values and Motivations . . . . 7.2 STEP 1: Identifying Strengths and Competitive Advantages . . . . . . 7.2.1 Building the Project on Solid “Fundamentals” . . . . . . . . . . . . 7.2.2 Project Fundamentals and Evolution of the Scenarios . . . . . . 7.3 STEP 2: Understanding Customers and Stakeholders . . . . . . . . . . . . 7.3.1 Knowing Your Customers and Stakeholders . . . . . . . . . . . . . . 7.3.2 Investing Where Customers and Stakeholders Perceive Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 STEP 3: Identifying Concrete Opportunities to Create Value . . . . . . 7.4.1 Matching Strengths with Stakeholders’ Needs . . . . . . . . . . . . 7.4.2 Identifying Real Opportunities for the Project . . . . . . . . . . . . 7.5 STEP 4: Creating a Simple, Clear but Achievable Vision (and Its Concrete Purposes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5.1 Creating a Vision, Defining Its Purposes and Motivations (Why We Do It) . . . . . . . . . . . . . . . . . . . . . . . 7.5.2 Communicating the Vision Effectively . . . . . . . . . . . . . . . . . . 7.6 STEP 5: Defining Positioning and Objectives of the Initiative . . . . . 7.6.1 Strategic Positioning in the Markets of Choice . . . . . . . . . . . 7.6.2 High Level Objectives: Let Us Make the Vision Real . . . . . . 7.7 STEP 6: Benefits and Competitive Advantages Offered to Individual Stakeholders (the Value Propositions) . . . . . . . . . . . . . . 7.7.1 Defining Benefits for Stakeholders . . . . . . . . . . . . . . . . . . . . . . 7.7.2 Finding the Correct Balance Among Multiple Expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 STEP 7: Defining Strategies and Action Plans . . . . . . . . . . . . . . . . . . 7.8.1 Creating the Executive Framework . . . . . . . . . . . . . . . . . . . . . 7.8.2 Execution Is King: Creating the Executive Strategic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 The Importance of a High Performing Team: Quality, Diversity and Alignment of Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Leadership and Teamwork . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1.1 Leadership in Real Estate Development . . . . . . . . . . . . . . . . . 8.1.2 The Importance of Individuals and the Importance of the Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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77 78 81 83 85 85 85 87 88 88 89 90 90 92 93 93 94 96 96 98 98 98 99 100 100 101 102 102 103 105 107 107 108 110

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8.2 Share Values, Goals, Challenges and Successes . . . . . . . . . . . . . . . . . 8.2.1 Creating Team Spirit, Identity, Values and Shared Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2.2 Sharing Risks and Rewards of the Initiative . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Positioning and Marketing of Real Estate Products . . . . . . . . . . . . . . . . 9.1 Market Positioning: Leveraging Your Very Own Skills to Create Unique Value Propositions . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.1 Competences, Competitive Advantages and Available Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.2 Choosing Target Markets: Improving the Present or Creating the Future? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.3 Understanding and Learning from Your Target Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1.4 Creating Value Propositions: Which Distinctive Aspects? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 Marketing, Branding and Communication . . . . . . . . . . . . . . . . . . . . . . 9.2.1 Communicating Value and Benefits for Stakeholders . . . . . . 9.2.2 Managing Company and Project Brands . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113 114 115 116 117 117 118 119 120 122 126 126 128 131

Chapter 1

“Intelligent” Urban Regeneration: Global Trends and Challenges

1.1 Social, Demographic and Environmental Trends Some demographic and social trends, on a global scale, are bound to have a strong impact on the built environment. In particular, it is likely that in 2030 (Neri 2013), when the world population will have reached approximately 8.3 billion people, four demographic trends will affect the international political and economic situation more than others. These trends are: – aging, a global change that will characterize both the West and most of the developing countries; – a still significant—but decreasing—number of states and companies with a very young average age population; – migratory flows, which will increasingly be a cross-border issue; – increasing urbanization, a global change, which will stimulate economic growth but could affect new tensions caused by the scarcity of water and food resources. Countries with a high population aging rate will face a tough battle to maintain their living standards. The demand for skilled and unskilled labour will spur migration phenomena. Some of these trends have obvious consequences also in the built environment. According to the aforementioned report by the Italian Institute of Strategic Studies, “Due to rapid urbanization in developing countries, the volume of infrastructure addressed to housing, offices and transport over the next 40 years could equal the entire volume of the same type of infrastructure made to date in the history of the world”. From the social point of view, it is appropriate to be able to grasp the cultural differences between generations. The digital generation, also known as generation Y or millennials (those born between 1980 and 2000) is growing; the oldest will turn 40 in 2020; it is a generation © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_1

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called new technology adopters, focused on career, family, home ownership and technologies. Generation Z, that of the so-called Internet Generation (born after 2000), has very different characteristics: it is a population of natives accustomed to mobility and social networks; this connotes its aptitude for mobile work, networking, a life made of connections that inspires its education and behaviour. These Y and Z generations will be connected globally, thanks to the network, more than previous generations were. The development of solutions and applications based on the use of mobile platforms significantly characterizes this population, which grows and develops its activities getting used to obtaining immediate answers. The industrialized world is aging significantly; the old baby boomers have reached retirement age but constitute, by culture, propensity to consume. Their lifestyle, what Americans call unretirement, often associates the retirement phase with starting a new part-time job or new business ventures. In the US, 1 in 6 people (about 46 million people) are over the age of 65, in Europe 1 in 5. Younger baby boomers (people between 55 and 65) start new business activities; the share of 55-year-olds at work is very significant and determines an increase in the demand for devoted services and products. Over the last 10 years, women have seen their presence in the world of work increase, nevertheless the gender pay gap is still a reality: in 2018, in the EU-27 as a whole, women were paid, on average, 14.8% less than men, while the difference was 15.9% for the euro area. It is estimated that the difference in remuneration with respect to men will gradually decrease until it disappears.1 Technology and its spread also play a decisive role in the development of urban environment. The growth of technologies that foster communication and networking have profoundly transformed the activities defined as “collaborative”; forums, virtual communities and other relationship systems are increasingly used to make decisions. The network is increasingly a free infrastructure, able to eliminate physical barriers, limit constraints, change the boundaries between companies/organizations and their customers, partners and suppliers. This free access to information involves an important growth in terms of transparency; the success of many initiatives depends on the involvement of people involved at different levels, with the gradual elimination of barriers and hierarchies. The possibility of sharing information online, aggregating information useful to demand, disseminating good practices regarding products and services, highlighting “good deals”, affects a new approach to markets. The dissemination of information allows consumers to be increasingly informed and aware; as a consequence, the possibility of influencing choices with traditional marketing techniques decreases. Technology is crucial, but even more so are the people who know how to make good use of it: finding the right people, at the right time, in the right place is the key to success in small business marketing.

1 Source:

Eurostat, Wages and labour costs. Data extracted in Auguast 2020.

1.1 Social, Demographic and Environmental Trends

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From an environmental point of view, awareness of the impact that the built environment has on the environment is growing globally. Cities consume resources and energy, and then return them to the environment in the form of waste, pollution and land consumption. Today, urban centres are responsible for consuming 3/4 of natural resources and more than 70% of global CO2 emissions.2 All this means that appropriate policies and practices aimed at environmental improvement in the city are fundamental and the expected results are potentially high, thanks also to investments in infrastructures and technologies useful for maximizing environmental benefits, but also the quality of life of people. A city suitable for citizens, which guarantees them excellent services, a reduced consumption of resources and energy, the development of a new economy and innovative governance models appears to be an inescapable objective.3 But what are the main environmental problems to be faced in the city? In addition to the emission of greenhouse gases, there is certainly the management and disposal of a huge amount of waste, a high consumption of drinking water and energy, traffic and finally land consumption. The rate of urban growth and extreme land use drastically reduce the availability of green spaces. Many specialists believe that a modern and thoughtful urban planning approach must take into consideration the natural context in which an inhabited centre is located and aim to meet the need for green areas, creating real lungs dedicated to the health of citizens and that of the city. In recent years, programs aimed at encouraging urban forestry have spread. The term “urban forestry” defines a discipline that deals with the study and development of greenery in urban areas. This definition recalls the natural connotation of urban greenery and claims its presence in the city. Of course, it is important not only to design and develop new green areas, but also to enhance the existing ones and ensure that citizens can re-appropriate them. Urban forestry can take shape through different solutions: urban gardens, parks and public gardens, roofs and green facades. In the city, any space can be transformed and made greener, the avenues can become green corridors, connecting lines between parks, gardens and woods, which can develop both inside and around the cities. Of course we must be aware that the balance of an urban system cannot be discrete from a multiplicity of functions, which in some cases make it difficult to balance the environmental quality and the conditions for growth (think of lighting), some of the which find their rightful place within urban centres). In some cities, the principle has been affirmed that “whoever consumes pays”, and therefore “whoever pollutes, plants trees”, thus combining the need to expand green spaces to improve the quality of city life and the growing interest of companies to undertake a voluntary path towards environmental sustainability. 2 Pranab

K. Roy Chowdhury, Jeanette E. Weaver, Eric M. Weber, Dalton Lunga, St. Thomas M. LeDoux, Amy N. Rose & Budhendra L. Bhaduri (2020) Electricity consumption patterns within cities: application of a data-driven settlement characterization method, International Journal of Digital Earth, 13:1, 119–135. 3 Hens, L. The challenge of the sustainable city. Environ Dev Sustain 12, 875–876 (2010). https:// doi.org/10.1007/s10668-010-9259-3.

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1.2 Urbanization: Concentrate or Distribute? Over the past 60 years we have seen an urbanization process that has developed very rapidly. In 1950, more than two thirds (70%) of people around the world lived in rural settlements and less than one third (30 percent) in urban settlements. In 2014, 54% of the world population was essentially settled in urban centres.4 Globally, as of 2007, for the first time in history, the global urban population has surpassed the global rural population. According to the United Nations World Urbanization Prospects report (The Department of Economic and Social Affairs of the United Nations Secretariat, 2014), the urban population is expected to continue growing, so that by 2050 the world will be a third rural (34%) and 2/3 urban (66%), essentially the opposite of the distribution of the rural-urban population of the mid-twentieth century. The growth of cities is particularly important. In 1990 there were 10 cities with over 10 million inhabitants. These “megacities” were home to 153 million people, representing less than 7% of the global urban population. Today, the number of megacities has almost tripled (there are 28), the population has grown to 453 million, and these agglomerations now represent 12% of the world’s urban areas. Tokyo is the largest city in the world with an agglomeration of 38 million inhabitants, followed by Delhi (25 million), Shanghai (23 million) and Mexico City, Mumbai and São Paulo, with approximately 21 million inhabitants. By 2020, Tokyo’s population is set to decline, although it will remain the largest agglomeration in the world with 37 million inhabitants, closely followed by Delhi, whose population expects rapid growth (36 million). While Osaka (Kinki Major Metropolitan Area) and New York-Newark were the second and third largest urban agglomerations in the world in 1990, they are projected to be 13th and 14th respectively by 2030. This progressive urbanization is transforming global demographics but above all creating proximity needs for digital services concentrated in all metropolitan areas worldwide. More than two billion people are expected to migrate to major cities by 2035, creating as many as 50 major urban metropolitan hubs that require a dense interconnected fabric. Some cities have invested heavily in programs and projects to foster this interconnection. Singapore is considered the city that occupies first place among the “smart cities” in the world; in the Republic of Singapore there is no aspect of urban life that is not monitored through sensors (supplied, among other things, by private companies) capable of processing a huge amount of data, from parking lots, to healthcare, passing through disposal of waste to the low consumption public lighting system. All collected data are monitored by Virtual Singapore, a software through which 4 The

Department of Economic and Social Affairs of the United Nations Secretariat, World Urbanization Prospects, New York, 2014.

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the local authority analyses the information and defines the most effective ways to manage the city. Basically, the data collected are used for a continuous process of improving services. Some cities are considered virtuous for their orientation towards innovation and the use of intelligent technologies. Barcelona, for example, boasts efficient parking and traffic monitoring systems. The hybrid bus fleet is one of the spearheads of the city, as is the promotion of sustainable mobility which includes the Bicing initiative with over four hundred bicycle stations that can be rented (also) via smartphone. Also worth mentioning is Bustia Ciutadana, an application (available for iOS and Android) with which citizens can communicate directly to the local administration any disservice or breakdown detected in the city. In London, undoubtedly one of the most chaotic metropolises in the world, the use of new technologies in a smart perspective is helping to significantly improve the lives of its nearly nine million citizens (who, according to analysts, will become ten million by 2030). Mobility is perhaps the flagship of smart London: electric bike sharing systems and an intelligent parking monitoring project are certainly a valuable aid in a city that makes movement its distinctive character. The USA comes fourth according to the Juniper Research ranking: the only American city in the top five is San Francisco, considered one of the technology capitals of the world. The public transport system is one of the sectors in which the smart approach is most developed: intelligent systems for paying fares via smartphone and contactless have significantly improved the use of public transport by the population. Finally Oslo, a city considered virtuous above all for an excellent intelligent LED lighting system, a traffic detection system and specific emission reduction policies. Density, which has always been a value, has been severely tested by the pandemic that hit the world in 2020. The debate between academics and market representatives in the sector is open. Some foreshadow the possibility of reversing this trend towards concentration, favouring, indeed, the development and growth of abandoned and peripheral villages. Others believe that density remains a value and that it is more appropriate to invest in services-solutions that can support the growing need for flexibility in the use of space. It should be noted that in recent years the concentration of people, services and infrastructures has been a determining factor in the attractiveness of the territories. The competition between countries has become, for some years now, a competition between cities. Attracting talents, creating a favourable context for the development of economic activities, promoting adequate environmental quality and an infrastructure system that makes the urban context liveable and services accessible are prerogatives that can be more effectively managed at the local level. Is there a relationship between the attractiveness and the built environment? Between the attractiveness of the location and the real estate product? Perhaps, at least in part, this relationship is perceptible.

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Fig. 1.1 The top ten classified (countries and cities) in the report The Global Talent Competitiveness Index 2018, Insead

The World Economic Forum (WEF) recently presented the Global Competitiveness Report 2016–2017, a research project that analyses the competitiveness of 138 countries through an indicator, the Global Competitiveness Index, built on 12 main parameters: institutions, infrastructures, macroeconomic context, health and primary education, higher education and training, labour market efficiency, commodity market efficiency, degree of financial market development, technological capacity, market size, business sector complexity and innovation. It should not be surprising that the countries and cities that are particularly attractive in terms of overall competitiveness (according to the Global Competitiveness Report of the World Economic Forum) and the ability to attract talent (according to the Global Talent Competitiveness Index), are also those that are characterized by a high attractiveness of real estate investments, often oriented towards developing products that can respond to a market demand that is increasingly oriented towards specific and quality solutions and less inclined to settle for a “generic” product (Fig. 1.1). Winning on growth cities,5 carried out by Cushman & Wakefield, is a research that helps us understand the relationship between the real estate component, investor objectives and the attractiveness of cities. There are three interesting elements that actually constitute alternative markets highlighted by this report. The first is the evidence that investments are addressed more often towards what are defined as “submarkets” or specific or specialized markets emerging in consolidated cities to obtain the desired return on investment while remaining within a relatively safe market. The second is characterized by investments in important cities outside the “core” countries, where it is possible to find “a myriad of compelling stories that are becoming increasingly difficult to ignore given the possibility of networking between

5 Hutchings

D., Tonkin E., a cura di di (2017), Winning on growth cities, Cushman & Wakefield.

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cities, access to new rich markets. for consumers, promising demographics and attractive returns”. Finally, many cities have an interesting differentiation of prices and positive economic fundamentals, but they require the investor to be able to read and analyse the local market, which is not always easy. While Paris, London, New York and Tokyo are well-known real estate markets, it is more difficult to identify cities that have the potential to become more “new poles of attraction” or even “important for the reference region” but are currently neglected by flows of international capital. Therefore, there is a growing need to offer professional answers to global capitals that are always looking for places to land and to make available products capable of providing adequate answers to demand. If the product does not exist, it is necessary to develop it or transform the existing one: 69% of respondents in the Emerging trends in real estate—reshaping the future—Europe 2018 report, edited by Price Waterhouse Coopers and Urban Land Institute, believe that “the transformation of existing buildings is the most effective way of investing in prime assets”. “Many companies are trying to create sustainable and safe jobs by offering employees spaces that give them the opportunity to practice sports, restaurants, shopping, and other services that facilitate daily life in the immediate vicinity. part of the real estate supply chain—lenders, investors and developers, aimed at generating more multifunctional spaces in future developments” (Emerging trends in real estate—reshaping the future—Europe 2018, p. 13). Basically, the possibility of attracting talents and creating favourable conditions to retain them is not indifferent to the container that hosts the business.

1.3 Built Environment and Emerging Needs: What Is Next? The perspectives of the built environment cannot disregard the transformations of economy and business on a global level; these transformations are increasingly rapid, frequent and are characterized by significant impact. The useful life of companies, which together with families represents a significant part of the demand for construction products, tends to shorten. Compared to the 1970s, the average life of companies is substantially halved (Garelli 2018). The report “2018 Corporate longevity forecast: creative destruction is accelerating” edited by the consulting firm Innosights, confirms this trend: the average life of S&P USA companies in 1964 was 33 years, in 2016 it was 24 and the forecasts for 2027 tell us that the average life will be 12 years. Over the next 10 years, more than 50% of S&P 500 companies will be replaced by new companies. This phenomenon originates from several factors, which Garelli tries to define identifying mainly three. The first factor is that there has never been so much liquidity: the balance sheet of the 9 major central banks exceeds $18 trillion; the 10 largest sovereign wealth funds manage over $10 trillion; finally, if we consider the largest European and US

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companies, availability exceeds $3 trillion. This pushes towards investments that increasingly consist of acquisitions and mergers (in 2017 alone for $3.490 billion).6 The second is linked to the development of technology, which has a strong impact on business models and tends to favour larger companies: Alphabet, Google, Amazon, Microsoft, Facebook or Apple increase their dominant position also through the acquisition of technological start-ups: Skype, Deep Mind, Shazam. In this way they limit the development of potential competitors and diversify their business area. In essence, large groups are getting bigger and bigger and expanding the market sectors in which they operate. The third factor is linked to the development of emerging economies. The presence on global markets of Chinese, Indian and South American organizations is a fact. The fact that they are often family businesses allows for quick decision times and, consequently, fast growth rates. Alibaba and Tencent recently joined companies capitalizing over $500 billion. In 2018, Chinese investments in the rest of the world exceeded $220 billion. Over the next 10 years, the spending power of consumers in developed countries is set to grow, but in a different way from the relative growth rates. Developing countries will tend to generate 60% of world gross domestic product, getting closer and closer to industrialized countries also thanks to technologies: emerging demand is oriented towards using technological devices for market access. This eliminates barriers and constraints, making it accessible without geographical distinctions and increasing the growth of trade between industrialized and developing countries. Speed also affects how to generate economic activity. The possibility of starting entrepreneurial activities at low cost is a reality. In some cases, the ability to support innovative entrepreneurial initiatives becomes a factor of attraction and growth of cities: 4YFN, an acronym that stands for 4 years from now (https://www.4yfn.com/), is the name of the Barcelona start-up initiative that has its moment of greatest exposure during the Mobile World Congress, parallel to which it opens to the rest of the world as part of the initiatives of the Mobile World Capital Barcelona (MWCB) program. There are over 1100 start-ups in Barcelona (34% of Spain); investments raised by start-ups in Barcelona in 2017 amounted to 477 million euros. Investments raised by start-ups in Spain (2017) amounted to 779 million euros. For newly established Spanish companies, the rate of “Impuesto sobre sociedades” is set at 15% based on the provisions of Law no. 27/2014. Digital technologies contribute significantly to launching light production processes, containing costs and breaking down barriers to entry. Flexibility and agility are the prerogatives of modern companies; this puts large corporations and small-medium enterprises in real competition for the first time. 6 The

EU-27’s gross household adjusted disposable income was valued at EUR 9 781 billion in 2018, which was equivalent to approximately three quarters (72.5%) of the value of gross domestic product (GDP). Germany accounted for the highest share of the EU-27’s gross household adjusted disposable income, 25.6% of the total, followed by France (18.7%) and Italy (14.0%). (Source: Eurostat: Households—statistics on disposable income, saving and investment, data extracted in July 2020).

1.3 Built Environment and Emerging Needs …

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The number of people employed in an unstructured manner is growing almost everywhere: collaborators, freelancers, part-time workers, consultants, often working full-time but with lower guarantees than they would have as employees. It should be considered that for some of these workers the choice of unstructured work also responds to specific needs for flexibility in working hours. In the United States, more than 80% of multinationals have launched programs for employee mobility and flexible work, intercepting the growing needs of some employees. This scenario leads to the growth of new requirements for buildings that must host different economic activities; among all, the ability to adapt to rapid changes and a flexibility that is an important competitive factor. A global phenomenon is certainly that of coworking; born in the United States around 2010, it has seen a phase of great expansion also in Europe, where a report by Bnp Paribas Real Estate (2019) records significant transactions in 2018 in the coworking market. This way of using space, aimed at favouring creativity and the connection between complementary activities, seems to give an answer to two aspects that characterize the demand. The first concerns the possibility of using workspace at low cost, based on the principle of “space as a service” (Zanzottera 2020), which is winning for a market demand that comes from freelance workers or workers at the beginning of their professional life (Andrioli 2014). The second aspect concerns the expansion of the advanced tertiary sector, a sector where the physical sharing of space favours the contamination of ideas, but above all the transformation of ideas into products/actions, as happened in the Renaissance workshops (Formica 2016). Differently from what we might think, at the moment the main competitors of coworking spaces are not traditional offices, they are not other ‘third places’ (Oldenburg 1989) such as bars and public and semi-public spaces (for example hotels and retail spaces), but they are housing. Kevin Roose (2020), NY Times columnist, cites 2014 research conducted by Prof. Nichola Bloom of Stanford University: the research, which investigated the work from home of travel agency operators, found a 13% increase in productivity but, at the same time, a difficulty in solving problems and, above all, a significant limit in the cohesion of the working groups. Even the goal of a better chance of a better balance between work and private life seems to be challenged by work at home (Crosbie and Moore 2004). For managerial profiles, who spend over 60% of their working day in meetings and face-to-face activities (Porter and Nohria 2018), this condition of physical distancing from people and from the office seems even more difficult to manage. Some researchers believe uncertainty will strengthen coworking spaces. Dane Stangler, entrepreneur, supports this thesis on Forbes (Stangler 2020) with three main reasons: the growth of remote workers entails the need for adequate space and private homes are not; coworking spaces not only meet spatial needs, but can offer crucial support services for small businesses, individuals, self-employed workers and other small entrepreneurs who are often “on the edge of the local economy”; finally, coworking spaces are now fully-fledged engines of local economies. Stangler cites the experience from the Launch Pad company: in just 5 locations, the company has

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helped generate over 9000 jobs, raised about $230 million in investments and rented space for over one million square meters. These numbers cannot leave cities and policy makers indifferent. In designing the future of work spaces, observers hypothesize two scenarios: one prefigures a world that will increasingly have to face pandemic risks, therefore it assumes that what we experienced in 2020 is destined to repeat itself and determines a situation of no return. The other hypothesis instead predicts that, once the health emergency has been resolved thanks to effective treatments, the new reality will be quite like the one before the pandemic. Whichever of the two scenarios will come true, rethinking the model of occupancy of workspaces with a view to greater resilience seems an indispensable step. Many experiences tell us about impact mitigation measures activated by collective spaces, including revision of membership policies to allow for further flexibility; virtual memberships, disconnected from physical space; marketing campaigns to attract new members, but above all to keep current members; openness to diversified targets (e.g. students); increase in services offered to occupants, including assistance and support for business development and growth, but also partnerships with shops and neighbourhood services to assist members and their families (e.g. with food delivery). These measures underline the extreme flexibility of the “coworking industry”, which can offer a decidedly wide and diversified range of continuously updated products and services. Coworking could transform from an urban phenomenon to a peri-urban and peripheral phenomenon (Brown 2017; Mariotti and Di Matteo 2020) in the perspective of an expansion of smart-working and decentralization policies of the workforce (Memoori 2021). In particular, the idea of “widespread work” could make its way for many companies as a preventive measure in terms of health and safety. Furthermore, the large coworking networks could benefit from ad hoc partnerships with more dispersed offices in the area to diversify the risk. Workspaces could hybridize with residential spaces on the basis of the “Office-asa-Service” philosophy. The companies that have promoted coworking spaces could professionally deal with the design and management of home-office spaces on a large scale. At the same time, some residential initiatives may include small spaces dedicated to coworking, for example at the foot of buildings. Finally, contrary to the existing gap in the literature between community- and business-oriented coworking (e.g. Gandini and Cossu 2019), a new integrated model could make its way through greater integration with neighbouring urban and local communities.

1.4 Building Trust and Public-Private Alliances Urban regeneration has, by definition, a “multidimensional” nature. Indeed, it is configured as a social and economic project, even before being disciplinary, which

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must hold together a plurality of dimensions: settlement (urban restructuring, new functions, welfare), energy (standards, materials), environmental (open spaces, connection with networks and ecological systems), economic (new businesses, youth entrepreneurship), social (cohesion, integration of different cultures), institutional (participation, supervision, development agencies). Urban regeneration also has a “multiscalar” nature, acting between the territorial and urban dimensions. The levels on which it is necessary to intervene are different: – times, impacts, methods of verification and reporting of urban regeneration policies, plans and programs, with the aim of triggering virtuous processes to increase local well-being; – identification of the “nodes” of institutional responsibilities for the planning, programming and implementation of urban regeneration processes, considering them a priority in favour of improving the quality of the family and business environment; – revision of the “governance” model for intervention in cities, considering the increasingly pressing need to integrate heterogeneous and complex procedures. For this reason, there is a strong need to develop the capacity for coordination and “direction” of the public actor in these processes and at the same time the need to delegate to the private sector the process of transformation of the territory. This principle must be the basis of public-private partnerships. This presupposes the construction of a relationship between the central state and local autonomies, which can give certainty to private operators, guaranteeing feasibility of implementation and compliance with the expected deadlines. This implies for the public part precise assumptions of responsibility to share the objectives generally expected from an urban regeneration project. The role of the private sector can be decisive also and above all in the case of alternative development models to the traditional ones. The American company Gensler in describing the “polycentric model”—in which self-sufficient districts are distributed among cities and function as urban villages— calls it “one of the best ways to shape urban concentrations”. According to the authors, in fact, “this model has the potential to improve the quality of life, promote pedestrian traffic and free up space for other uses such as parks and gardens”. The concept of “urban federalism” represents a reversal of perspective with respect to POPS (Privately Owned Public Spaces). In the case of POPS, the private sector offers part of its land for public use, ensuring its management and care in exchange for incentives. One of the possible applications of this model foresees that the private person invests in the requalification, maintenance and care of public land, obtaining economic benefits (tax benefits and commercial revaluation). In the face of the lack of public funds for the management and maintenance of cities, governments increasingly rely on collaboration with the private sector, including local communities. The concept of Public Private Partnership (PPP) is

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now a constant in the urban planning of Japanese cities and is often implemented through Privately Owned Public Spaces (POPS). Several studies have shown that, particularly in the case of Tokyo, a combination of conventional public space and POPS represents, if managed correctly and transparently, an advantage for all parties involved, including residents.7 This type of approach in planning and managing urban public spaces paves the way for more liveable and sustainable cities in the future. A noteworthy case study is that of Kashiwa, on the outskirts of Tokyo, where an original form of PPP was tested based on a strategic partnership between three main sectors: public, private and academic. In the specific case, the Municipality of Kashiwa has allied with one of the main real estate developers in Japan (Mitsui Fudosan) and the main national public university (the University of Tokyo) with an ambitious common goal, that of creating a global model of the city of the future based on environment, industry and longevity. In the USA, too, various experiences go in this direction; the San Francisco Planning and Urban Research Association (SPUR) has created a guidebook in order to bring the city’s “best kept secret”—its 68 POPS—into public awareness. Even in the enhancement of areas that must be profoundly re-functionalized, an alternative model to the direct sale can pass through the concession model. The city of Milan has launched an important regeneration activity in the area that hosted Expo 2015 through the selection of a private developer who has the task of coordinating the entire development of the area. The entire area will be transformed into the MIND Milano Innovation District, a science, knowledge and innovation district with the aim of creating a place open to the world that can promote territorial excellences, add value to the investments already sustained and to the Expo legacy. The client is a publicly owned private company8 that takes on the role of director of the intervention, delegating the operation to a private developer who will have the right to exploit the private side of the area as a concessionaire for a period of 99 years. We can say that new solutions of “administrative and organizational architecture” today take on a decisive meaning for the purposes of urban regeneration and require the same creativity of architectural design.

1.5 New Challenges: Health, Safety and Sustainability Any type of development cannot ignore the well-being objectives of citizens who are increasingly sensitive to environmental factors and the conscious use of resources. 7 Please

see the research Privately Owned Public Spaces 2010–2015 by the Department of Urban Engineering The University of Toyo (retreived at http://ud.t.u-tokyo.ac.jp/en/projects/archives/ post_8.php). 8 Arexpo Spa is majority public capital owned by the Ministry of Economy and finance, Lombardy Region, Municipality of Milan and Milan Fair Foundation. Small shares are held by Città Metropolitana di Milano and Municipality of Rho.

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A sensitivity that has also grown thanks to scientific research recently aimed at deepening the relationship between pollution, health and the built environment. The Lancet Commission on Pollution and Health was inspired by Lord Stern’s work on climate change (Stern 2006). Commissioned by the UK government, the research examined the global costs of climate change and predicted that without interventions aimed at tackling pollution, these costs constantly erode 5% of global economic output. By placing global climate change as a major social challenge, Stern shifted the debate from academia to the centre of global politics and focused on the need for radical change. In continuity with Stern’s work, the Lancet Health Commission estimated that all forms of combined pollution were responsible for 9 million premature deaths in 2015—16% of all deaths worldwide—and for 268 million disabilities (Forouzanfar et al. 2016).9 The number of deaths from pollution is three times greater than the number of deaths from AIDS, tuberculosis and malaria combined and 15 times more than the number resulting from all wars and other forms of violence. Despite this, the resources directed towards health care related to AIDS/TBS/malaria are 25 times higher than those dedicated to the fight against pollution.10 The Commission indicates the steps considered fundamental towards a circular economy, which include a variety of actions that include the large-scale use of nonpolluting energy sources, wind, solar and tides; the production of durable goods that require less materials and energy for their production; incentives for recycling and reuse; replacement of hazardous materials with safer alternatives such as those developed using Green Chemistry technologies; development of new transport systems that reduce the use of private vehicles. At a global level, the consumption of resources is growing significantly, as well as the spending power and purchasing power of a part of the planet that until recently was unable to consume (Behrens et al. 2007; McKinsey Global Institute 2015). Therefore, it is likely that many material resources will become increasingly difficult and more expensive to use and, above all, a large amount of these could be lost for future use (Defra 2012; Ecorys 2012; Hazell and Benton 2013). In the UK, it is estimated that 37% of the materials used, equal to 158 Mt, are lost (WRAP 2012). The European Commission, national and local administrations are developing circular economy policies to benefit the environment and the economy (LWARB 2015; SG 2016). The built environment is an important sector from an economic point of view, with the construction industry contributing, on average, 5–13% of the total gross added value (Eurostat 2016) and generating 812 million euros at the European level. tons of waste, one third of the total waste produced (Eurostat 2018). 9 Forouzanfar M, et al. GBD 2015 Risk Factors Collaborators. Global, regional, and national compar-

ative risk assessment of 79 behavioural, environmental and occupational, and metabolic risks or clusters of risks, 1990–2015: a systematic analysis for the Global Burden of Disease (2016) Lancet 388:1659–1724; https://doi.org/10.1016/S0140-6736(16)31679-8. 10 Greenberg H, Leeder SR, Raymond SU (2016) And Why So Great a “No?” Glob. Heart 11:381–385; https://doi.org/10.1016/j.gheart.2016.10.018. Nugent R. (2016) A Chronology of Global Assistance Funding for NCD. Glob. Heart 11:371–374; https://doi.org/10.1016/j.gheart. 2016.10.027.

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It is therefore important to orient the construction sector towards virtuous behaviour aimed at the reuse of materials and products, which limit the consumption of resources, resulting in a lower impact on the environment. In his report Growth Within: A circular economy vision for a competitive Europe, McKinsey photographs the critical issues of the built environment in the different phases of the real estate life cycle: construction, use, end of life. Construction: waste of 10–15% of the material used in the construction phase. The construction sector is not very oriented towards innovation and increasing productivity; even in countries with highly developed economies (USA and Germany), in the last 25 years the sector has recorded very modest increases in productivity, while others have seen their productivity grow by 50% over the same period. There are possibilities: Belgium and Austria in the last 15 years have recorded growth trends of 2% per year. Usage: it is estimated that 60% of the offices in Europe (14 million square meters) are not occupied during working hours and that 50% of people live in houses with a surface greater than what is necessary. In particular, in the UK 33% of people over 60 would like to live in smaller houses, but only 10% have actually chosen to live in a smaller house. A share of between 20 and 40% of the energy consumed by existing buildings could be effectively reused. End of life: 54% of demolition materials are sent to landfills; in some countries this percentage does not exceed 6%. It should be considered that reuse is not always possible because some materials are toxic. Awareness is growing in all countries that creating a built environment in balance with the human load requires, above all, a deep and widespread cultural transformation.

References Andrioli B (2014) Per superare la crisi arriva il coworking. Retrieved April 29, 2020, from https://st.ilsole24ore.com/art/notizie/2014-07-08/per-superare-crisi-arriva-coworking-184 430.shtml?uuid=ABnJvqYB Behrens TEJ, Woolrich MW, Walton ME, Rushworth MFS (2007) Learning the value of information in an uncertain world. Nat Neurosci, 2007 Sep;10(9):1214–21. https://doi.org/10.1038/nn1954. Epub 2007 Aug 5. Brown J (2017) Curating the “Third Place”? Coworking and the mediation of creativity. Geoforum. https://doi.org/10.1016/j.geoforum.2017.04.006 Crosbie T, Moore J (2004) Work-life balance and working from home. Soc Policy & Soc 3(3):223– 233 Defra (2012) Resource security action plan. London: HM Government Department of Urban Engineering, The University of Toyo, Privately Owned Public Spaces 2010– 2015 by the (retrieved at http://ud.t.u-tokyo.ac.jp/en/projects/archives/post_8.php) Ecorys (2012) Mapping resource prices: The past and the future. Ecorys, Rotterdam, the Netherlands Eurostat (2016) Constructon statistics NACE Rev.2, (http://epp.eurostat.ec.europa.eu/statisticsex plained/) Eurostat (2018) Waste statistics. https://ec.europa.eu/eurostat/statistics-explained/index.php/ Waste_statistics#Waste_generation_excluding_major_mineral_waste

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Eurostat, Households—statistics on disposable income, saving and investment (data extracted in July 2020) Eurostat, Wages and labour costs. Data extracted in August 2020 Formica P (2016) The innovative coworking spaces 15th Century Italy, Harvard Business Review, April 2016 Forouzanfar M et al (2016) GBD 2015 risk factors collaborators: global, regional, and national comparative risk assessment of 79 behavioural, environmental and occupational, and metabolic risks or clusters of risks, 1990–2015: a systematic analysis for the Global Burden of Disease. Lancet 388:1659–1724. https://doi.org/10.1016/s0140-6736(16)31679-8 Gandini A, Cossu A (2019) The third wave of coworking: “neo-corporate” model versus “resilient” practice. Eur J Cult Stud 1:1–18. https://doi.org/10.1177/1367549419886060 Garelli S (2018) 2018: a massive restructuring of the world economy? IMD Publications. https://www.imd.org/research-knowledge/articles/2018-a-massive-restructuring-of-theworld-economy/ Greenberg H, Leeder SR, Raymond SU (2016) And why so great a “no?”. Glob Heart 11:381–385. https://doi.org/10.1016/j.gheart.2016.10.018 Hazell J, Benton D (2013) Resource resilient UK A report from the Circular Economy Task Force, Green Alliance, Jan 2013 Hens L (2010) The challenge of the sustainable city. Environ Dev Sustain 12:875–876. https://doi. org/10.1007/s10668-010-9259-3 Hutchings D, Tonkin E,a cura di di (2017) Winning on growth cities, Cushman & Wakefield London Waste & Recycling Board (2015), Towards a circular economy-context and opportunities Mariotti I, Di Matteo D (2020) Coworking in emergenza Covid-19: quali effetti per le aree periferiche? Eyes Reg 10(2):1–6 Memoori (2021) 2020 Reshaped the Workplace, 2021 Will Reshape the Workforce. https://mem oori.com/2020-reshaped-the-workplace-2021-will-reshape-the-workforce/ McKinsey Center for Business and Environment, Ellen MacArthur Foundation, SUN (2015), Growth within: a circular economy vision for a competitive Europe Neri C, a cura di (2013), Global trends 2030: alternative worlds, Istituto Italiano di Studi Strategici Nugent R (2016) A chronology of global assistance funding for NCD. Glob Heart 11:371–374. https://doi.org/10.1016/j.gheart.2016.10.027 Oldenburg R (1989) The Great good place, Da Capo Press, Boston, USA Porter ME, Nohria N (2018) How CEO’s manage time, Harvard Business Review, Jul–Aug Price Waterhouse Coopers (2018), Emerging trends in real estate—reshaping the future—Europe Rose K (2020) Sorry but woorking from homes is overrated, NY Times, 10 March 2020 Roy Chowdhury PK, Weaver JE, Weber EM, Lunga D, LeDoux STM, Rose AN, Bhaduri BL (2020) Electricity consumption patterns within cities: application of a data-driven settlement characterization method. Int J Digit Earth 13(1):119–135 SG (2016) A Circular Economy Strategy for Scotland. Scottish Government, Edinburgh, UK Singapore Government (2016), Economic survey on Singapore 2016. http://www.mti.gov.sg Stangler D (2020), Here are three reasons COVID-19 makes coworking spaces even more important. Retrieved April 29, 2020, from https://www.forbes.com/sites/danestangler/2020/04/03/here-arethree-reasons-covid-19-makes-coworking-spaces-even-more-important/#4995d1233aca Stern N (2006) The Stern Review on the Economics of Climate Change. Cambridge, Cambridge University Press The Department of Economic and Social Affairs of the United Nations Secretariat, World Urbanization Prospects, New York (2014) The Global Talent Competitiveness Index (2018), Insead World Economic Forum (WEF) (2017), Global Competitiveness Report 2016–2017 WRAP (2012) The Framework for Greater Consistency in Household Recycling in England Zanzottera C, Il coworking cresce, cambia l’ufficio e lo spazio diventa un «servizio» (2020). Retrieved April 29, 2020, from https://www.ilsole24ore.com/art/il-coworking-cresce-cambia-lufficio-e-spazio-diventa-servizio-ACgnUcBB

Chapter 2

Looking for Flexibility: Dynamic Real Estate

2.1 Flexibility as a Strategic Approach The drivers of change described in the previous Chapter are bringing about profound and sudden shifts in the cultural, social and economic context of reference for real estate developers. The “magnitude” and consequences of these shifts are difficult to comprehend and predict. Change is bringing about new great opportunities, but is also altering our familiar territories, increasing complexity and making it difficult to develop credible scenarios even for the near future. One possibility of “hedging” development projects against the volatility of the context and the loss of capital is to create real estate products that can mutate, evolve and adapt over time as conditions change (Dall’Orso and Ciaramella 2019). With this strategy, the obvious challenge to overcome is to make “flexible” and adaptable an asset that is intrinsically “static” and that is planned, designed and built for a useful lifespan of more than 50 years.

2.1.1 Context (R)evolution and Alignment of Physical Assets The mandatory need to embrace flexibility in order to create real estate assets that can adapt over time is exemplified in graphic form in Fig. 2.1 by correlating the market context (industry sectors) with the business models of companies (tenants/users) and the characteristics of physical assets (instrumental buildings).1 Over the period from the end of World War II to the late 90’s, markets were characterised by “predictable” (or top-down induced) trends and cycles, well-understood and defined industries—in terms of demand, supply and competition—and constantly 1 Analogous representations could be created with reference to other specific sectors, for example by

correlating certain social and economic scenarious (e.g. customer preferences and spending power), with customer behaviour (e.g. visitors of a shopping mall) and the characteristics of physical assets (e.g. merchandising, F&B and leisure offering mix). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_2

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Fig. 2.1 The need to pursue flexibility in order to allow real estate products to mutate and adapt over time (Source Authors’ elaboration)

improving consolidated technologies. In this context, companies have developed and progressively refined business models and medium-long term strategies, pursuing growth and productivity over time. As a result of this “stability”, physical assets were mainly owned by the operator itself and planned, designed and built to serve well-established business models, formats and customers. The future is unknown and the current context is altered by sudden and difficult to predict transformations, the melting away of well-defined trends and cycles, and competitive “arenas”—rather than specific industry sectors—where incumbents compete with emerging players who enter markets with innovative, sometimes disruptive, business models, products and services by virtue of the intelligent adoption of new technologies. In this context, to stay relevant, companies, must develop innovative business models, implement multiple strategies, create new demand and strive for agility and innovation in “open architecture”. Consequently, also physical assets must evolve to maintain alignment with business needs and must be planned, designed and built to serve multiple functions, variable strategies over time, encourage multi-disciplinary collaborations between diverse subjects and support new formats. With this perspective, real estate assets can become a dynamic component of an integrated value proposition rather than mere instrumental facilities. The real-life implementation of this approach requires a deep “revolution” of the entire supply chain, the collaborative involvement of multiple actors from different sectors, substantial investments in research and development, and the adoption of innovative technologies. Finally, it involves the recognition that real estate assets can be one of the key drivers to achieve “superior” social and economic goals for the benefit of communities.

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2.1.2 From Predictive Models to Agility and Adaptability The common practice for dealing with real estate development and urban regeneration initiatives is the creation of a “Business Plan”, which involves making decisions regarding market positioning, defining assumptions and assessing profitability through multiyear financial forecasts and “exit” strategies. This approach requires preliminary checks on constraints and opportunities, the development of sensitivity analyses and an iterative process aimed at optimizing choices and assumptions in terms of product mix, formats, quality, timing, costs, revenues, returns and macroeconomic parameters. With this method, uncertainty and variability of certain hypotheses underlying the model are factored in by analysing multiple scenarios, the “best and worst case”, and by allocating risk budgets. BOX: Typically, key stakeholders such as investors, lenders and public sector institutions assess the reliability of the forecasts, i.e. the “robustness” of the Business Plan prepared by the developer through a critical, in-depth review and validation of the assumptions underlying the model: In general terms, “physical and financial” assumptions (i.e. constraints, uses, sizing, formats, construction and operational costs) are accurate and reliable, net of any potential contingency and liability (e.g. environmental liabilities) for which a risk budget consistent with the situation and the knowledge of the specific location must always be allocated. Market assumptions (i.e. pricing levels and absorption rates) at a time when real estate demand was growing, even if cyclically, were generally validated on the basis of available comparables, supported by the belief that a growing demand would eventually take up the product. Macroeconomic assumptions (i.e. inflation, interest and discount rates) were incorporated into the financial model assuming different trends over time to simulate more or less favourable scenarios but always based on the projection of historical data series. This “common practice” described above presents a series of weaknesses and critical points such as to make it no longer sufficiently reliable in the current context. It is quite obvious that, today, trying to predict future scenarios by simply adopting hypotheses based on past experience and extrapolating historical data series through the “usual algorithms” would, in all probability, lead to the definition of hypothetical scenarios that might substantially differ from those that will actually occur in reality. In the past, a generalised economic growth and cyclical demand for real estate assets have mitigated the development risks and created favourable conditions that, to some extent, would “forgive” most mistakes. The current and future socioeconomic scenario is very selective and does not allow for lack of professionality or superficial evaluations. In fact, while technology today makes it possible to elaborate increasingly accurate assessments of physical and financial assumptions, the

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current social and economic context makes it difficult, if not impossible, to develop reliable forecasts in the medium and long term with regard to macroeconomic and market assumptions. In order to handle this extremely challenging scenario, developers have understandably adopted a “defensive” strategy: on the one hand, they expect to reach a certain proportion of pre-let or pre-sell before starting to develop a property in order to mitigate the risk associated with the market; on the other hand, they look for a short-term exit to a long-term core investor as soon as the property has been built and commercialised, thus also mitigating the risk associated with the volatility of macroeconomic variables. This “defensive” strategy works in the short term for the developer but is essentially based on the transfer of market and macroeconomic risks to the medium- or long-term investor who intervenes later. In fact, while it is true that in the past, once the construction was completed and the building commercialised and in operation, the main risks of the real estate transaction were substantially eliminated, in the current market scenario the residual risk that is transferred to investors who acquire the asset with a medium- or long- term strategy can also be significant if the property in question does not possess certain characteristics of sustainability, quality, flexibility and ability to adapt over time. The need to guarantee these characteristics becomes even more evident when, by moving from an initiative on a single property to a regeneration of an entire urban area, the scale and the time of execution increase and therefore the uncertainties. In view of these considerations, it is essential that the developer commits to provide its products (and services) with the maximum possible flexibility and adaptability as the only constant in the future will be change.

2.1.3 “Change” and a New Approach to Cope with It The impracticability of generating reliable and accurate forecasts in the medium and long term is clearly not compatible with the time-to-market and lifespan of urban regeneration and development initiatives. For some projects, the fickleness of the context, on top of other major flaws, makes returns and risk profiles unconvincing to the extent of compromising their ability to raise funds. Therefore, in a market characterized by rapid and unpredictable developments of the demand, developers should evolve and focus on adaptability and agility of their organisations, products and services, rather than trying to identify trends and cycles through the development of sophisticated forecasting modelling capabilities. Real-life examples demonstrate that a “predictive” approach is inadequate and even a “strategic” approach might be insufficient (Fig. 2.2). In order to be successful in dealing with an unknown future, developers will have to be fully equipped with new leadership and the change management skills necessary to advance towards a “progressive” approach. Key traits that should be acquired—also through the use of technology—include the ability to listen and understand stakeholders’ needs, the capability to prototype, test and iterate, the passion for collaboration to create

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Fig. 2.2 The evolution of the approach to real estate development as the market scenario changes (Source Authors’ elaboration)

opportunities in every aspect of the supply chain. In this way it is possible to transform real estate assets into a strategic resource and an integral component of a social and economic ecosystem capable of generating superior shared value for all stakeholders.

2.2 Flexibility in the Different Stages of Real Estate Development Flexibility of real estate products, be it single buildings or urban regeneration schemes, must be pursued in relation to all aspects and all phases to ensure resilience and sustainability through adaptability to changing conditions over time.2

2 Real

estate is "slow" compared to other more dynamic sectors such as the financial and ICT. This is due to renowned endogenous and exogenous factors such as bureaucracy and the multiplicity of actors involved in the authorization procedures; complexity associated with multi-disciplinary; lack of digitization, transparency and availability of data; lack of investment in research and development; very poor industrialization, efficiency and productivity of the supply chains.

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2.2.1 Flexibility at Urban and Environmental Planning Consent Real estate development and urban regeneration initiatives are negatively “affected” by the uncertainty and lengthy time-to-market. In mature economies, large scale developments can take between ten and fifteen years from conception to completion. In some cases, planning and building consent procedures take up the largest chunk of the development time of a project. Once granted, planning and building consent are usually not flexible enough to allow for timely adaptation of the development to meet changing needs over its lifespan. BOX: Critical aspects for planning and building consent procedures include: – uncertainty and duration not compatible with market context; – negotiations of uses, sizing, environmental constraints and infrastructure; – backwardness of certain rules and planning tools in relation to the evolution of market scenarios, stakeholders’ needs and adoption of new technologies; – lack of flexibility of rules, zoning and consents that are given many years before the project reaches the market and that can generate unnecessary constraints during the whole life of the project; – conflictual (i.e. contrasting) relationship between private operators and public authorities, rather than collaborative partnerships (with exceptions). These critical issues can have serious tangible implications on the success or failure of projects. In some cases, real estate initiatives with solid fundamentals have remained “hostage” to rigid and outdated urban and building consent procedures, which were based on assumptions that have become profoundly out of sync with market scenarios. Pursuing flexibility throughout urban planning and building consent procedures requires establishing a transparent, trustworthy, collaborative and professional relationship between public and private sectors. It also means being prepared to venture into unexplored technical-administrative territories. With this approach, consent procedures should focus on vision, guiding principles, strategic objectives, some non-negotiable characterising aspects of the specific initiative, rather than on enforcing rigid requirements and constraints across the board. Contractual agreements between public and private parties should provide for sufficiently wide margins of manoeuvre to allow, over time, the appropriate adjustments in order to ensure the achievement of the objectives during the project’s useful life as scenarios change. Periodical or ad hoc checks, in case of certain unforeseeable events, should be foreseen to ensure alignment and contractual balance.

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2.2.2 Flexibility: Guiding Principle in Design and Implementation The objective is to design real estate assets, infrastructure and technologies that can evolve over time to serve different types of functions, uses, contents and services.3 The challenge here is to make “flexible” “real estate” assets, which are “fixed” by nature and sometimes customized to meet specific needs (e.g. industrial assets) (Moline 2013). One possibility to pursue flexibility at design stage is to learn from the automotive industry. With this approach, real estate products are made up of a scalable structural framework, the “chassis”, conceived in such a way as to be able to accommodate modular building components with variable characteristics. Plants and technological customizations, mechanical and electrical services are designed as “add-ons” that are manufactured in the factory, installed or uninstalled on site with ease according to the actual needs that will arise during the life of the building. In addition, certain plant components such as those for energy, cooling and heat production, lifting equipment, surveillance equipment and others can be regarded as flexible “Service Level Agreements” to procure, rather than “fixed” items to purchase and install. On an urban scale, flexibility can be pursued at master planning stage by providing for autonomous functional building plots, modular infrastructures and systems, zoning plans that allow for variable uses and future expansion zones.

2.2.3 Operational and Commercial Flexibility The flexibility of a real estate product must concern not only its physical and functional characteristics but also the way it is operated, managed and made available to the various stakeholders. By way of example, many tenants, instead of immobilising large resources to purchase real estate, look for flexible ways of using it to support their strategies in both expansionary and contractionary periods. In addition to the traditional office space dedicated to individual companies, some recently built office buildings also provide shared “buffer” areas that offer flexible space for expansion to companies that are already occupying the building. End users, such as visitors to an amusement park, hotel guests or those living in shared residences are looking for flexible services and experiences that can be customised to their specific needs and demand that the pricing structure is transparently commensurate with the benefits actually provided. Investors, on the other hand, are looking for guaranteed returns and maximum flexibility in deciding when to liquidate their investment. Traditional 3 The

principle of flexibility in this case refers both to multi-functionality in the short term, even during the day (e.g. a multi-functional arena whose internal configuration is transformed within 24 h to host events of a different nature: sports, music or corporate), and to transformation in the medium to long term as market conditions change (e.g. a multi-storey car park already designed to be converted to a different use if the demand for mobility is radically transformed as a result of the spread of self-driven electric vehicles for shared use).

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developers are trying to pursue operational and commercial adaptability through flexible contractual formulas both for active contracts (leases, facility services, sponsorships, etc.) and passive contracts (services, supplies, maintenance). The opportunity to adopt flexibility and meet changing needs has encouraged a new generation of operators to enter the market with innovative and disruptive business models.4

2.2.4 Real Estate Assets and Corporate Performance Most companies use real estate assets to carry out their activities, whether instrumental, leased or owned; in other cases they are pure financial investments dedicated to preserving capital and generating additional income over and above that produced by the core business. For some categories (pension funds, banks and insurance companies), real estate can make up a significant portion of the company’s investment portfolio and balance sheet assets. Real estate assets affect the company’s profitability and brand both directly, in terms of operating costs, investments and ability to generate revenues, and indirectly by influencing the company’s image and culture, employee motivation and productivity. In addition, the morphological, architectural and functional characteristics of the built environment can also have a positive or negative impact on a company’s ability to innovate by virtue of its intrinsic ability to encourage or not encourage collaboration and interaction between people within the company itself and with external parties. Moreover, real estate assets are by their nature “static”, not “flexible” and not “liquid” and can limit the company’s agility to the point of compromising the ability to implement organizational changes and new strategies in an effective, timely and economical way. In some highly regulated industries, highly specialized real estate assets can quickly become obsolete and, in view of the difficulty of marketing them and the high conversion costs, they can also quickly become a liability on the balance sheet (IAMC 2010). Finally, environmental issues, serious accidents and lack of consensus among local communities can erode the company’s reputation or represent an insurmountable barrier in the authorization processes related to the regeneration and transformation of the real estate assets involved. The lack of a real estate strategy that guarantees alignment with the company’s broader objectives prevents the generation of value from the real estate assets which, from a potential “resource”, can even be turned into an “obstacle” to the company’s agility or a liability on the balance sheet.

4 Initiatives such as Airbnb, WeWork, Dovevivo and others have in fact shifted the focus to services

and the quality of the user experience, aspects that give added value to the physical component (brick), compared to traditional models.

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2.2.5 Strategic Real Estate Management: Opportunities for All Corporate real estate assets are typically managed by adopting an administrative accounting approach based on the definition of KPIs and metrics generally created specifically to feed broader ERP management systems and to measure day to day operational efficiency and productivity (Ciaramella 2010, 2016). However, when contextualising real estate assets within the broader market scenarios, it becomes clear that real estate assets can be transformed into a strategic resource capable of “releasing” positive energy at the service of corporate strategies in the form of finance, capital, workforce motivation, creativity, image and corporate brands (Carder and Ware 2012). BOX: Real estate is a strategic resource for organisations: Real estate assets can: – generate economic and financial resources through divestment or sale and lease back transactions, surplus sales, space rationalization and renegotiation of the terms and conditions of the leases; – help to communicate and support the company’s values, culture and image through design and planning choices that use morphologies, architectural languages and functional choices that are consistent with and strengthen the new positioning of the business; – be the focus of strategic initiatives to reduce the environmental footprint of an organisation, generate savings in operating costs and a positive image; – support companies in low margins industries, by adopting strategies that take advantage from the performance of the real estate market, for example by renegotiating rents and lease terms when the market is dominated by demand. The current market environment, therefore, offers new opportunities for developers to gain in-depth, intimate knowledge of the end-users (customer tenants) and the industries in which they operate, and incorporate the outcomes into their real estate products and services. Only with this approach is it possible to create products and services constantly “aligned” with the business “trajectories” of the client companies and therefore able to contribute to their agility, profitability and competitiveness. This approach requires the real estate operator to promote new business models based on medium-long term partnerships with its clients rather than shortterm transactional logics. Moreover, in order to provide its real estate products and services with the characteristics of flexibility and dynamism required by the market today, the real estate developer must invest in the research and adoption of innovative technologies, in the digitization of the supply chains, in the systematic collection of

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data, in the creation of solid, multi-disciplinary, open-architecture information platforms that cover not only the physical aspects of the real estate products and services it intends to offer but also the market dynamics of the sectors in which its clients operate. It is therefore an opportunity, or rather the need, to adopt a new, open, dynamic and decentralized approach to real estate development that broadens the horizon of research at a global level. This favours the crowdsourcing of the best solutions, which is aimed at enhancing collaborative relationships, data and processes, compared to the classic closed, centralized and based on the obviously limited know-how of a few.

References Carder P, Ware J (2012) Raising the bar: enhancing the strategic role of facilities management. Royal Institution of Chartered Surveyors, November, UK Ciaramella A (2010) Property management per le imprese. Franco Angeli, Milano Ciaramella A (2016) Corporate real estate. Franco Angeli, Milano Dall’Orso M, Ciaramella A (2019) Sviluppo immobiliare e rigenerazione urbana – Perché alcuni progetti hanno successo e altri falliscono. Franco Angeli, Milan, Italy IAMC (2010), Surplus property. Health & science companies industry group. White Paper. IAMC— Industrial Asset Management Council, Fall Forum, October, USA IAMC (2011), Resourcing critical CRE activities within large scale manufacturing and consumer packaged goods industry sectors. a large scale manufacturing industry action group report. IAMC—Industrial Asset Management Council, March, USA Moline A (2013), Designing flexibility into the industrial workplace, Special Report, Industrial Asset Management Council, Society of Industrial & Office Realtors, USA

Chapter 3

Adapting to Change… or Driving Change? An Open-Source Approach

3.1 The Traditional Approach to Development The evolution of the social and economic context combined with the disruptive effects of unpredictable events, such as the 2020 pandemic, are forcing substantial changes in the real estate sector. Demographic trends, rapid urbanization, technological innovation, new lifestyles, the push towards solutions with low or no environmental impact, as well as facts associated with the search for new geopolitical and trade equilibrium are significantly influencing the relationship between demand and supply of real estate products and services. There is now a clear need to rediscover stakeholders’ expectations and design innovative solutions that meet those expectations (Dall’Orso and Ciaramella 2019).

3.1.1 Typical Traits of the “Traditional” Real Estate Sector To present our thoughts on how the real estate sector could evolve in the future, we briefly summarise the main traits and undisputable “beliefs” that have characterised the sector so far: – Multidisciplinary: requiring coordination of several subjects such as technical, financial, commercial, legal and socio-economic. – Multiplicity of stakeholders: requiring active involvement of many public and private stakeholders and customers. – Cyclical market: historically, i.e. looking back to the past, the real estate sector has been characterised by market cycles (in the future?). – Each project is a prototype: difficult to standardize, heavily conditioned by constraints and opportunities of the specific location.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_3

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– Can generate substantial long-term impact and externalities on the territory, the environment and local communities. – Static: building structural frameworks and layouts are generally not very flexible, and the static content is linked to the location. – Highly labour-intensive: the construction industry is not very innovative, with low productivity and little industrialisation. – Highly capital-intensive: significant up-front investment, long lead times, not liquid (compared to securities with similar risk profile).

3.1.2 A Centralised, Know-How-Based and Closed Approach In the past, the real estate sector was characterized by a sequence of relatively well studied and predictable cycles “coupled” with the upward trends of main socioeconomic indicators. In this context, real estate was regarded as a safe haven for small savers and as an alternative asset class for professional investors, given its low correlation with the stock market. On the offer side, real estate developers mainly operated adopting a “centralized and closed” working method based on the know-how and intuitive skills of few specialists (the wider project team). With this top-down approach, developers and landowners cyclically fed the supply pipeline with new projects being relatively certain that they would have been absorbed by the market. This approach to real estate development, although flawed with obvious limitations, allowed the most professional operators to bring to market properties that were sufficiently aligned with the demand. BOX: In summary, the “traditional” approach to real estate development is typically based on the following principles: Centrality, know-how, intuition, research and selection: developers operate mainly on the basis of their in-house experience and know-how, i.e. that of its “key” people and advisors under a top-down authoritarian leadership. The extended team (in-house + external consultants) research “optimal” solutions in terms of design, materials, technologies, operators and supplies within the boundary of its own know-how horizon. Focus on quantities and architecture (the building object): one of the main actors of the entire development process is the designer, as great attention is paid to “square meters” and building fabric. The objectives are usually the maximization of floor areas and the architectural quality (sometimes even an end in itself), introducing innovative materials and technological solutions. Tried and tested formats and contents: true innovative formats and contents are rare. Developers prefer to minimise risks relying upon markettested formats and contents for which solid benchmarks are available. Commitment of “anchor tenants” is acquired before starting development.

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Demand/supply forecasting: business plan assumptions are based on the extrapolation of historical data series relating to well established key socioeconomic indicators. This quantitative analysis is usually supported by qualitative evaluations, including focus groups and motivational analysis. Validation is carried out through comparison with benchmark projects. The socio-economic changes underway have highlighted the limitations of the traditional approach. In the current market scenario, it seems no longer possible to make reliable assumptions and forecasts, even in the short term, to ensure real estate products stay in sync with changing demand.

3.1.3 Limitations of the Approach in the Current Market Context The dynamic of change is so profound and disruptive that it is bringing to light the limitations of the traditional approach to the point of making it no longer reliable and suitable to serve the sector in the years to come. Customers and stakeholders are increasingly discerning because of real-time availability of data and reviews, and the possibility of interacting with other parties and communities with the same interests. They can easily compare alternative offerings, evaluate costs, benefits, technical and experiential aspects, and thus make informed decisions. Customers want to “do more with less”, want to immediately meet their needs, look for rare, authentic and interactive experiences, as well as flexible and customized solutions. In this context, it can be difficult for lenders and investors to make reliable estimates of the future demand, profitability and risk profile to such an extent as to make some projects unattractive for particular categories of investors. Other critical aspects that have a negative impact on the entire real estate value chain include lack of innovation, low productivity, long time-to-market and the shortterm, top-down approach with superficial involvement of key stakeholders. BOX: In summary, the well-known traditional approach to real estate development is typically conditioned by the following shortfalls: Lack of innovation: technology transfer is too slow. The natural tendency is to “reinvent the wheel”, using the know-how within the organization, rather than develop solutions through research and adoption of best global practices. Low productivity and low efficiency: insufficient integration, standardization and industrialization of the real estate development process.

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Formats and Contents “crisis” propensity for “business as usual” by adopting standard real estate formats and concepts that have worked before. Traditional demand is saturated by traditional offering and new potential demand is not met. There is a need to develop truly innovative formats based on in-depth market research and professional product design approach. Little flexibility and ability to evolve: traditional real estate products have little potential to evolve, and are increasingly out of sync with the rapid and continuous evolution of market needs. Old and obsolete existing stock: in mature economies new-generation buildings represent a small portion of the overall existing stock. Some urban areas and communities are “hostage” to out-of-date disused assets that no longer meet the needs of the socio-economic ecosystems they should serve. Unsubstantial involvement of Society: although among the main stakeholders and potential allies of urban regeneration programs, local communities are not always effectively involved in the development process. Long time-to-market: the gestation time of urban regeneration projects, from conception of the idea to completion, can be uncertain, too long and not compatible with the expectation of customers and stakeholders. Difficult to make reliable forecasts for supply and demand: In the current scenario, it is hard to accurately estimate the revenue generation ability of a development project based on extrapolations of past data and benchmarks. For example, long and uncertain timing for completing development and regeneration schemes increasingly represent an obstacle in commercial negotiations with various stakeholders. Think, for instance, how difficult it could be to match the timeto-market of a real estate development project with the increasingly short term and dynamic strategies of corporate tenants. One of the main limitations of the traditional approach to real estate development is precisely that of being mainly “supply driven”. This means that most developers cyclically “push” standard products on the market dedicating not enough resources in trying to understand their customers. The future scenario rewards developers who adopt an approach based on disciplined and relentless listening to stakeholders, systematic analysis and interpretation of demand. With this focus and bottom-up “pull” logic, they can create innovative solutions that meet the needs of their target customers (Fig. 3.1). Traditional and conservative real estate operators, unwilling to invest in research and development, are faced with unfamiliar scenarios in which success is linked to the ability to create innovative products and services capable of evolving over time in order to meet the changing needs of stakeholders.

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Fig. 3.1 The need to change approach to real estate development and urban regeneration in order to continue to be competitive in new market scenarios (Source Authors’ elaboration)

3.2 A New Approach for a New Market Context There is an opportunity, or rather a need, to change the mindset and adopt a new approach that, making the most of new technologies and embracing an “open” logic, resolutely focuses on gathering data and researching markets to ensure demand expectations are analysed and understood over time. The chance is to create products and services that are no longer designed on the basis of what worked in the past—and the “limited” experience of the project team—but conceived by broadening the horizon of research, listening to stakeholders and interacting collaboratively with the wider market (suppliers, tenants, end-users, etc.). Needless to say that quality and experience of the project team remains crucial, but one should ensure that these generate opportunities and not bias and preconception that can condition future choices.

3.2.1 How to Win in New Market Scenarios New technologies offer operators the possibility to transform their business models, broaden their research horizons and access innovative solutions, resources and collaborations in an efficient and economical way. It is possible to explore a new working model to address development and regeneration initiatives based on the general principles described below (Fig. 3.2).

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Fig. 3.2 Two working models in comparison: centralized closed based on know-how (the past) and decentralized open based on relationships and processes (the future) (Source Authors’ elaboration)

On the supply side, digital technologies can facilitate the interception of the best innovative solutions that represent the state-of-the-art globally and that can be used, improved and adapted to meet the needs of a specific development or regeneration project. On the demand side, technology can be used to better understand the dynamics of change in real time. Big data, Internet of Things and Artificial Intelligence can be used to create “digital twins” of complex socio-economic systems such as, for example, the catchment areas of real estate projects. BOX: In summary, the proposed “new” approach to real estate development could be founded on the following principles: Technology transfer can be accelerated by adopting an “open architecture” mindset based on decentralization, information, collaborations and processes. Developers should acquire a deeper understanding of the markets in which they operate, the ability to select the best solutions and integrate them intelligently into an optimized system. Developers should focus on creating in-house expertise in data science, digitization, collaborative processes and integration of innovative technologies. Investments in research and development and great attention to customers’ experience with the aim of creating new formats, services and products perfectly aligned with expectations or even able to generate new market and new demand. The challenge is to create innovative offerings that meet stakeholders’ needs and ensure adequate profitability.

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Embrace flexibility across all phases and dimensions of real estate products to ensure sustainability and resilience over time. Acknowledge the importance of high-quality architecture and engineering intended as the ability to create a durable, contemporary built environment that meets demand, that guarantees full occupation of space, equipped with efficient systems and technologies at low running costs. Quality architecture creates place identity, reinforcing its vocation in harmony with nature, and serves users and local communities. Forge extraordinary partnerships to position the scheme, access chosen markets, secure demand and reduce commercial risk before the development starts, rather than investing resources on forecasting hypothetical scenarios. Create the future instead of trying to predict it. The know-how, experience and intuition of real estate professionals will continue to be the most valuable assets for the real estate industry in future scenarios. What we are suggesting here is that it is possible to augment the power of human capital through the intelligent use of new technologies.

3.2.2 Leveraging Data and Machine Intelligence Similarly, to what we are already able to do for the built environment, using tools such as CAD, BIM, GIS and others, it is possible to use new technologies to develop virtual digital models of the socio-economic environment. Through the use of data and information generated by sensors, cameras, mobile devices, systems and other platforms, it is possible to model, simulate and visualize the behaviour of the social and economic ecosystem in the catchment area of interest for a given initiative (Fig. 3.3). The creation of a “digital twin” allows the modelling of the physical environment and socio-economic activities. This virtual model is a prototype of the real estate product and its context—should be fed and updated in real-time by different sources of data—and should provide a coherent and comprehensive representation of the future that we plan to create. It is data and information that inform the product design process and its operation when completed. The virtual digital model can be used at planning and design stage to identify and test optimal mix and sizing of uses, infrastructure and services. During construction it can support accessibility and site logistics. At completion, the model allows us to monitor operation, check the balance between supply and demand and identify the most appropriate corrective measures. The extraordinary advantage compared to traditional systems consists in the fact that the model dynamically uses the information flows originating from real life in the catchment of interest instead of static statistical data series. Intelligent adoption of AI tools, together with systematic verification and calibration activities, can improve the reliability and accuracy

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Fig. 3.3 The integrated digital model of the built, social and economic environment in the real estate product catchment area (Source Authors’ elaboration)

of representation over time (Hoar et al 2017). Ideally, the model should be open and accessible to facilitate co-creation, collaboration and innovation processes. The dynamic updating of the model, as new data are generated, allows the optimization of decisions in relation to the simulations and responses generated by the ecosystem. It is quite obvious that the standard zoning and planning tools are no longer adequate because they are static, anchored to the last review date and not very representative. For instance, in large urban regeneration programs the digital model should help prototype, test, review and compare options, quantify stakeholders’ needs and estimate the actual impacts generated by the various alternatives at completion. The model uses real-life input data and not static info from literature and therefore reflects, in real time, the actual needs of users, operators, community and society. During development and operation, the model should help monitor the positioning of the scheme and identify any misalignment between the offering and the demand, thereby improving the flexibility of the real estate product during its useful life. The digital model can run accurate, real-time simulations of a physical, social and economic ecosystem. It helps acquire agility and build resiliency, however it will not be able to make medium-long term forecasts for an unknown future.

References

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References Dall’Orso M, Ciaramella A (2019) Sviluppo immobiliare e rigenerazione urbana – Perché alcuni progetti hanno successo e altri falliscono. Franco Angeli, Milan, Italy Hoar C, Atkin B, King K (2017) Artificial intelligence: what it means for the built environment. The Royal Institution of Chartered Surveyors (RICS), London, UK

Chapter 4

How Can We Drive Innovation?

4.1 Innovation as a “Total Solution”: The Business Model Revolution For entrepreneurs, start-ups and emerging players, innovation means turning good ideas into competitive products and services after having tested and refined them according to the feedback received from the market. At the same time, they create culture, values and business models perfectly aligned with the value propositions they have created. The main challenge for them is to scale-up, manage growth and transform the start-up into a real company. For “mature” and more structured real estate operators, however, innovation can be much more difficult and tiring. For these players, in fact, innovation means questioning processes, logics and “beliefs” deeply rooted in the organization. It means initiating paths of change that inevitably introduce elements of uncertainty and clash with the natural resistance of people to change their habits. It means venturing into new, sometimes unknown, work contexts.1 Innovation does not happen suddenly, extemporaneously, following a brilliant idea; in most cases it is the result of hard work at all levels of the organization, continuous and systematic, usually not linear but rather composed of a series of iterative activities. It is a result of a long-term strategy fed by corporate culture and processes that support multidisciplinary collaboration. The real estate operator who is mature to innovate must critically analyse his business model and define a clear strategy that identifies where to innovate and what to change. 1 In

the real estate development sector, these "beliefs" concern aspects that operators have so far considered not "negotiable", i.e. to be accepted because they cannot be improved or modified, such as the static nature of regulatory frameworks, the long and uncertain time-to-market due to bureaucracy in the authorization processes and the difficulty of creating an efficient and industrialized supply chain. This reflection is well presented in de Jong M., van Dijk M. (2015), Disrupting beliefs: A new approach to business-model innovation, in “McKinsey Quarterly”, July 2015, McKinsey & Company, NY, USA.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_4

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Sometimes innovation is generated by necessity, such as the need to overcome certain constraints, the scarcity of essential natural resources or the commitment to solve certain critical issues. Other times innovation originates from the intelligent change of behaviour that is already in place. BOX: Urban environment can be a fertile ground for open innovation Most advanced countries across the globe are showing a consolidated correlation between R&D investment, innovation and economic growth. The transformation of R&D input into innovation, creation of viable businesses and new jobs requires effective, open collaboration across different disciplines. It is possible to create physical, social and economic environments that support these “magic” synergies. New-generation innovation districts are currently being developed across the world. These districts are high-quality, sustainable, mixed-use areas, with urban attributes, where people from public institutions, research centres, universities, global corporations, SMEs and startups, “collide”, share, cooperate and co-create. These “ecosystems” are characterised by high-density intellectual capital, cutting edge technologies, substantial entrepreneurial resources, engaged networked-communities and a strong culture that supports innovation. Best practice for successful creation and operation of innovation districts often relies upon Productive Public-Private Partnerships. Good human-centred technological innovation can be the engine that drives urban communities, supporting socio-economic growth and increasing broad-based prosperity and attractiveness. Today, innovation of specific services and products must be accompanied by an overall review of their entire supply chain, taking into account local cultural aspects and socio-economic conditions. It means that the introduction of an innovative product or service in the market also requires a review of the overall business model. This might call for the renewal of distribution channels, new customer relationship strategies, new strategic partnerships, the finding of new resources and therefore, in general, the redefinition of a “complete integrated solution”. The objective being to deliver rare, personalised, satisfactory experiences that generate great quality and value in the long term (the so-called “customer journey”). Consequently, in addition to product and service innovation, one of the areas where truly radical and disruptive innovations can be achieved is that of business models. When a company builds a strong culture that favours innovation, opportunities to do things differently and better can be found every day, at any level within the organisation, and in any area. It is possible to innovate the market segments on which to focus, the value propositions, the ways in which a company relates to its customers, the supply chain and partnerships, the ways in which resources and skills

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are valued, etc. If opportunities are everywhere, every person in the organization can be an agent of innovation.2

4.2 Experimentation, Openness, Flexibility and Ambition In the current socio-economic context it is difficult to make reliable predictions about the future. Assumptions, principles and reference models of the past no longer guarantee the right answers to the changing needs of consumers. Nowadays, the best way to verify the appeal of innovative ideas is to test them in real life. Practical testing of innovative ideas makes it possible to verify their functionality in a real context, assess the level of interest by target users and acquire very useful feedback to improve the user experience. Experimentation requires the creation of a prototype, the availability of a wide and diverse set of sample users, and the creation of test conditions that are as representative as possible of the real-life scenarios. BOX: Urban Living Labs To this end, areas of experimentation or “Living Labs” are being developed in several parts of the world3 to test new urban technologies in partnership with various private and public stakeholders. A key feature of Urban Living Labs is the active involvement of communities. In these labs, people collaborate in the design of innovative solutions, and provide feedback on the actual perceived benefits. It is clear that, while it can be relatively simple, quick and cheap to prototype and test a new App, a new product or service, it can be challenging to create a physical prototype of a building or an entire development! For real estate development and regeneration projects, full-scale experimentation is feasible through the creation of digital prototypes that reproduce, in a sufficiently accurate way, the physical characteristics of a product and its interactions with the

2 The

principles underlying good innovation are described in Fischer B. (2011), Innovation: what’s new? in “Forbes”, October 2011, Forbes Media LLC, Jersey City, USA. In a nutshell, the author believes that the art of innovation requires the adoption of design thinking techniques; open architecture and co-creation; considering both the possibility of creating value and "capturing" value; establishing close collaborative links with all stakeholders in the supply chain; building on the experience of lead users; creating virtuous teams led by strong and confident leaders. 3 The European Network of Living Labs (ENoLL) (https://enoll.org/) defines Living Labs (LLs) as innovation ecosystems in open architecture (open innovation) focused on the end user. Living Labs are based on the systematic use of co-creation and integration of research and innovation processes in real life contexts and communities. A description of the working methods adopted by the LLs is provided by Steen K. e van Buern E. (2017).

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local context.4 These are virtual replicas of buildings, open areas and infrastructure provided with data and information regarding multiple tangible attributes. Specialised digital tools, sometimes already integrated with the former, can be used to reproduce the “hard” aspects of interest, such as the impact of a new project on mobility and the environment (traffic, noise, pollution, etc.), as well as requirements of natural resources and energy consumption. These tools make it possible to simulate and test the physical characteristics of a new real estate product within a given built environment (the physical catchment area). It is a lot more complex to accurately simulate the nonphysical attributes associated with the creation of a new real estate product within a catchment area. To analyse “soft” aspects such as the dynamic relationship between offer and demand of goods and services, the creation/disappearance of jobs or the behaviour and quality of life of people who live in the area, it is necessary to build a sophisticated digital model of the socio-economic ecosystem. Prototyping and experimenting help developers to better understand and match the demand. However, the volatility of the context is such that it also requires the adoption of principles of flexibility and agility, both of the operator and of its products and services. In the current market, getting out quickly from a dangerous situation that might lead to financial losses is just as important as promptly entering into potential new market opportunities. Effective stakeholder involvement at early stage makes it possible to get ideas and feedback, introduce improvements, build consensus and encourage the rapid dissemination and adoption of a real estate product. Involvement should cover the widest possible spectrum of stakeholders and the process should aim at establishing an open collaborative environment inspired by the possibility of considering different ideas from different actors. The overall objective in innovation should be to generate sustainable tangible benefits to stakeholders by improving their quality of life and experience and not to just add some new techno gadgets for their own sake. Putting people at the centre, real estate developers should undertake ambitious, even revolutionary new paths and break new ground rather than losing out having to adapt to change.

4.3 Recognising Good Innovation As a first approximation, the appeal of an innovative idea, measured in terms of its market acceptance potential, can be assessed by referring to the results of the research work conducted by the sociologist Everett Rogers. Based on these studies, it emerges that the main and fundamental objective of any innovative idea is to be adopted quickly by the market. 4 Think of the potential of augmented reality in this area. Today’s technology also makes it possible

to create digital twins and use them to quickly carry out cost-benefit analyses of alternative technological solutions, simulations of the construction site and operating phases.

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BOX: According to Everett Rogers, an idea, to be adopted quickly, must have the five characteristics briefly described below Benefits offered compared to cost: Innovation must generate important tangible benefits for the users. These benefits must be well identified, explained and communicated in a way that makes them visible and understandable. The description of the benefits should focus on the actual advantages and the quality of the experience that users will have in adopting the new idea. Simplicity of adoption: The simpler the new idea is, the more likely and faster it will be adopted by the market. Complex and difficult-to-explain ideas are less likely to be adopted and even less likely to be adopted quickly. Compatibility with users’ lives: To be adopted quickly, a new idea should not require the user to go through burdensome procedures, laborious changes and adjustments to their devices and habits. If the new idea requires too many changes from the user all at the same time, it is more difficult for it to be adopted quickly. Testability by potential users: The possibility of testing the idea before adopting it allows us to overcome the barriers of initial distrust. New ideas must be made accessible, sometimes initially even for free, because if the users can try the idea and if they like it, they are likely to decide to purchase and adopt it. Observability by potential users: For rapid adoption of a new idea, it is essential that as many potential users as possible can see the idea and thus feel encouraged to test it. The quicker an idea is adopted, the quicker the pay back of the investment and the more benefits are spread to the users. Moreover, the speed of adoption of the idea gives the innovator a first-mover advantage over those competitors that will follow on the same path.

4.4 Innovation: Putting People at the Centre In general terms, “good” innovation focuses on people and aims to solve concrete problems, meet needs, generate tangible benefits, create new opportunities and thus contribute to improving quality of life while respecting certain environmental, social and governance principles. In the specific case of real estate development and urban regeneration, putting people at the centre means taking into account a multiplicity of diverse human functions and roles, i.e. tenants, end users, visitors and the main stakeholders of a specific initiative. The real estate developer, therefore, must focus its attention not only on architectural, engineering and commercial aspects, but also on building a deep knowledge of human behaviour through direct observation, monitoring and analysis. This

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refers not only to the a posteriori measure of human well-being but also, and above all, to the systematic acquisition of useful information and data on the socio-economic dimension that are needed as input for the development process. In analogy to what we usually do for the built environment—i.e. topographic and other technical surveys of various kinds, and deep geotechnical investigations to find a solid base on which to set the foundations of buildings—we must adopt a similar approach for the soft components to understand the needs, aspirations, deep motivations of people and therefore their behaviour. All this is necessary to define concrete actions aimed at achieving the objectives of improving the quality of urban life, creating opportunities, accessibility and social inclusion. This activity, which requires the real estate operator to devote time and resources to the study of social and economic disciplines, should not be underestimated and regarded as a secondary “cosmetic” activity for the sake of marketing and communication purposes. On the contrary, the in-depth knowledge of people, their lifestyle and aspirations— and therefore the overall social and economic framework of reference—must be part of the “core business” of a real estate operator, as they represent the solid base for the creation of strong visions and strategic objectives of development and regeneration initiatives. With this approach, real estate assets become the means with which the operator, based on its capacity and available technological solutions, meets people’s expectations in terms of services, experiences and opportunities. The systematic acquisition of data and information on social and economic aspects, therefore, is a strategic activity that must be started already in the preliminary phases of a project. This activity, in fact, allows us to consciously direct strategic choices towards solutions that meet people’s real needs and create a positive social impact. An in-depth analysis must be made for all stakeholders to have a complete picture of needs and expectations. Sometimes it may also be useful to search for data and information about the behaviour and opinions of people outside the target market segments, as interesting original points of view, innovative ideas and unexplored market spaces may emerge from this research. The complexities that arise as a result of these activities relate to the fact that probably not all the needs and expectations expressed can be met, that sometimes some of them are conflicting with others or that certain expectations and needs are not explicitly expressed by people. The role of the real estate developer, therefore, is also to act as “mediator” and identify the optimal solution well balanced between the various different interests of the main stakeholders, as well as to undertake initiatives aimed at identifying innovative products and services with the ambition of creating new demand.

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4.5 Intercepting and Adopting “Good Innovative Solutions” We live in a world characterised by rapid, ever-increasing concern on the potential negative consequences of social, health and environmental problems. There is a growing pressure for action on policy makers and corporations to take responsibility for negative externalities, look after all stakeholders—and not just shareholders—and address global challenges. We are also witnessing a mounting pressure on communities and citizens to change their behaviour and be more sustainable and inclusive. At the same time, a solid correlation between R&D investment, innovation and competitiveness drives a renewed growing interest in creativity and entrepreneurship. The real problem is to identify the Good Innovative Solutions (GInS)5 —those that deliver sustainable socio-economic progress—among the large ever-growing number and variety of innovations. Why do we want to address this problem? Because we strongly believe the effective identification of good innovation and its swift and meaningful real-life adoption can help the much-needed, urgent transformation towards a sustainable and equitable future for all. BOX: Why is it difficult to intercept and adopt good innovation? Arduousness of intercepting “Good Innovative Solutions” (GInS): Innovation happens every day, everywhere around the world. Therefore, it can be extremely difficult and onerous for companies, institutions and individuals to track and “intercept” good innovation (reasons include: limited resources, networking and market intelligence capabilities; logistics issues; “inwardlooking” rather than “outward-looking” culture; “business as usual” attitude; blurring industry lines with new entrants; etc.). Sometimes the difficulty starts, even earlier, due to poor understanding of the specific context and inability to identify the right problems that need solutions. Intercepting GInS is just the start: to generate tangible positive impact we must address the Lack of speed in adopting Good Innovative Solutions: practical adoption of transformative GInS is currently too slow compared with the fast pace of change and urgency to address big social and environmental issues. Transfer and real-life meaningful adoption of good innovation is not efficient and not

5 In this context, the term “Good Innovative Solutions” (GInS) means innovative proven best-practice

solutions that meet the following criteria: “do well & do good”, represent State-of-the-Art, can be transformational, generate tangible positive impact, are ESG compliant and contribute to specific UN SDGs. These include both “soft” and “hard” innovative solutions such as green behaviour, services, processes, business models, policies, materials, technologies, products and complex bundled solutions. GInS are solutions that have been successfully tested and are already available on the market. Suppliers of GInS can include diverse actors such as small businesses and Start-Ups, SMEs, big Corporations, Institutions, NGOs, NPOs, Research Centers, Universities, Innovation Hubs, etc.

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fast enough (reasons include: limited diversity in the workforce; resistance to change and taking risks; “re-inventing the wheel” culture; benefits-to-cost not understood; limited triablility and observability; complexity; no compatibility or lack of transformation of whole value chain; etc.). It can be extremely difficult and frustrating for organizations and individuals to stay on top of all that is new and all the rapid changes. Consequently, most stakeholders (Public Institutions, Private Sector, Communities, etc.) are increasingly out of sync with changing needs, are not good at finding new problems and often just “re-invent the wheel” because they are afraid to fail and are not aware that good innovative proven solutions already exist somewhere in the world. To resolve this problem, we have developed one possible solution that should make it easier to access GInS at global scale and foster their practical implementation. We envisage the creation of an independent, curated, open, digital ecosystem, with global reach, that can facilitate identification and real-life adoption of “Good Innovative Solutions” from place to place and across industries. Focusing on solutions that are important for society and nature, one can contribute to create a better future for all.

4.5.1 A Digital Ecosystem for Sourcing Good Innovative Solutions Intercepting and adopting “Good Innovative Solutions” (GInS) can be very arduous and far too slow. One option could be the creation of a digital ecosystem—a platform—that facilitates sourcing and real-life adoption of GInS from place to place and across industries. To be successful, the ecosystem should deliver “never-experiencedbefore” value to all Participants in terms of reduced effort, time and cost to access solutions, markets and knowledge. We are not thinking about a transaction-based e-commerce, neither a static knowledge-transfer platform, nor an incubator, accelerator, innovation or investment platform.6 We are thinking about the creation of an independent, open, prosperous, digital ecosystem where diverse Participants meet, collaborate, share knowledge and experiences, and match needs with proven 6 The

platform is not a technology transfer office, an incubator, accelerator or investor. The digital ecosystem contributes to “consolidate a fragmented innovation market”, helps bridge the gap between suppliers of GInS (which are solutions that already exist in the market) and potential adopters. It is a global, open, coordinated, curated and prosperous knowledge environment where a community of diverse Participants can access all the resources they need to be successful. The ecosystem provides the ideal, frictionless and collaborative environment that facilitates the transformation of knowledge and solutions into behaviours and real-life applications that contribute to society. Depending on the specific objectives of the platform, a revenue model could be set up to support the vision to create and maintain a dynamic digital ecosystem and reach critical mass on selected markets very rapidly.

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innovative market solutions. The platform would support lifelong learning, nurture curiosity and amplify human cognitive abilities. All Participants—the ecosystem’s customers—should be nurtured, and the platform should be curated and big enough to maximise community, ecosystem and network effects. The platform should be “flexible by design” to meet the diverse and evolving needs of its Participants. The platform should strive to pursue “total simplicity” of Participants’ role in the ecosystem. Its authentic purpose should be to contribute to create a better future for all by sourcing best available GInS globally and boosting their cost-effective, meaningful real-life adoption. The ecosystem should provide a digital environment—a “one-stop-globalknowledge-market”—where offer and demand of Good Innovative Solutions meet. A diverse community of selected experts and experienced users supported by efficient data lake architecture and AI powered algorithms select, review and allow perfect matching between specific needs and best available GInS at global scale, and support their swift and meaningful real-life adoption (Fig. 4.1).

Fig. 4.1 Independent, curated, open, digital ecosystem, with global reach that facilitates identification, transfer and real-life adoption of “Good Innovative Solutions” from place to place and across industries (Source Created by the authors)

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The ambition should be to understand and address the individual needs of the various Participants and generate beneficial network effects aligning various positive forces (science & knowledge, policies, commercial, finance). The focus should be to deliver customised value propositions by helping Participants resolve their problems and achieve their specific goals.7 Suppliers of GInS could benefit from: lower customer acquisition cost; Participation in markets that would be unreachable; improved status and market positioning; faster adoption; better targeted R&D investments based on real-life feedback and data; reduced cost of productive networking, collaboration, co-creation and knowledge access; opportunity to address connectedness and complexity of big issues that need innovative solutions. Hunters of GInS could benefit from reduced effort, time and cost to search, map, access and adopt good solutions, and from the largest choice of solutions thanks to global reach and constant update. Additional benefits could include established expert review and rating system; reduced cost of productive networking, collaboration, cocreation and knowledge access; opportunity to address connectedness and complexity of issues that need innovative solutions; continuous learning and effective re-skilling of talents. Creators of knowledge, market intelligence, strategies, policies and initiatives could benefit from: global visibility; ecosystem and network effects; opportunity to easily promote and monitor systemic initiatives; potential to quickly disseminate knowledge, policies and opinions; access to real-life, real-time feedback and market data that can inform policy and decision making; access to best-practice policies and solutions globally. Quality of the ecosystem’s contents and Participants should be the priority. The ecosystem should be actively curated to ensure high-quality Participant experience. Curation could be carried out by in-house and external experts who review and select Participants, check quality of the platform’s content, monitor traffic and performance.

4.5.2 Creating Conditions for Scaling up Good Innovative Solutions Good Innovative Solutions must be widely and rapidly adopted to generate a positive impact on our lives. A multitude of fragmented, diverse actors exist across most industries and geographies mainly focusing on R&D, technology transfer and early 7 Suppliers and Hunters of innovative solutions typically include Global Corporations, SMEs, Start-

Ups, Entrepreneurs, Inventors, Experts, Innovation Leaders, Investors, Universities, TTOs (Participants can play all roles simultaneously: the Supplier, the Hunter or the Creator). Potential Sources of Suppliers include Accelerators, Industry Networks and Associations, Innovation Districts/Hubs, Experts, etc. Creators of knowledge, market intelligence, strategies, policies and initiatives typically include Institutions, Foundations, Associations, Networks, Media, Opinion/Decision makers, Scientists, Research Centers, Universities, NGOs, NPOs, etc.

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Fig. 4.2 Scaling-up Good Innovative Solutions—Competitive landscape, context and needs (Source Created by the authors)

stage start-up incubation and acceleration.8 However, at present, offering of support, services and tools in the scale-up and adoption segment is currently weak (Fig. 4.2). We expect the Platform could help to speed up the much needed adoption of GInS because it focuses on: – Scale-up and adoption of market-proven innovative solutions that bring tangible benefits, are ESG compliant and pursue UN SDGs. – Collaboration, matching needs/problems with innovative market solutions, sharing knowledge and real-life experiences. The platform is curated and has scale to maximise ecosystem and network effects.9 – The relationships among the diverse Participants to the ecosystem, their needs and provides all the resources required for their success.

8 These

include Generalist e-commerce Platforms, Solutions Crowdsourcing Platforms, Corporate Innovation Platforms, Static Knowledge-Sharing Platforms, Specialized Service and Capital Access Platforms that boost rapid growth. Innovation Events, Pitch Events, Technology Fairs and Exhibitions, Conferences, Hackathons, Workshops, etc. Incubators, Accelerators, Venture-Client programs supported by digital platforms (digital and physical). Innovation Districts, Science and Technology Parks, Innovation Hubs. Universities, Research Centres, Technology Transfer Offices and Companies, Ecosystem Intermediaries. Innovation Networks, Associations, Foundations, Initiatives. 9 The value of the ecosystem increases with the quality and number of Participants. Critical mass can be created sector by sector, niche by niche. Our vision is to create an ecosystem with a portfolio of selected, complementary and synergetic verticals (target niche markets) and not a generalist platform.

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Focusing on selection and rapid adoption of high-impact Good Innovative Solutions, the Platform can create opportunities for people, drive sustainable progress and contribute to society10 : – Help align business strategies and public policies to selected UN SDGs. – Assist private sector rethink business models; public Institutions rethink policies and Communities rethink their behaviour. – Contribute to build trust and re-align the disconnect among knowledge, public opinion, Institutions and the private sector. – Inspire and facilitate the creation of extraordinary alliances across boundaries of all nature (industry, culture, geography, etc.). – Help build a collective sense of purpose, learn from nature and align forces to address big social, economic and environmental issues. – Help monitor and measure the actual end benefits generated by the adoption of GInS. As our market of choice is real estate development and urban regeneration, the Platform should address both existing and new urban areas, focusing on five main target sectors that urgently need Good Innovative Solutions, namely Built Environment, Energy, Mobility, Waste and Water. BOX: Why is adoption of GInS urgently needed for urban areas? Cities are big contributors to social/environmental problems and can be a focal point in a transition to a sustainable era. Much of the existing urban areas are decades/centuries old, formats are outdated, services not adequate and urgently need retrofit, renovation and repositioning. Policies and regulations need to be reformed as they are increasingly out of sync with socio-economic development and no longer meet the needs of the demand. Urban population growth is expected to continue in the next few decades generating unprecedented pressure on the built environment. The built environment sector is technologically underserved, needs innovative solutions to improve productivity, re-position its image and attract young talents. There is a growing offering—but highly fragmented—on PropTech, Smart Cities, Circular Economy, Sustainability, Social Impact, ESG innovations applied to the built environment. Opportunity to repurpose, leapfrog and get ahead of the curve.

10 The ecosystem is driven by authentic strong purpose beyond profit. The ecosystem itself should include functionalities that allow monitoring and measuring of the impact it generates on selected social, economic and environmental dimensions and objectives.

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Scouting GInS globally and facilitating their transfer and meaningful real-life adoption from place to place and across industries, we contribute to transform and create urban areas that serve prosperous, inclusive and sustainable communities.

4.6 Urban Areas: A Fertile Ground for Innovation In the current rapidly changing socio-economic environment, not even the largest companies have all the know-how they need in-house. Successful innovation requires multi-disciplinary, open collaboration among various actors as most of the problems and challenges we are facing nowadays are new and complex, and off-the-shelf solutions are often not readily available. Consequently, today’s most powerful innovation originates from deep collaboration, cross-pollination, sharing of ideas, mashing up of radically different disciplines and technologies to create new solutions to new problems or to progress traditional industries. Effective multi-disciplinary, open collaboration therefore requires intellectual density,11 diversity, tight proximity, strong networks and partnerships among the various actors involved.12 Physical proximity and density are attributes that can be typically found in some urban environments. Compact, walkable, bikeable, mixed-use urban areas with research labs, universities, offices, co-working spaces, business incubators, housing, retail and leisure offer a fecund ground for collaborating and practicing open innovation. A high-quality, “porous” built environment with great architecture, public spaces and services is one of the fundamental ingredients for attracting talents and businesses and can serve as a Living Lab for testing urban technologies. However, these physical attributes of cities and metropolitan areas are only some of the components that are needed to trigger successful innovation. Creating a buoyant ecosystem that supports entrepreneurial spirit and cutting-edge performance—where innovation input is effectively transformed into tangible socio-economic output—also demands some social, cultural and behavioural aspects of crucial importance. Creating a state-of-the-art innovation ecosystem—an inclusive, diverse and lively community where people feel they are changing the world—requires a gradual shift of focus from built-environment investment to socio-economic output. Rather than merely pursuing often unrealistic growth targets directly through major, capital-intensive infrastructure and real estate projects, cities and towns should concentrate on their local culture, heritage, traditions, unique strengths and define strategies to turn them into valuable assets. With this approach, the built environment is a means—one of the ingredients needed to achieve superior returns—and not the end in itself. Focusing on local competitive advantages and pursuing socio-economic outputs could potentially allow moving from “incremental impact”, which is typically generated by direct investment 11 Concentration of scientists and engineers but also social science experts to address ethics, privacy and inclusion issues. 12 End users, citizens, talents, mature businesses, start-ups, research centres, academic institutions, venture capitalists, etc.

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in real estate and infrastructure (short-term output proportional to input), to more resilient, long-term “exponential impact”, which also incorporates the social and economic returns generated by the creation and growth of talents, networks and entrepreneurial culture.

4.6.1 Creating a State-of-the-Art Innovation Ecosystem Creating a state-of-the-art innovation ecosystem requires deep understanding of the key “soft” and “hard” ingredients that drive entrepreneurship and innovation. We recognise that we do not have all the answers, but we are aware that the creation of a successful innovation ecosystem requires both great tangible assets (the “hard” ingredients: capital, technology and built environment) and great intangible assets (the “soft” ingredients: talents, culture and networks). It is quite rare to come across actors that can master the “magic” of the creation of the great intangible aspects of the entrepreneurial phenomenon: how to attract, create and retain talents; how to build a sustainable long-term culture that supports innovation, collaboration and entrepreneurship; and how to facilitate the creation and growth of personal and business networks.13 To effectively transform innovation input into industry leaders and consequently into socio-economic output, it is necessary to learn how great tangible and intangible assets should be crafted, nurtured, leveraged and combined to create the most prolific innovation ecosystem (Dall’Orso 2019). Tangible assets include the physical infrastructure, in terms of built environment and technology, and the capital that is needed to create and maintain it over time. In addition, a major share of the available funds is needed to support the intangible assets dimension and to drive the innovation ecosystem in the long run: – Capital is necessary to create a high-quality built environment and value-add technologies able to attract talents and companies. Operational capital is needed to “power charge” the innovation ecosystem, fund start-ups, finance cross-sector projects, mentor, coach and grow local talents. Some commitment of public-sector funding increases credibility and can generate matching from private investors. The right balance of “patient” and short-term capital will help achieve both financial and social returns. – Unique, state-of-the-art, better, faster and more secure technologies should be embedded in the urban fabric (so that scientists and entrepreneurs can create more tech and more innovation). Technology should be shared to reduce cost, affordable for micro businesses and individual entrepreneurs, and easily upgradable to meet growing/changing demand over time. 13 On the topic of Innovation District see the paper from Katz B. and Wagner J., The rise of innovation districts: a new geography of innovation in America, Metropolitan Policy Program at Brookings, US.

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– The built environment should facilitate collaborations, interactions and “accidental collisions” among the various actors. To attract talents, citizens, visitors and businesses, the urban fabric should offer high-quality, authentic, vibrant private and public places, with great mixed-use functions and services, including great food, entertainment, culture, art and leisure. Intangible assets comprise local and global talents, an authentic innovation culture, deeply rooted in the community, which supports entrepreneurship and strong collaborative networks among actors: – High intellectual density should be pursued not only by luring the best talents from around the world but also, and most importantly, by creating favourable conditions to grow and develop locals, unleashing their potential through training, coaching, on-going mentoring, creating opportunities and experiences. Support should be offered not only to innovative technological ventures started up by skilled entrepreneurs, but also to traditional businesses operated by local people, therefore contributing to the creation of an inclusive urban community.14 – Transforming innovation input into socio-economic output requires a missionoriented culture, strong motivation, tenacity, audacity, hard-work, competitiveness and commitment to deliver great outcomes. At the same time, technological innovation needs openness, participation and collaboration and a culture that supports entrepreneurships, accepts risk-taking, failures (useful “productive” failures that build-up experience) and learning from mistakes.15 – Networks are instrumental for collaborating and practicing open innovation but also for increasing social cohesiveness of the community. Strong networks among stakeholders, socio-economic parties and citizens facilitate cross-disciplinary work, knowledge spill-over and mash-up of different technologies.16

14 Some “intellectual turnover” can be acceptable, or even recommendable for bringing in new ideas and different perspectives, but in general terms creating an innovation ecosystem is a longterm process that requires a stable community of people with long-term view, shared commitment, passion and emotional attachment to the vision and the place. 15 Transactional relationships mainly based on financial opportunities and convenience (I join because I am going to be better off) would not help. Building a resilient and sustainable community in the long run requires people that share the authentic purpose of the urban ecosystem, the fundamental deep reasons for existence that make day-to-day work meaningful, and people that feel they are creating something great for humanity. 16 A porous and dense urban environment can generate spontaneous or accidental collisions among people that potentially can evolve into fruitful collaborations and hopefully into innovations. However, to create and maintain a successful innovation ecosystem, specific strategies and processes should be put in place with the objective of creating and nurturing networks among key actors within the community and with the global players of innovation.

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4.6.2 Driving Progress in Communities Through Innovation Good innovation can be the engine that drives sustainable progress and supports socio-economic revitalization of communities, but requires a strong vision, a coherent unitary masterplan and a collaborative governance. Embracing good innovation is one of the strategies some cities and towns might take into consideration to stimulate growth, enhance competitiveness or revitalize distressed communities. Transforming science into innovation and innovation into high-growth entrepreneurship requires a strong authentic vision and the ability to create a well-balanced ecosystem with great physical and socio-economic infrastructure. Whilst tangible assets are relatively quick and easy to construct, modernise or reconstruct, building intangible assets requires a long-term commitment to create the right mind-set of a community. Global talents and businesses are mobile and can be attracted by a vibrant urban environment with distinctive amenities, but, at the same time, they can be “volatile” and suddenly leave for a more convenient place as conditions change. Therefore, the real challenge here is to generate those fundamental conditions for breeding and growing local champions, which means investing in education at all levels, promoting real-life networking and multi-disciplinary initiatives, teaching locals how to manage companies and market products. It also requires structuring ad hoc initiatives to bring into work less-represented segments of the community and steer younger people from safe, but less rewarding jobs, to entrepreneurial careers. Some market forces such as demand growth in emerging sectors, competitive pressure and a favourable tax/regulatory environment can facilitate the activation and establishment of innovation ecosystems. Even when these conditions are in place, innovation ecosystems still require careful intervention, a constant injection of energy and drive, a coherent unitary strategy with clear objectives on both dimensions (tangible and intangible assets). A long-term thinking Governance should maintain alignment with vision and convergence of interests, cultivate networks, provide support, promote participation and maximise the potential of all stakeholders. The strategy should be translated into a compelling story and clearly communicated in a coordinated manner across multiple channels to reinforce the positioning of the innovation ecosystem in the marketplace. Even good innovation and new technologies will not guarantee productivity growth, long-term sustainability or shared prosperity. To achieve these superior objectives we have to change mindset, raise people’s skills, align policies, incentives and social structures at the pace of technological innovation. Businesses should transform and innovate to stay relevant, minimise negative externalities and contribute to society. Institutions should update policies and regulations in sync with technological developments and needs to address social and environmental problems. Communities and citizens should change their habits and embrace new sustainable behaviour. We should not overestimate the potential of innovative technologies and underestimate the importance of human beings. To stay in control of our future we have to learn from nature and invest in both good innovation and human capital.

References

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References Abrahamson S, Ryder P, Unterberg B (2013) Crowdstorm: the future of innovation, ideas, and problem solving. Wiley, New York, NY Clark G, Moonen T (2017) The logic of innovation locations. Catapult Future Cities, The Business of Cities and Future Cities, London, UK Clark G, Moonen T, Gert-Joost P (2016) Building the innovation economy: city-level strategies for planning, placemaking and promotion. Urban Land Institute, London, UK Dall’Orso M (2019) Promoting sustainable urban development through impact innovation. Urbanet, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Bonn, Germania Dall’Orso M, Ciaramella A (2019) Sviluppo immobiliare e rigenerazione urbana – Perché alcuni progetti hanno successo e altri falliscono. Franco Angeli, Milan, Italy De Jong M, Van Dijk M (2015) Disrupting beliefs: a new approach to business-model innovation, in “McKinsey Quarterly”, July 2015. McKinsey & Company, New York, NY Fantino D, Mori A, Scalise D (2011) Geographic proximity and technological transfer in Italy. Banca d’Italia, Mimeo Fischer B (2011) Innovation: what’s new? in “Forbes”. Forbes Media LLC, Jersey City Katz B, Wagner J (2015) The rise of innovation districts: a new geography of innovation in America, Metropolitan Policy Program at Brookings, US McKinsey Center for Business and Environment, Ellen MacArthur Foundation, SUN, (2015), Growth within: a circular economy vision for a competitive Europe Rogers EM (2003) Diffusion of innovations, 5th edn. Free Press, New York, NY Senor D, Singer S (2011) Start-up nation. Twelve Hachette Book Group, New York, NY Steen K, van Bueren E (2017) Urban Living Labs: a living lab way of working. Amsterdam Institute for Advanced Metropolitan Solutions, Delft University of technology, Amsterdam, Netherlands The Brooking Institution (2017) Restoring prosperity. The Brooking Institution, Washington, DC

Chapter 5

Balancing Physical and Socio-Economic Attributes

5.1 The Socio-Economic and Built Environment Dimensions How can great inclusive places be created? How can healthy urban environments be forged to provide opportunities for interaction and for personal and professional growth? How can cities balance the short-term need to integrate new residents with the long-term goal to guarantee inclusive, healthy, safe, resilient and sustainable urban environments? To be a winner, cities should couple the “hard” factors of real estate and infrastructure with the intangible “soft” factors of culture and social capital. While crafting strategies for the (re)creation of urban environments, people should be put at the forefront balancing and integrating multiple strategies, adopting “soft” and “hard” factors that benefit the entire community. This approach is complex and requires a holistic view supported by multi-disciplinary resources.

5.1.1 “Soft” and “Hard” Factors in Real Estate Development When we assess the positioning of a real estate project—a single building, a transformation of an urban area or an entire city—along the two dimensions of socioeconomic and built-natural environment, we can create a practical framework that identifies four macro categories: Stressed, Distressed, Aseptic and Ideal urban environments (Fig. 5.1).1 Soft factors define the quality of the socio-economic environ-

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_5

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Fig. 5.1 How “soft” and “hard” factors affect the characteristics of the urban environment and communities (Source Dall’Orso 2017)

ment, the human experience in terms of opportunities, accessibility, interactions, inclusiveness, respect for cultures and traditions, governance, policies and services.2 Hard factors define the quality of the built-natural environment, the availability of physical infrastructure and buildings that promote health and are environmentally sustainable, affordable housing, spaces for social life and people-oriented intelligent technologies.3 Soft and hard factors are interdependent and striking the right balance between them is a complex task, requiring continued, long-term leadership, commitment and the understanding of local aspects, culture and right timing for execution. Hard factors can be relatively quick and easy to implement (e.g. building a bicycle track) whereas soft factors can be difficult and take a long time (e.g. creating a strong travel-by-bicycle culture).

1 This

simple framework was developed and described in Dall’Orso M. (2017), What characterises an ideal city, and how do we get there? June 2017, Urbanet, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Bonn, Germania. The same author has subsequently applied the framework in order to illustrate how good innovation can help promote sustainable social and economic development in urban areas (with a particular focus in developing regions) in Dall’Orso M. (2019), Promoting sustainable urban development through impact innovation, Urbanet, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Bonn, Germania. 2 The term "soft" or "intangible assets" refers to aspects such as safety, employment and professional growth opportunities, accessibility to public services, inclusiveness, community vitality, opportunities to socialize and interact, entertainment and wellness opportunities, respect for local culture and traditions, rules and quality of services. 3 The term "hard" or tangible assets refers to aspects such as characteristics and availability of infrastructure, facilities, technologies and buildings; presence and quality of public places for socializing, leisure and culture, quality of the environment, landscape, morphological and naturalistic features.

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Distressed urban areas are characterised by a low-quality built and socio-economic environment. They are “non-places”, lacking sufficient infrastructure, with inadequate urban functions and public services, without space for socialization, culture and leisure. In some cases, these are marginal areas, physically isolated and disfigured due to hyper-infrastructure. Distressed urban areas are unable to offer opportunities and to evoke people’s pride and a sense of belonging. Many suburbs of large metropolises, dormitory communities, informal settlements in developing countries fall into this category. Stressed urban areas are extremely vital and dynamic from a social and economic point of view, they are able to offer advantages and opportunities for people, they are attractive and therefore in strong demographic growth, but are penalized by an urban environment that is not able to evolve as quickly and keep pace with the anthropic load generated by the social and economic ecosystem. Run down by traffic, with overburdened, polluted services and infrastructures, these urban areas become progressively scarcely affordable for large sections of the population; they are not inclusive and are unsustainable. For instance, some megacities in emerging economies with rapidly growing populations, and some very dynamic cities in other regions of the world can be positioned in this category. Aseptic urban areas are characterised by a high-quality built environment, equipped with advanced and efficient infrastructures and technologies, but are unable to generate social capital, i.e. to encourage the establishment of a stable and viable community. These areas are the failed result of an incomplete real estate development strategy that has focused exclusively on the creation of the built environment, while overlooking the social and economic dimension. In some cases, these are projects designed with the objectives of minimizing the environmental footprint, maximizing the efficiency of infrastructure, facilities and services—through the extensive use of digitization and new technologies—but which struggle to integrate people, and thus create communities. This category includes some newly built neighbourhoods, some futuristic real estate developments and whole new satellite cities that have been conceived by adopting strategies focused mainly on the “performance” of the built environment without focusing on the integration of human, the creation of social capital and sense of place. The Ideal City is a utopian model resulting from the successful, balanced integration of high-quality socio-economic and built natural factors over time. An Ideal City is vibrant, authentic, inclusive, safe, healthy, resilient, sustainable and rich in opportunities. Its positive attributes are a mix of quality architecture and functions, efficient and accessible infrastructure and public services, spaces for socialization, art and culture and a natural landscape integrated into the built environment. This category includes some urban areas and neighbourhoods in large cities and some smaller towns and villages.

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BOX: soft and hard factors are strictly correlated The “soft” and “hard” factors are evidently interdependent. The quality of the built environment influences positively or negatively the quality of the social and economic ecosystem and vice versa. The introduction of social capital in terms of health, safety, rules, services, culture, and values such as inclusiveness and collaboration, can foster the progressive “physical” regeneration of a degraded built environment. Similarly, the creation of quality architecture, places for social aggregation and intelligent innovative technology, can encourage the creation of social capital and the recovery of distressed communities. Successful developers allocate resources, design and execute strategies along both the built environment and the socio-economic dimensions. Achieving and maintaining the right balance between the two can be very complex and requires a longterm strategic vision, continuous commitment, strong leadership, right timing and the ability to fully understand target markets, local culture and traditions.

5.1.2 Soft and Hard Factors in the Design and Construction Phases Creating a pedestrian and bicycle lanes network is simple; we know how to design it, how much it costs and how long it takes to build. Achieving a strong walking and cycling culture that sticks in the community can be more complex and lengthy. Similarly, designing and building advanced laboratories and research facilities, state-ofthe-art shared workspaces and business accelerators is reasonably simple. Attracting winning talents and companies, creating effective networks and collaborations and a culture that fosters entrepreneurship—i.e. creating an ecosystem where ideas are transformed into successful companies—is more complex and requires skills, resources and long-term commitment along the intangible assets dimension. The “hard” factors are relatively quick and easy to build and are the “core business” of real estate operators, while the “soft” factors are more complex and take a great amount of time to implement. In the real estate industry there are people with strong skills in the physical aspects: architects, engineers, contractors and suppliers know very well how to design infrastructure, buildings or technological plants, how to estimate construction time and costs and finally how to manage maintenance activities to ensure functionality and performance over time. On the “physical” dimension, we can rely upon sophisticated algorithms and models that make it possible to plan and design various types of assets and achieve the desired quality and performance levels. In the social and economic dimension, skills are much rarer, levels of knowledge are less in-depth and, moreover, there are no “magic formulas” for “place making”, for

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Fig. 5.2 The “progressive” real estate developer acquires the skills related to “soft” factors and expands its role to include aspects concerning the social and economic ecosystem (Source Created by the authors)

the creation of a certain culture or social relations or for achieving a certain level of vibrancy of a certain community (Fig. 5.2). Designing and building a new neighbourhood provided with a well-calibrated mix of uses, attractive functions and services, green, accessible and served by cuttingedge technology, certainly is a strong prerequisite for a successful project but does not guarantee the creation of a vibrant community. In order to achieve this “superior” objective, which is of crucial importance to guarantee the sustainability and resilience of a real estate project over time, it is necessary to carry out surveys, to plan, design and execute strategies also for the social and economic aspects.

5.1.3 “Soft” and “Hard” Factors in the Post-development Operational Phase To ensure the long term success of a real estate initiative it is necessary that the developer remains involved and committed well beyond the end of construction phase or, alternatively, that a highly specialised operator takes over responsibility for the strategic and day-to-day management of the scheme. In analogy to other sectors, such as automotive or large industrial machinery, it is essential that a true culture of post-development and after sale “service” is also consolidated in the real estate sector. The real estate product, however, because of its characteristics such as very long useful life, involvement of multiple stakeholders and customers, and

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its potential impacts and externalities on the local community, requires a different after-sale attention compared to other industrial products. BOX: the creation of social and economic capital requires long time and the careful and constant commitment of a “progressive” developer. In analogy to the standard facility management services, to guarantee the maintenance of the built environment and its performance over time, it is necessary to organize “community management” activities, to guarantee place making, activation and socio-economic vitality. This “soft” activity is essential for guaranteeing the positioning of the project in the “Ideal” urban environment quadrant, avoiding the triggering of trajectories of degradation. When possible, the creation of soft factors should start very early in the development process through tactical regeneration activities such as temporary uses, events and shows that are aligned with the vision of the project and contribute to build reputation and brand equity. Indeed, the initial positioning of a project, once the development is completed, can evolve over time in a virtuous way towards the Ideal environment, thanks to continuous and coordinated activities on both dimensions, or fall back down towards less desirable positionings due to lack of attention, bad management, or inability to cope with external events.

5.2 Virtuous Trajectories and Negative Spirals: Value Creation or Degradation in Urban Regeneration Programs Obviously, the simplified representation along the two dimensions of the built and the socio-economic environment is dynamic, not static, and evolves over time. Real estate projects, neighbourhoods and entire cities can, during their lifetime, travel their own “trajectories” and migrate from one quadrant to another.

5.2.1 Prosperity and Degradation of Real Estate Projects and Urban Areas Virtuous trajectories towards the top-right corner of the chart originate from the understanding of where an area is coming from, the definition of a clear vision and a strategic plan that is consistently executed with strong leadership over time. Vicious, detrimental drifts towards the bottom-left of the chart can happen because

5.2 Virtuous Trajectories and Negative Spirals …

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Fig. 5.3 Prosperity and degradation of urban areas and real estate projects: “virtuous” trajectories and “negative” trajectories (Source Dall’Orso 2017)

of unmanaged or mismanaged unfavourable events and trends, lack of vision, poor leadership or a combination of all these issues (Fig. 5.3).4 For instance, failure to reinforce existing buildings and infrastructure to make them earthquake resistant has caused the displacement of entire communities and the dismantling of whole socio-economic ecosystems. For cities relying on one single industry or market, the failure to diversify has caused major downturns in local economies or even bankruptcy when the one industry or market suddenly delocalised or disappeared. A lack of strategies to address climate change will be a major threat for some coastal cities; failure to address social problems such as ageing population and income inequality trends will impair social capital. A technologically advanced urban environment provided with high-performing infrastructure and buildings can be aseptic and quickly turn into a degraded environment if these innovative features, rather than offering tangible benefits, represent a “barrier”, introduce limitations or require unsustainable adjustments to people’s lives and habits. With these innovative high-tech projects, to be successful, technology must be flexible, accessible and responsive to people’s real needs, and therefore adopted quickly. In fact, the main risk is that technology becomes obsolete before sense of place and community is established. To avoid that a technologically advanced

4 The

concept of trajectories, referring to companies, their development strategies and tactics is described in Strebel P. (2003), Trajectory management: leading a business over time, John Wiley & Sons Ltd, Chichester, England. The principles that underpin the transformative business strategies are illustrated in Strebel P., Ohlsson A. V. (2006), The art of making smart big moves, in “MIT Sloan Management Review, Winter 2006, Vol. 47, No. 2, pp 79–83, Cambridge, USA. Some of the principles presented by the authors can be considered both with reference to the strategies of the developer, as a company, and those of development and regeneration projects.

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urban environment becomes Aseptic or Distressed, a non-place where people do not want to live, it is necessary to take actions on the socio-economic axis. Stressed urban areas may progressively lose their attractiveness due to environmental factors such as excessive air pollution, poor quality of the natural landscape, increasing crime, unaffordability of public services, housing and education. In these circumstances, talents, innovative companies, young families and certain consumer segments may be induced to relocate to safer, greener, sustainable areas that provide a better quality of life. In these cases, to avoid that the “leakage” of vital energy for the local social and economic ecosystem is translated into a permanent impact, it is necessary to take actions on the axis of the naturalised and built environment. Distressed urban areas require attention on both dimensions through the definition of a balanced portfolio of initiatives that, progressively implemented over time, allow undertaking and consolidating a virtuous trajectory towards the Ideal condition. BOX: Mature urban areas and new real estate development. In general terms, historical, mature, consolidated urban areas possess high social and economic characteristics, vital communities well rooted in the local territory and culture. These areas typically require organic “tailormade” interventions on the size of the built environment to adapt its quality and capacity. For new real estate developments, on the other hand, the main challenge is the creation of social capital, the community. In these cases, the success of the initiative is closely linked to the effectiveness of the programme of actions on the social and economic axis. In some circumstances the success or decline of a real estate project or an entire urban area may be the result of specific policies, the burden of bureaucracy or tax and in general the regulatory administrative environment. For example, if planning and building consent times are slow and uncertain, if good initiatives remain hostage to obsolete urban zoning and planning tools, the decline may be caused by the impossibility to regenerate the territory, buildings and infrastructure and to seize the opportunities offered by change in a timely manner. Urban areas can rise to near Ideal cities and then fall into deep decline if they are not resilient to change, shocks or conflicts and fail to adapt. History has taught us that severe and unpredictable events, such as wars, social conflicts and disease outbreaks, can very quickly steer the trajectory of entire urban communities into unknown terrible territories at least in the medium term. In general, real estate projects, urban regeneration programs or whole cities, should not try to imitate similar successful cases. These should be researched, studied and understood to draw useful experiences and lessons. Every place and every project has its own history, culture, traditions and strengths that represent attributes of uniqueness and solid foundations for a distinctive strategy towards success. So, every real estate development is unique, and every urban area has its own history and potential trajectory. Real estate initiatives must be genuine, authentic, not a replica of

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other initiatives. Urban areas are dynamic, evolve and transform over time driven by internal and external factors but must aspire to maintain their own identity and distinctive characteristics. To move towards an Ideal city, a high-performing, multi-disciplinary team should be set-up as a partnership between local government, community-based organisations and the private sector, and charged with responsibility to design and execute integrated strategies on both dimensions. Phases and intermediate milestones should be planned to keep pace, excitement and energy in the team and stakeholders despite the long time that is usually required for the completion of urban projects. In general, a virtuous trajectory towards the Ideal quadrant is a continuous sequence of affordable, successful, strategic moves, consistently aligned with the target positioning. Virtuous urban trajectories should be based on solid long-term fundamentals, leverage corestrengths and competitive advantages and meet stakeholders’ needs and expectations. The Ideal configuration is not a “status” that is acquired but a dynamic balance that must be pursued and maintained over time.

5.2.2 Creation of “Sense of Place” and Community Bringing life into a real estate development can be the main driver for shared-value creation. The crucial aspect is to create the conditions to attract people: it is the citizens and visitors who bring life and create social capital. BOX: when a real estate operator focuses its attention only on the built environment and bases its strategy on short-term profit maximization, it is difficult to ensure the sustainability of the initiative over time. A purely “transactional” relationship between the developer and its stakeholders, simply based on economic convenience, would be extremely volatile and vulnerable to changing circumstances. In this scenario, tenants, end users, visitors and local communities would base their rental, purchase or consumption decisions only on their economic advantage and would be inclined to change quickly if more convenient alternatives were to arise. As described above, real estate developments, and especially urban transformations, require integrated actions on both the physical and socio-economic dimensions. Only by operating in this way is it possible to generate value for all stakeholders and ensure the sustainability of projects in the medium to long term. In fact, the intrinsic quality of a real estate asset, i.e. its architectural design and functional characteristics, the quality of the materials and technology are only one of the aspects that contribute to the determination of real estate value. The general Context in which a property is located, the amenities and services available in the area, the atmosphere,

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Fig. 5.4 Creation of high quality Context aligned with vision and coherent with target markets can multiply the value of a real estate development (Source Created by the authors)

the social, cultural and economic characteristics of the local community all contribute significantly to the commercial value of a real estate development (Fig. 5.4). Buildings or entire neighbourhoods of low intrinsic “physical” value can also assume very high commercial real estate values thanks to the vitality, dynamism and opportunities offered by the social and economic context in which they are located and fully integrated.5 All these suggest that to create great urban regeneration programs, developers (and key stakeholders) should relentlessly focus also on building up the soft attributes from day one. This is vital for success because creating the right context and community can be a lot more challenging and can take longer than creating the physical components of the project. In general terms, the scale of this challenge increases with the size of the regeneration program. Some complications arise from the fact that large regeneration programs, albeit conceived with a unitary vision, are delivered in phases across several years. In these large programs, one of the main difficulties is to deliver the full value proposition and the expected quality for the socio-economic environment from Phase 1, when occupancy starts and the other phases are still under construction or at planning and design stage (Fig. 5.5). To address this issue, it is of paramount importance that the phasing of the development is planned around the experience perceived by customers and stakeholders and not just logistics, construction or financial considerations. One other difficulty lies in the fact that scenario changes will

5 Think

of the many successful examples of regeneration of industrial buildings or entire disused manufacturing areas through the introduction of "content", functions and services that have created attractive unique experiences and context. Or think about those small old villages that have become exclusive touristic destinations commanding premium prices.

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Fig. 5.5 Creation of high-quality Context across multiple phases of a large urban regeneration program as market conditions vary (Source Created by the authors)

happen during the delivery period with consequent implications on the creation of the socio-economic context. It is therefore clear that the social and economic dimension requires fundamental attention and must be considered a core area for real estate developers. In addition to ethical considerations, creating the right Context, atmosphere, sense of place and a vibrant socio-economic ecosystem represents a tremendous opportunity for creating and maintaining commercial real estate values in the medium to long term. The creation of these non-tangible attributes requires a deep knowledge of people’s expectations, ambitions and difficulties as well as a long-term commitment to meet and resolve them respectively.

5.2.3 The Territory as an Ally for Real Estate Development The territory—i.e. the wider local community with its values, social relations, culture and economic activities—in the catchment area of interest must be considered a fundamental ally in real estate development initiatives. The perfect integration of a real estate initiative within a community allows generating positive social impact and avoiding negative externalities. In doing so, the real estate project acquires vitality and transforms itself from a simple “physical space” that satisfies basic needs, to a “place” that generates atmosphere and sense of belonging, to an “engine” that drives sustainable social and economic progress. The complexity is that the know-how and experience on the creation of socioeconomic vitality is not yet consolidated, the cause-effect relationships are not always

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Fig. 5.6 Creation of high-quality urban regeneration requires intelligent strategies on both the Soft and Hard dimensions, starting from day one (Source Created by the authors)

fully understood and predictable, and the time required for its creation is long. One thing is sure, developers should start building the soft assets from day one, avoiding the fatal mistake of waiting to do so until the physical assets are completed (Fig. 5.6). Building the soft attributes very early in the process also helps to achieve the desired positioning of the real estate product on the market. By way of example, the creation of a business community capable of successfully transforming innovative ideas into concrete activities and therefore into tangible benefits for people can be a winning strategy for the revitalization of degraded areas. In some cities, abandoned and unused areas have been transformed into authentic, vital and attractive places characterized by a mix of functions including laboratories, technological infrastructure, shared workspaces but also services, F&B, art and entertainment offering. At the same time, initiatives have been created to involve the local community, train people, create an entrepreneurial culture, with the aim of preparing them for future job opportunities. The real challenge today is to create the fundamental conditions for the local community to feed itself with values, culture and positive energy and thus be able to generate opportunities. This in many cases means investing in education and training at all levels and creating a built environment that fosters relationships, inclusion and proximity of multi-disciplinary activities. BOX: Purpose beyond profit! Education is, and will be, one of the most powerful changing agents towards a more sustainable future. It should not matter whether they are big or small urban areas; cities and towns should invest in modern facilities and

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create the best possible educational programmes, vocational trainings and apprenticeships that are rooted in their DNA, that meet future needs and serve communities. People, families and businesses will come and settle down and, with them, better urban environment, services and infrastructure. In very large urban regeneration programs, some of the challenges that need to be resolved are the mobilisation of sufficient financial resources, the availability of operational resources and capabilities, the need to build up widespread consensus and the long period for completion. The complexity and the scale of the intervention are such that require a coordinated effort by multiple private and public actors including local communities. One possible strategy to share the financial and operational burden and accelerate the regeneration is to create favourable conditions that induce complementary, widespread, spontaneous and organic regeneration initiatives. A well thought, top-down urban regeneration program, under favourable conditions, when socioeconomic output reaches a critical turning point, can propagate its powerful effects like “positive impact waves” and travel across neighbourhoods and communities. This means that the individual top-down projects should not behave like segregated “bubbles” but rather “seeds” that interact and lay deep roots across the urban fabric to support a widespread renaissance movement (Fig. 5.7). The success of an integrated multi-dimensional development and regeneration strategy stems from an in-depth knowledge of the community in which it operates,

Fig. 5.7 Well thought top-down regeneration projects can extend their positive effects beyond their borders, induce additional initiatives from third parties and generate conditions for widespread spontaneous mid to micro regeneration initiatives (Source Created by the authors)

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its value aspects and its critical issues, and requires the developer to listen, assess and understand rather than impose a pre-established top-down transformation model.

References Dall’Orso M (2017) What characterises an ideal city, and how do we get there?. Urbanet, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Bonn, Germania Dall’Orso M, Ciaramella A (2019) Sviluppo immobiliare e rigenerazione urbana – Perché alcuni progetti hanno successo e altri falliscono. Franco Angeli, Milan, Italy Strebel P (2003) Trajectory management: leading a business over time. Wiley, Chichester, UK Strebel P, Ohlsson AV (2006) The art of making smart big moves. MIT Sloan Management Review 47(2):79–83

Chapter 6

Opportunities to Create Value

6.1 Understanding and Integrating the Value Chain Real estate development and urban regeneration projects require collaboration of multiple actors and intelligent integration of multidisciplinary activities, which can be referred to three macro phases: Conception, Production and Go to Market. When we represent the development process of a single building, an urban area or an entire new city along the two dimensions of “Development Phases” and “Value Creation”, we can draw a simple framework that allows us to graphically illustrate the potential for value creation in each phase (Fig. 6.1).

6.1.1 Value Creation Potential in the Development Stages In this simplified representation the horizontal axis shows the standard macro-phases of a real estate development process from conception of the idea to construction, marketing and operation. The vertical axis “measures” the potential to create value in the three macro-phases, i.e. the possibility of generating tangible benefits for the key stakeholders and shareholders. The dotted curve outlines the potential for value creation in the past, and now outdated market scenario, in which the developer—often coinciding with the land owner and construction company—would focus mainly on the architectural design of the building, with the main objectives of maximizing built floor areas and pricing levels, while controlling construction costs. Most of the times developers adopted a short-term strategy, with little attention to long-term sustainability and stakeholder involvement, and scarce in-depth knowledge of customers and markets to be served. Because of a generalised economic growth, albeit with cycles, developers were pretty confident that the market would have taken up the newly created real estate.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_6

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Fig. 6.1 Potential for value creation in the various stages of conception, implementation and management of a real estate product (Source created by the authors)

This market scenario—predictable and not very selective—“forgave” the possible mistakes made by less capable developers and “rewarded”, but only partially, the most enlightened operators. The solid curve represents the potential for value creation in the current and future market scenario in which, for the reasons described in the previous chapters, maximising built floor-areas can no longer be the main objective of a developer. Quantity should be just one of the many components of a more sophisticated and customised value proposition. In this new market context, developers should adopt an “open”, collaborative and shared approach, focusing their attention on the benefits delivered to key stakeholder including end-users, visitors, investors or local community. With this approach, “Man is the measure of all things”.1 In the current complex and competitive market environment, the best opportunities to create added value can be generated very early at the Conception phase and in the marketing and postdevelopment service phase. Creation of shared value is less and less associated to maximisation of built floor areas, and more and more dependent on the maximisation of the benefits delivered to stakeholders in the medium to long term. This rather complex strategy requires innovative business models and building formats that meet the demand with a bottom-up “pull” approach. Real estate values can be sustained and increased over time when developers maintain their active 1 Protagora,

Fifth century, the most famous of the Sophists: “Man is the measure of all things; of things as they are, of things that are not as they are”. Reality is subjective because each individual judges it on the basis of his own culture. Developers should create a realistic representation of their “envisioned future” and focus their attention on the perceptions, feelings, issues and opportunities that end-users, visitors, investors and local community will experience during construction and when the scheme will be in operation.

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involvement in the long term, after practical completion, through the provision of value-added services.

6.1.2 Vision, Strategy and Product Design The best opportunities to create value in development and regeneration projects today can be identified in the initial phase when vision, strategy, partnerships and positioning of the building product/service are defined. Since real estate development activities modify the territory, it is necessary to assess the implications that these transformations induce in the social and economic ecosystem in terms of positive impacts and negative externalities (Fig. 6.2). The positive effects of socio-economic revitalization “reverberate” on the real estate product, which in turn benefits from the presence of a vital community that helps to sustain and grow its value over time. With this approach, a real estate initiative becomes a tool to trigger a virtuous process and pursue “superior” objectives. BOX: focusing on social and economic “outputs” can generate positive long-term impacts whose beneficial effects go well beyond the mere direct and indirect impact of real estate investments Shifting focus requires a “cultural revolution”:

Fig. 6.2 Create social and economic impact through real estate projects by shifting the developer’s attention from “inputs” to “outputs” (Source created by the authors)

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establishing trustworthy relationships with key stakeholders and adopting participatory working methods based on listening, mutual respect and the synergetic collaboration of several public and private actors. This approach should also help build relationships both “vertically”, within the supply chain, and “horizontally” with actors operating across different industrial sectors acknowledging the role of communities and designing with respect for cultures, traditions and needs. developing new skills, recognising the urgent need to invest in digitisation and develop the capacity to exploit the availability of data to create value. adopting ESG principles across all activities. For example, the creation of facilities and technological infrastructure for training, collaborative work, innovation and experimentation enables the generation of knowledge, entrepreneurial culture, relationships and economic activities. In other cases, real estate projects can help to solve some critical issues in urban areas and make them more liveable if the focus is on accessibility, affordability and social inclusion objectives. Under certain favourable tax, regulatory and market conditions, renovation of the residential stock can generate interesting returns and at the same time contribute to environmental improvement and safety if directed towards de-carbonisation, energy efficiency, structural and hydrogeological safety. Creation of Prime Residential and Hospitality Real Estate, supported by high-quality place making and activation, can create a “destination” and attract substantial wealth, generating opportunities for the local community.

6.1.3 Design and Construction The built environment creates the context within which most of human socioeconomic activities take place. Mix of uses, characteristics of buildings, public areas, technology and infrastructure influence the daily life and behaviour of people, the destiny of entire communities, and the competitiveness of businesses. The ultimate goal of those working in this industry therefore should be to create buildings, urban areas or entire cities that are respectful of nature and where people want to lay roots and live. In addition, McKinsey (2020) estimates that the whole construction sector, including real estate, infrastructure and industrial structures, is the largest industry in the global economy, accounting for 13% of the world’s GDP.2 2 Some of the main challenges are clearly illustrated in a Report by McKinsey & Company “The next

normal in construction – How disruption is reshaping the world’s largest ecosystem”, June 2020, McKinsey & Company. The construction industry has underperformed over the past 20 years, with annual productivity growth only a third of total economy averages. Lack of innovation because of risk aversion, fragmentation and difficulties in attracting talents. The Report also highlights that

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However, while the importance of the physical context is well understood in terms of its industry size, crucial role in creating conditions for social and economic wellbeing for citizens, the real estate development and urban regeneration industry have not yet reaped the benefits offered by innovative advances, as in other industries. The persistent lack of investment in research and development over the past decades in terms materials, technologies, formats and business models, has resulted in a progressive misalignment between this industry and the expectations of the various stakeholders. The level of productivity in the sector is insufficient, time-to-market is too long, products are not flexible and increasingly out of sync with demand. The industry has often considered innovation as an obstacle, an additional source of complexity and cost or a risk, rather than an opportunity to gain competitive advantage. Perhaps the most critical consequence of this “business as usual” approach is the progressive loss of competitiveness of the industry to attract the best talents, without whom it is unlikely to trigger a renewal process. The absence of iconic brands that inspire and fascinate, rigid business organizational models, little adoption of technology, low interest for creativity and innovation are characteristics that make the sector unattractive to the aspirations of the younger generations. It is quite obvious that it is necessary to make up for lost time, start a deep transformation, or rather a revolution of the industry, and leap into a modern approach.3 Technology, innovation, knowledge, hard data and soft skills must take priority over capital and labourintensive inefficient activities. In the Production phase, developers should reimagine their approach and pursue quality of the final product (on all dimensions: environmental, social, economic and financial), increase in productivity, reduction of design and construction time and minimisation of construction risks. In relation to these objectives, the design and construction supply chains present a series of unquestionable critical issues. Some of these could be reduced or eliminated through the industrialisation of processes (i.e. learning from the automotive industry), overcoming the traditional segregation of the design, construction and operation activities.4 The lack of efficient integration among the various phases and activities is a major source of inefficiencies, lengthening of time, loss of knowledge, duplication and lack of optimisation of technical and operational requirements. Technology already available allows for “vertical” and “horizontal” integration of supply chains through “Digitalization is lower than in nearly any other industry. Profitability is low, at around 5% EBIT margin, despite high risks and many insolvencies. Customer satisfaction is hampered by regular time and budget overruns and lengthy claims procedures.” The Report explains that “Nine shifts will radically change the way construction projects are delivered. A combination of sustainability requirements, cost pressure, skills scarcity, new materials, industrial approaches, digitalization, and a new breed of player looks set to transform the value chain.” 3 A very interesting book on how companies can stay relevant and succeed in the long term by continuously reinventing themselves, by Howard Yu, “Leap: How to Thrive in a World Where Everything Can Be Copied”, Public Affairs, Hachette Book Group, NY, 2018. 4 On this topic see Tronconi O., Ciaramella A., Pisani B., La gestione di edifici e patrimoni immobiliari, il Sole24Ore, 2007.

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process & products digitization, as well as sharing of data, information and knowledge through collaborative platforms. The industrialization of the construction sector also foresees the extensive use of off-site prefabrication and a substantial reduction of the works carried out on site, which should mainly involve assembly, testing and commissioning activities.5 This approach requires the adoption of principles of standardisation, modularity and flexibility. In this ideal scenario, the detailed drawings and technical specifications produced by architects and engineers are the input for the off-site prefabrication and, vice versa, suppliers’ product catalogues feed the “digital library” of construction components that architects and engineers can upload and use to create the real estate product. Moreover, construction time schedules become the production and logistic time plans for just-in-time delivery to “assembly” site. Technology makes it possible to create the digital “twin” of the real estate product and to model the various phases of off-site prefabrication, transportation logistics and assembly on-site to optimize time and minimize the unexpected events during construction. A digital prototype also makes it possible to run simulations and analysis to assess the implications of design choices in relation to various aspects, such as energy performance, construction timing, operating and maintenance costs. A new mindset and the intelligent adoption of innovative technologies make it possible to generate considerable value also in the design and construction phase accelerating the leap of the real estate sector into a sustainable and productive industry.

6.1.4 Marketing, Services and Management The “Go-To-Market” phase includes activities such as marketing & PR, sale and rental of space, and the provision of asset, property and facility management services to optimise the operation of a real estate product and guarantee certain levels of performance. Opportunities to create value can be generated when a real estate product is seen as one of the ingredients that support a broader value proposition aimed at achieving a superior purpose (Fig. 6.3). There is a big opportunity to be seized by redefining the scope of work for developers and changing their mindset. From pure creators of space, to let or sale, developers can evolve (some have already) to proactive providers of flexible, strategic resources or services or places. The next step in this evolutionary process could be towards the “Progressive” status where a developer is driven by its purpose to create 5 Off-site

construction hybrids the production processes of the construction sector with those of industrial manufacturing, taking advantage of the opportunities of information technology. This approach could foster a considerable increase in productivity. Operating in this way should also ensure achieving higher quality, as most of the activities are carried out in a controlled factory environment rather than on site. Off-site construction represents a new synthesis between construction and manufacturing, in which the production of building components moves from the site to the factory. Some projects have also demonstrated that it is possible to create buildings of high architectural value and iconicity, while respecting the requirements of standardization and modularity required by prefabrication.

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Fig. 6.3 Evolution of the operator’s approach and evolution of the real estate product in order to increase the potential for value creation (Source created by the authors)

“hard” & “soft” assets that are key contributors to a sustainable socio economic ecosystem. By way of example, office, logistics and industrial properties can be “transformed” from a simple operational necessity into a strategic resource that can contribute to increase the competitiveness of tenants, boost their business growth and generate new jobs and demand for services and goods. Public urban areas have the potential to evolve from “aseptic functional spaces” to “active places” with strong identity and atmosphere that contribute to consolidation of positive social values, sense of belonging and the creation of vital communities. Residential properties can deviate from the standard model of property ownership or renting and become an integral part of a portfolio of personalised, flexible services that are also available in a shared form. A multi-modal interchange, for example a busy railway and metro station, or a Port for cruising ships, can be transformed from a pure logistics infrastructure into a hybrid pole of attraction and accelerator of social and economic interactions. Urban regeneration and real estate development initiatives can further evolve in the scale of value creation potential if they are able to trigger and sustain virtuous social and economic transformations over time. This evolution, driven by the search for “exponential” value creation, requires an equally profound evolution of the real estate operators. To pursue these ambitious goals, developers have to learn new skills and reimagine their business models to include a range of post-development added-value services, similar to the after-sales services for industrial products, to sustain the effectiveness, quality and attractiveness of their products as the external context changes over time.

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6.2 Value Creation Tactics 6.2.1 Prototype, Test and Review Adopting a “product development” mindset, the three main Phases should be part of an integrated unitary process that requires coordination by a multidisciplinary team capable of managing all aspects and activities. For the sake of simplicity of graphic illustration, and for the sole purpose of reflecting on value creation opportunities, the three Phases have been represented sequentially, in hypothetical chronological order, from Conception to Production and Go-To-Market. In real life, development and regeneration processes are much more complex. Some activities have to be carried out in parallel and require several iterations aimed at identifying alternative scenarios and optimising solutions. A more realistic graphical representation of a real estate development process should have a “spiral” shape formed by a succession of iteration cycles (Fig. 6.4). For example, in the Conception phase it is necessary to take into consideration data originating from marketing activities, customer profiling and feedback from stakeholders, ensure compatibility of strategic choices with technical constraints, overcome critical issues and seize design and construction opportunities. Similarly, in the Production phase, some principles and technical specifications must be incorporated into the process in order to achieve the most effective performance in the operation and management of a building after practical completion.

Fig. 6.4 The development process represented as a succession of iteration cycles aimed at identifying the optimal solutions to create value, and the related commitment of resources (Source developed by the authors)

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In the “spiral” representation, the first iteration cycles are based on preliminary data and information that allow quick checks and assessments related to the demand, the product and its technical and economic feasibility. These initial analyses require relatively little time and resources and have the objective of testing the feasibility of alternative options. At the beginning of the process it is therefore possible to make comparisons, modify assumptions and change decisions with relatively modest impact on time and cost. This is a “design thinking” process that involves several iterations of discovering, prototyping, testing and reviewing activities. As more and more in-depth due diligence, research, analyses and iterations are carried out, the commitments of resources also increase, and the cost of change becomes increasingly significant. It is notorious how painful it could be, in terms of time, cost and motivation, to introduce substantial variations at detail design or construction stage. It is crucial to spend enough time to acquire a full set of hard data, validate assumptions, analyse all the options and make the right decisions at the beginning of the process. It is of fundamental importance to avoid the fatal mistake of eagerly and prematurely embarking into detailed activities and driving the process in the wrong direction, without having gone through all the necessary preliminary stages. Unfortunately, this structured approach has a flaw due to the rapidly changing market scenario. Real estate products are designed and manufactured on the basis of the customer’s knowledge acquired by the developer at the initial phase of the process. The question is how will customers preferences evolve over time? What will customers want when, after several years, the product will be launched on the market? The process takes a long time and while the developer is focused on the design and implementation aspects, the external scenario can change significantly and, with-it, the needs and expectations of key stakeholders. There is therefore a real risk of misalignment between the real estate product and the actual demand at the time when the product will be available on the market (Fig. 6.5). To minimize this risk, it is essential to adopt principles of flexibility, continue to monitor and update the knowledge of the target customers, reduce development times and create unique value propositions. The final objectives of this iterative process are to maximize value creation and simultaneously contain the development risks.

6.2.2 Join Forces and Forge Consensus The increasingly competitive and constantly changing market scenarios urge real estate developers to forge alliances with parties that can bring complementary technical, commercial, socio-economic and financial capabilities. Joining forces and aligning them towards a shared objective can mitigate risks and make an initiative more attractive. The creation of consensus among key institutional, social and economic stakeholders is an essential requirement for real estate development projects as they transform the environment in the long term and influence people’s lives. The creation of

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Fig. 6.5 Potential misalignment between real estate product and user knowledge by the operator during development (Source created by the authors)

consensus is the result of a continuous process of sharing, listening, understanding and building trust. Consensus must be created very early in the process and should be maintained throughout the life of the project and beyond practical completion through continuous monitoring of stakeholders’ opinions and perceptions.

6.2.3 The Three “Cs”: Pursue High Quality on All Dimensions High quality real estate products attract the interest of investors even in less favourable market times. These exceptional products possess all the features and attributes of an alternative, long-term “safe” investment such as sustainable profitability, resilience in economic downturns, relatively low correlation with stock markets and relatively high liquidity. High quality products offer a real opportunity for diversification in investment portfolio allocation strategies. In general, these “ideal” assets are ESG compliant, perform very well financially, bring social and economic benefits to society and are respectful of nature. They realize the optimal shared-value balance for all key stakeholders. What are, in practice, the characteristics of a high-quality real estate product? In general terms and by way of example, these characteristics can be traced back to three aspects of fundamental interest to all stakeholders that we can define as the three “C’s”, namely the “Container”, the “Content” and the “Context” (Fig. 6.6).

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Fig. 6.6 Successful real estate product simultaneously maximizes the potential values of the container, content and context (Source created by the authors)

The “Container” is the actual physical building with its own intrinsic characteristics (office building, residential building, logistics warehouse, shopping mall, etc.). In relation to this aspect a quality product should be6 : – durable: i.e. designed, built and maintained in such a way as to preserve its performance over time; – equipped with plants, systems and technologies that guarantee occupants wellbeing and contribute to drive the competitiveness of its corporate occupants at low operating costs; – attractive, meet demand and guarantee full occupancy over-time, at pricing levels that are consistent with its market positioning; – designed and built to be flexible, modular and able to adapt to changing needs without requiring substantial renewal interventions during its useful life; – sustainable, respectful of nature, local heritage and culture; – expression of great purposeful architecture and engineering (not ego driven or selfreferential), recognizable, integrated into the context and associated with positive values and experiences of use. The “Content” refers to the socio-economic activities that are carried out within the building itself and the “experiences” that are created by its users (tenants, endusers, visitors, operators, etc.). As far as this aspect is concerned, quality real estate product should host contents that are:

6 On

this aspect it is important to refer to the best practices recognized by the market, as well as to the rules and laws in force. An attempt at a holistic view of buildings has been developed by Bravem&t, a spin-off of the Politecnico di Milano, which has promoted BraVe, a tool that aims to measure and certify the compliance of buildings’ performance with quality parameters shared by the market.

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– able to guarantee financial sustainability and profit targets, such as high-standing tenants that can ensure payment of rents and service charges at market level for the duration of their tenure; – consistent with the market positioning of the real estate product and the context in which it is located, both in terms of branding, quality and type of activities carried out; – capable of generating consensus and positive impact on the society while minimizing negative externalities; – using the asset to its full potential, in terms of permitted uses and over time. The “Context” represents the “hard” and “soft” features of the area where the real estate product is located, including socio-economic ecosystem, built environment and natural landscaping. These include: – public and private accessibility, which must be guaranteed through reliable infrastructure and services of adequate level and capacity to meet the current and future demand; – quality and atmosphere of communal outdoor spaces, public and private, such as places for socialising, for leisure, culture and entertainment, green areas rich in nature, and associated services; – local community, i.e. the social and economic ecosystem in the catchment area, which should be vibrant, vital, safe, inclusive and rich in opportunities; – quality and accessibility of public and private services, such as education, health, sport, entertainment, art, culture and commerce. Successful real estate products are intelligently positioned at the intersection of the three “C’s” and maximise most of the positive characteristics described above. They are great buildings that host exceptional activities, are coherent with the positive attributes of their location and are loved by the local community. This apparently simple approach presents two main difficulties. The first one is associated with internal and external constraints of various kinds, including budget limits, site morphology, environmental issues, planning and building regulations. The second one stems from the fact that this simplified graphical representation with the intersection of the three “Cs”, is not static. The Context is evolving or rather “mutating” towards unknown scenarios. Contents are struggling to stay relevant: in most cases people and organisations are trying to adapt to change and in other visionary cases are trying to invent the future. Containers must possess the ability to adjust to maintain their ideal positioning at the intersection.

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6.2.4 Look for Gradients The Encyclopaedia Britannica defines Contour mapping as7 “… the delineation of any property in map form by constructing lines of equal values of that property from available data points…”. On topographic maps, for example, the morphology of an area can be shown by means of contour lines. In this representation a Contour line, “… represents an imaginary line on the land surface, all points of which are at the same elevation above a datum plane, usually mean sea level…”. In Meteorology, for example, an Isobar, “… is a line on a weather map of constant barometric pressure drawn on a given reference surface. The isobaric pattern on a constant-height surface is extremely useful in weather forecasting because of the close association between pressure and weather. Regions of low pressure at sea level tend to be areas of bad weather, especially in winter…; … the closer together the isobars are, the stronger the wind speed…”. In other words, and in simple terms, wind speed increases as pressure gradient increases, where gradient can be defined as the rate of change of barometric pressure with respect to change in position.8 In addition to Topography and Meteorology, Contour mapping is routinely applied to map the course of countless variables in several scientific, social and economic disciplines. Not unexpectedly, some beneficial utilisations of Contour mapping techniques can be found also for urban regeneration and real estate development. One example is the application of Contour mapping to real estate market values. In this representation, contour lines delineate imaginary lines connecting homogenous properties (i.e. residential assets) having the same unitary market value (i.e. e/sqm) on an a given borough, urban area or wider region. Contour mapping unitary market values can be a quick and simple way to summarize information, visualise data and grasp the big picture of a given urban area (Fig. 6.7). If we draw an analogy between “Contour mapping unitary property market values” and “Isobars”—and being fully aware of the power and the pitfalls of analogy9 —we can try to come up with some useful general principles and ideas. Contour mapping unitary property market values can be very useful in forecasting market trends and identifying areas of potential opportunities. Typically, there is a close correlation between “market pressure” and quality of the urban environment: areas of high market pressure tend to be areas characterised by a combination of high quality 7A

definition of Contour Mapping, Contour Line and Isobars can be found at the following web pages of the Encyclopaedia Britannica online version: https://www.britannica.com/science/contourmapping; https://www.britannica.com/topic/contour-line; https://www.britannica.com/science/iso bar-cartography. 8 The Encyclopaedia Britannica online version defines Gradient in mathematics, “… a differential operator applied to a three-dimensional vector-valued function to yield a vector whose three components are the partial derivatives of the function with respect to its three variables. The symbol for gradient is ∇. If in physics, for example, f is a temperature field (giving the temperature at every point in a space), ∇f is the direction of the heat-flow vector in the field…”, https://www.britannica. com/science/gradient-mathematics. 9 Gavetti Giovanni and Jan W. Rivkin (2005), How Strategists Really Think: Tapping the Power of Analogy, Harward Business Review April 2005 Issue.

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Fig. 6.7 Contour mapping techniques can be used to identify urban areas characterised by sharp drop/increase in property values. These “high Gradient areas” can offer potential opportunities to generate value from urban regeneration and real estate development (Source created by the authors)

“hard” and “soft” factors. On the other hand, areas of low market pressure tend to be areas where the quality of the urban environment is comparatively lower. The rate of change of market pressure with distance, the gradient, gives a measure of the potential opportunity: the speed of change (where change is the improvement of the quality of the urban environment) driven by urban regeneration processes increases the closer the market contour lines are. In other words, the urban areas where the rate of change in unitary market value with respect to change in position is higher (where contour lines are closer), are the areas that might offer the most interesting opportunities to generate value (Fig. 6.8). The steeper the market gradient between two locations/areas the bigger the potential opportunity to create value through urban regeneration. To grasp this opportunity, it is essential to understand the key drivers of the market pressure: why is the market pressure so high in one location? And why is the market pressure so comparatively low on the other location? Is it due to the poor quality of the built environment? Is it because of the distressed social and economic environment, or, most likely, a combination of the two? A strategy should then be designed to address the issues and seize the opportunities, creating the conditions for a sustainable urban regeneration process. In some cases, when the market gradient is very steep, these positive dynamics happen spontaneously, bottom up, for example in the areas adjacent to large successful real estate developments. In other cases, because the gradient is not so steep or because of other hindrance to the urban regeneration, some top down intervention is needed to trigger the process.

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Fig. 6.8 Substantial changes (drop/increase) in unitary property values (i.e. e/sqm) per unit distance (m) indicate a potential opportunity to create value. For example, two locations (or urban areas) that have very different price levels and are not too far away from each other. The same can be true if unitary property values show a rapid increase over time (Source created by the authors)

References Gavetti G, Rivkin JW (2005) How strategists really think: tapping the power of analogy, Harward Business Review, April 2005 issue, USA McKinsey & Company (2020) “The next normal in construction—How disruption is reshaping the world’s largest ecosystem”, June 2020, McKinsey & Company, USA Tronconi O, Ciaramella A, Pisani B (2007) La gestione di edifici e patrimoni immobiliari, Il Sole 24 Ore. Italy, Milan Yu H (2018) Leap: how to thrive in a world where everything can be copied, public affairs. Hachette Book Group, NY, USA

Chapter 7

Real Estate as a “Product” or “Service”: A Reference Framework

7.1 Creating the Vision and the Strategy A successful project generates tangible benefits for stakeholders, even as the context changes over time. Some development initiatives are born losers because they do not meet the target demand and others become losers because they are not sustainable. So why do some projects succeed, and others fail? The forces of change described above and the global competition among urban areas create extremely dynamic and complex market scenarios in which the built environment increasingly plays a key role in the attraction of economic activities, talents and capital. Today, with some exceptions, the value of a property is increasingly correlated to its ability to host high-value “contents”, support functions and actively contribute to the success of social and economic ecosystems, rather than to its intrinsic building characteristics. As with products and services in other industries, also with real estate the ambition should be to attract and retain customers by offering rare, memorable experiences and bringing sustainable tangible benefits. What lessons can be learned and transferred from other industries to real estate?

7.1.1 A Possible Reference Framework When we approach real estate development with the methods and tools adopted for industrial products, we can easily identify opportunities for innovation, digitization, standardization, industrialization and optimization of the entire supply chain, with potential benefits in terms of productivity, quality, safety and lead time. It is even more interesting to explore what lessons can be transferred, at a more strategic level, at product conception and market positioning phase when, as we discussed earlier, the best opportunities to generate value should be identified. There is a lot to learn about and reflect on when principles of “product design” and “design thinking” are © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_7

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Fig. 7.1 A possible reference framework that can be used to create the vision and strategies of a real estate development or urban regeneration project (Source created by the authors)

transferred and adapted to real estate.1 For instance, putting customers (and stakeholders) at the centre, which means acquiring in-depth knowledge of their needs and looking for feedback on user experience, overcoming the limiting logic of consultation and consensus building. It is of great importance also for real estate developers to become fully aware of the growing role and power of discerning consumers in defining, co-designing and choosing products and services. In order to reflect on the potential benefits of approaching real estate development with the logic of product design, we have created a simple Framework that can be used as a reference in the initial strategic phase of creating the vision and strategies (Fig. 7.1). The Framework foresees seven main “STEPs” organised in the following logical and chronological sequence: STEP 1: identification of strengths, competitive advantages and main issues of the project, location and catchment area (the potential offer). STEP 2: identification of target customers and key stakeholders, their expectations, needs and difficulties (the potential demand). STEP 3: identification of concrete opportunities that can arise by matching strengths and needs (potential offer and potential demand). 1 The

principles of “design thinking” were initially set out in Brown T. (2008) Design thinking, in “Harvard Business Review”, June 2008, Harvard Business Publishing, Brighton, USA. More recently they were taken up by the same author in Brown T. (2015) When everyone is doing design thinking, is it still a competitive advantage? in “Harvard Business Review”, August 2015, Harvard Business Publishing, Brighton, USA.

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STEP 4: creation of a strong vision for the initiative and definition of its authentic purpose. STEP 5: decision on market positioning and vision-level objectives for the real estate product. STEP 6: definition of the value propositions, i.e. the benefits and competitive advantages that the real estate product proposes to generate for target customers and key stakeholders. STEP 7: definition of strategies and execution plan including concrete decisions and actions needed to realise the vision. Before diving into the merits of each of the seven Steps listed above, it is useful to reflect on the importance of the purpose, deep motivations, ambitions and expectations that drive a real estate developer’s actions.

7.1.2 Why Do We Do What We Do? Values and Motivations As for successful products and services, also real estate projects, to be authentic, should incorporate and communicate values, motivations and expectations of the organisation that creates, promotes and develops them.2 Large real estate developments and urban regenerations are very challenging and demanding ventures, requiring long-term commitment. It is of fundamental importance, before embarking into a new initiative, to analyse and understand why we want to do it. What are our goals and our challenges? What are our deep, authentic motivations and passions? Where does our inspiration and energy come from? What are the values we believe in? What are the “higher” causes, the beliefs that guide us? Why should it be important for our stakeholders? The goals are to feed the products we develop with our authentic purposes and values, to connect “intimately” with customers and key stakeholders who instinctively believe in what we believe. Every product, in order to be successful over time, should aspire to achieve “superior” objectives and developers should be aware that they are undertaking a “mission” far greater than the construction of buildings. Our deeper motivations, values and purposes inspire and guide our daily work, i.e. the way we approach our projects. Values such as sustainability, innovation, true commitment to ESG principles, customer service excellence, attention to details, total safety, uniqueness of content and experience and so on must be incorporated into real estate products and communicated effectively through the most appropriate channels. Successful developers are able to translate analytical thinking, data and performance levels, technical specifications and project characteristics into tangible benefits, sensations and specific experiences for customers and stakeholders.

2 Sinek S has described this approach, which originates from the deep motivations of people in Sinek

S., 2011, “Start with why: how great leaders inspire everyone to take action”, Portfolio Penguin.

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7.2 STEP 1: Identifying Strengths and Competitive Advantages Each location is different, it has its own heritage, history, vocation, potential and physical constraints. Local communities within the catchment area have culture and traditions (and criticalities) that must be respected and valued (and resolved). At the initial phase of creation of a real estate product, it is essential to identify and analyse strengths, competitive advantages, unique aspects, as well as problems to be solved and areas of potential improvement. It is necessary to identify and fully understand the physical, social and economic “fundamentals” of the area in relation to the specific real estate initiative. By way of example, some projects base their strengths on the needs to address segments of unmet demand, other projects focus on the benefits to resolve critical issues or overcome constraints, some projects leverage selected competitive advantages of the site, of specific assets or the socio-economic ecosystem in the catchment area, or a combination of various factors. In this first step, it is necessary to carry out analyses, surveys, research and in-depth studies useful for identifying strengths and competitive advantages, but also constraints and issues in order to assess their potential to become “strong fundamental attributes”, the solid base, for the creation of the vision and the long-term development strategy of the project.

7.2.1 Building the Project on Solid “Fundamentals” The objective of Step 1 is to dig deep into every relevant geographical, physical, cultural, socio-economic and administrative aspect, and extract interesting facts explaining their implications for the real estate initiative.3 Core strengths, competitive advantages and issues should be assessed to evaluate their potential to become long-term solid fundamentals. Many development and regeneration projects create a strong vision around fundamentals based on “positive” attributes that are further enhanced by the project in alignment with the local “DNA”. In some other successful projects, the vision is created around fundamentals based on “negative” characteristics through the ability to address critical issues or overcome constraints that are important for the local community.

3 Aspects

of interest include: Geographical (positioning, climate, accessibility at international, regional and local scale); Natural & environmental (valuable natural morphology, landscapes, unique visual axes); Cultural (history, traditions, heritage, perceptions, atmosphere, arts and food & beverage); Socio-economic (positioning, trends, businesses and key “anchors” any relevant rankings); Land-use and urban planning permission (status, procedures, public entities involved); any relevant public or private planned initiative (new infrastructure, relocation/delocalizations, tax, events, etc.).

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“Positive” fundamentals can originate from attributes such as excellent location accessibility; favourable climate; great natural environment and landscapes; unique perspectives and views; valuable heritage that can be enhanced; existing “anchors” and poles of attraction; proximity to drivers of innovation and economic growth such as talents, know-how and demand; quality of schools and universities; a strong identity and vitality of the local community. “Negative” fundamentals can originate from characteristics such as lack of valuable resources (natural, social, economic), heavy pollution, physical segregation due to excessive infrastructure, hydrogeological and flooding risk, and social degradation. In these cases, a real estate project can generate positive energy and strong consensus through its ability to find concrete solutions to the issues of the site and the local community. Other aspects that should be investigated include demographic characteristics, density, spending power, vitality, diversity and inclusiveness of the local community; safety, security and public order; tax regime and any advantageous scheme for companies and individuals; stability of the political system, certainty of rules, transparency and ease of doing business.

7.2.2 Project Fundamentals and Evolution of the Scenarios Strengths, competitive advantages and issues should be analysed in perspective, taking into account the evolution of market scenarios and those specific external factors that might influence their potential to create value and resilience over time. For instance, any future change in planning and building consent procedures, creation of new infrastructure, establishment or delocalisation of economic activities and demographic trends can substantially influence or even determine the characteristics of a real estate product, its time-to-market and costs, and ultimately its destiny. For example, a “lean urbanism” policy enforced in distressed areas, abandoned sites or complexes of obsolete buildings located in interesting areas can stimulate virtuous processes of rapid bottom-up regeneration. Again, by way of example, some sites are located in strategic geographical positions such as to make them natural “doors of entry” to certain developing markets and natural resources or, in general, to potential opportunities offered by a specific catchment or region. In these cases, policies that ensure clear and stable rules, accessible and quality facilities and services can help to attract investment, talent and companies and thus foster the development and regeneration of urban, social and economic environment. Other external factors such as demography, climate and environmental change, and scarcity of natural resources can drive innovation and contribute to the creation of R&D-intensive areas. Successful real estate projects originate from a deep understanding of all potential opportunities to generate value and base their vision on carefully selected “fundamentals” relating to the physical and socio-economic dimensions. These fundamentals create a solid foundation for the project and provide a clear direction for allocating

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resources and investments. The activities of Step 1 should be carried out in parallel with those of Step 2.

7.3 STEP 2: Understanding Customers and Stakeholders The creation of a real estate product or service should be driven by a deep understanding of target customers and key private and public stakeholders. They should be involved across all phases of a real estate development process, directly or indirectly, in relation to their respective roles and the characteristics of the specific initiative. In general terms, both customers and stakeholders are “clients” whose needs and expectations must be met through the creation of real estate products and services. The objective of Step 2 is to identify and fully understand their motivations, aspirations, preferences, needs and problems. Developers should focus on understanding the benefits that customers and individual stakeholders expect to obtain from the real estate product, not so much in terms of technical specifications and performance of the product itself—which must be guaranteed—but rather in terms of how the proposed real estate solution will help them achieve their goals, solve their problems and improve their customers’ experience. Developers should look at the product with the eyes of their customers and stakeholders and incorporate their needs in the creation of the vision and strategies of the real estate solution. Activities related to Step 1 and Step 2 should be carried out in parallel, adopting an iterative approach, trying to identify and validate the best set of fundamental attributes that can be leveraged to meet customers’ and stakeholders’ needs.

7.3.1 Knowing Your Customers and Stakeholders The first step is to identify target customers and key stakeholders involved in the specific initiative. Customers are the main direct beneficiaries of a real estate product, while stakeholders are diverse entities that are directly or indirectly involved in the initiative. In general terms these can include economic operators such as corporations, suppliers, tenants, partners, insurers, investors and lenders4 ; end users like residents, 4 Economic operators look for proximity to growth

factors such as high-quality services and infrastructure, expanding markets, talents, technology and innovation. Tenants are usually interested in efficient, flexible and functional real estate products at low cost. Global companies want iconic real estate solutions that contribute to attracting talents and consolidating the company’s brand. Start-ups look for flexible spaces in dynamic contexts and shared facilities that support innovation and facilitate collaborations. Retail operators aspire to establish themselves in consolidated, highly frequented “destinations” that can offer unique experiences to their consumers in an environment characterized by a growing offer of entertainment and the integrated convergence of physical and digital environments. Investors are looking for financial returns that are consistent with the risk

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local communities, associations, consumers and visitors5 ; and Institutions including various levels of Government, Authorities and Control Bodies.6 Once target customers and key stakeholders have been identified, it is necessary to research and understand their needs, the issues they face, the objectives they intend to achieve and the tangible outcome they wish to generate from their actions. For instance, urban regeneration requires analysing, measuring and studying the behaviour of citizens, their daily activities, how they move around the city, how they use public and private spaces, how they access services, and consequently design a built environment in such a way that meets the real needs of people and make their life better. In some cases, it is possible to create innovative real estate solutions that, because of their exceptional tangible benefits, change people’s behaviour. A complete and deep understanding of customers and stakeholders requires a combination of quantitative and qualitative surveys. Hard data can be generated through surveys and, increasingly, in the form of big data, from platforms, IoT, the digitization of the territory, systems and services. Soft data and information involve the understanding of deep motivations, feelings, emotions and reasoning that lead to certain choices and behaviours. Various techniques are used for these analyses, such as interviews, focus groups and motivational analyses, social media analytics and artificial intelligence tools, with the aim of understanding the experience and expectations regarding certain real estate products and services. Technology already available today makes it possible to create digital clones of entire urban areas. These digital twins are very powerful tools not only for visualising the built environment but also for simulating the socio-economic ecosystem through the use of AI and big data in real time. The aim is to acquire useful data and information to be used in the design of real estate solutions that deliver the best possible answers to the needs of the current and future demand.

profiles of their equity investments, in a context of stable and transparent rules, characterized by certain timing. 5 End users, such as individual customers, seek authentic experiences, as well as flexibility and freedom of choice. Citizens want sustainable, safe and inclusive places, rich in opportunities for interaction, culture, leisure and professional growth. Local communities seek sustainability, a sense of belonging to the place, respect for culture and traditions. Older people prefer proximity and convenient access to primary services. Young couples seek contemporary urban solutions at affordable prices, people on high incomes demand luxury, families want safe and spacious green spaces, while students and young professionals seek vibrant urban environments, shared, modern and high-tech spaces. 6 Public sector Institutions play the role of policy makers, regulators and controllers across planning and building consent procedures. In strategic and complex initiatives, such as major urban regeneration programmes, Institutions are also actively involved in partnership with the private sector to facilitate the planning process and take responsibility for some key public infrastructure. Their objectives are social prosperity, improving the quality of life of citizens, public safety, environmental protection, compliance with standards and consistency with political agenda. Issues they are facing include: competition from other urban areas in attracting global economic activities and talents; scarcity of financial and natural resources; rapid urbanisation; social inclusion also associated with immigration; safety and security of citizens; environmental pollution and the social and economic regeneration of distressed urban areas.

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7.3.2 Investing Where Customers and Stakeholders Perceive Value Developers should focus on the benefits and value perceived by customers and stakeholders in relation to the various attributes of a real estate solution. Understanding this aspect is absolutely crucial for the success of a real estate project. For example, theme park visitors look for rare attractions, immersive scenography, special effects, shows, services and a customer care level that make their experience immersive, unique and unforgettable. Technical specifications and performance of structures, plants, mechanical and electrical services of the theme park buildings is of little interest to them. Conversely, scientists using a facility with specialist research laboratories are interested in the technical specifications of the buildings, for instance floor slabs should have load bearing capacity high enough to allow installation of very heavy machineries avoiding vibrations, and HVAC systems with adequate filters and air flow capacity to guarantee a safe and healthy working environment. Detailed assessments of customers’ and stakeholders’ perceived value and preferences are of decisive importance as they identify those aspects of the real estate product that are important and where resources should be allocated (Fig. 7.2). Potential sources of complexity in this case are the diversity and multiplicity of customers and stakeholders that might have different and sometimes conflicting expectations. In addition, expectations and issues vary over time, are interdependent and possess many facets. A developer must therefore find the right balance also in relation to time (short-term and long-term). Finding the right balance between the

Fig. 7.2 Value perceived by stakeholders in relation to the attributes of the real estate product and the benefits it is able to generate. Example diagram (Source created by the authors)

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various needs is extremely complex, requires multidisciplinary skills and a holistic long-term approach.

7.4 STEP 3: Identifying Concrete Opportunities to Create Value The research, surveys, analyses and evaluations carried out in Steps 1 and 2 provide quantitative and qualitative information and data needed to take strategic decisions in the initial phase of product Conception. The aim of Step 1 is to identify strong “fundamentals” for the real estate offering, while the purpose of Step 2 is to identify needs, expectations and issues expressed and not expressed by target customers and key stakeholders.

7.4.1 Matching Strengths with Stakeholders’ Needs Step 3 is about matching offering (in terms of strong fundamentals of the project) and demand (in terms of needs) to identify concrete opportunities to create shared value for customers and stakeholders. A straightforward option is to serve segments of existing unmet market demand with “standard” products and services leveraging the strengths identified for the project. In this case, opportunities to generate value consist in trying to fill market gaps or to create innovative solutions that offer tangible benefits to customers and stakeholders, higher than those offered by standard solutions already available on the market. Visionary developers can create new markets through innovative disruptive solutions that offer exceptional advantages and create new unexpressed demand (Fig. 7.3).7 In any case, the process of defining the product or service presents two main complications that need to be addressed and resolved: the first one relates to demand volatility over time, hence the need for flexibility; the second one relates to the need to strike the optimal balance among contrasting expectations of the various customers and stakeholders. Matching competitive factors with expectations enables identifying potential concrete opportunities around which it is possible to build vision and strategy for real estate development. In analogy to what is done for industrial products, this activity of defining product characteristics and verifying demand must be carried out with a 7 The

opportunity to develop strategies capable of creating new demand and new markets has been described in Chan Kim W., Mauborgne R (1998), Creating new market space, in “Harvard Business Review”, January-February 1999, Harvard Business Publishing, Brighton, USA. The authors themselves have further elaborated the concept and introduced the term “blue ocean strategy” in Chan Kim W., Mauborgne R. (2004), Blue ocean strategy, in “Harvard Business Review”, October 2004, Harvard Business Publishing, Brighton, USA.

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Fig. 7.3 Relationship between supply and demand. Supply meets demand expressed through a standard solution. Innovative supply creates new demand and new market. Sometimes it is possible to meet unexpressed demand with standard solutions, through intelligent technology transfer from one industry to another (Source created by the authors)

“scientific”, systematic and iterative approach based on objective, solid and complete information.

7.4.2 Identifying Real Opportunities for the Project Real opportunities should be identified by leveraging a project’s fundamentals to meet the target demand. This is an iterative activity that involves a systematic review of assumptions and outcomes, within the specific context, assessing their consistency with local culture, timing, technical and financial feasibility in relation to developers’ ability to execute. In some projects, for example, concrete opportunities identified by developers consisted in meeting the needs for rapid urbanization through the timely creation of affordable housing solutions with customizable formats associated with flexible workspaces and other leisure functions and services within walking distance. Some real estate products have been “based” on the opportunity to enhance existing historical buildings through the creation of rare contents, atmospheres and experiences for people (events, arts, culture, F&B, craftsmanship), complemented by a system of pedestrian zones, green areas and cycle paths. Entire economically depressed urban areas have been successfully regenerated through the adoption of lean urbanism aimed at attracting social and economic activities and encouraging the reuse of existing buildings and land. Other projects have leveraged the creativity and

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entrepreneurial culture of a region to regenerate distressed areas providing state-ofthe-art urban innovation districts that offer opportunities for people and businesses. Some waterfront locations offer opportunities for creating sustainable residential and hospitality offerings that maximise panoramas, views, outdoor spaces and amenities, whilst maintaining privacy and exclusivity. Successful real estate products have some fundamental characteristics: – Creating their own attractiveness, competitiveness and sustainability over time by adopting multiple strategies. They do not base their success on a single strength, but rather on a portfolio of attributes and strategies that work in alliance with each other creating a virtuous and resilient proposition. – Renewing, optimising and enhancing the entire value chain related to the use of the product or service by creating the conditions for a “total” and “frictionless” customer journey. Successful projects do not only enhance the potential of the product itself but also maximize the efficiency, quality and attractiveness of all aspects, functions, services and activities that contribute to the experience of using the product itself by customers and stakeholders. By way of example, with reference to the “customer journey”, for a theme park the visitors’ experience begins at the time of planning the visit and continues with a follow-up after the visit. Accessibility is a key aspect for most real estate projects and should be optimised in order to offer a seamless trip and experience consistent with the product itself. How and how long is it going to take to get there? Am I going to get stuck in traffic? The aim is to make all the above-mentioned phases optimal and memorable to create an extraordinary overall experience for customers and stakeholders. Conversely, some real estate projects fail because they are just the result of “mechanical aggregations” of standard real estate functions and formats that have worked in the past or in other locations, without having carried out a preventive, systematic process of analysis and understanding of strengths and specific local needs. Some urban scale projects fail because they are unable to integrate people, to create a community and sense of belonging. They are not sustainable because they lack a strong, proactive place-making and activation strategy in terms of services, animations, authentic atmosphere and content creation. They fail because of the fragility of the social and economic ecosystem associated with the built environment. Obviously, and all the more so in the current rapidly changing market scenario, the evaluations in Step 1, 2 and 3 must be contextualized and verified with respect to boundary conditions, identifiable trends, strategies adopted by competitors and, in general, with respect to all the external factors, even at macro scale, that can influence positively or negatively the relationship between product offered and demand.

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7.5 STEP 4: Creating a Simple, Clear but Achievable Vision (and Its Concrete Purposes) Once concrete opportunities to create value have been identified, a strong vision can be crafted around these opportunities together with its purpose. The vision is a “dream” that generates positive energy emotions, motivation and commitment in all those involved. With real estate development and urban regeneration projects— because of their long time-to-market and the need for collaborative involvement of many people with different skills—a strong vision plays a very important role. The vision represents the “leading light” that guides decisions throughout the entire development process and beyond as well as the “path” that keeps all stakeholders aligned towards the final objectives. To be effective, a vision must be “tangible”, i.e. it must be easily representable in terms of customers’ and stakeholders’ experience, quantifiable in relation to the benefits it will bring, and must be clearly and relentlessly communicated through the most appropriate channels.

7.5.1 Creating a Vision, Defining Its Purposes and Motivations (Why We Do It) Creating a strong vision requires observation, creativity and experimentation in the context of a data-based disciplined process that has the objective of aligning concrete opportunities (Step 3) with expectations (Step 2) and strengths (Step 1). In order to create a vision it is necessary to carry out a synthesis exercise that consists of envisioning a future scenario where customers’ and stakeholders’ needs are satisfied through concrete opportunities that are based on the project’s and location’s strengths. BOX: Defining a vision for a project means “envisioning a better future” for people, identifying tangible goals and “quantifying” benefits. Every urban regeneration project is different and location counts. Deep dive into the history, identity, tradition and culture of the area. Identify those “critical issues” and “core strengths” that offer opportunities for creating solid competitive advantages for the project. Build an authentic vision, rooted into the local DNA, which is sustainable, has purpose and generates tangible benefits for all stakeholders. Great projects start with a simple, clear, ambitious, yet achievable vision. A dream that inspires, creates positive energy and to which all stakeholders will become passionately committed. Some of the most sustainable and inspiring visions are those that put people at the centre, are authentic, have purpose and are rooted in the history, identity and culture of the location. Some great visions create the future,

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rather than extrapolating it from the past, contributing to change people’s behaviour and creating new opportunities. An example would be “a vision for the creation of climate-smart, state-of-the-art urban district, a model for vibrant and responsible communities”. Another relevant example would be “a vision for the regeneration of a derelict area into the most successful ICT cluster in the region”. Another one could be “a vision for the development of a leading touristic destination contributing to generate the conditions for a widespread regeneration of an entire community”. Strong visions motivate people, providing direction and focus throughout the development process and beyond. Visions should be effectively communicated with short, vivid descriptions that explain what stakeholders will see, feel and experience when the project is completed. In general terms, the vision of a real estate development project should have the following ten characteristics: 1.

Simple and clear: the best visions, like the best ideas, are logical, reasonable, “natural”, not very elaborate and sophisticated, and can be explained clearly and comprehensibly to all stakeholders. 2. Ambitious but achievable: a vision, by its very nature, represents a challenge, a leap forward from status-quo, a difficult undertaking, requiring extraordinary commitments, but achievable. 3. Inspiring, motivating and exciting: the vision activates people’s deep emotions and feelings, recalls fundamental values and mobilizes the positive energy needed to overcome difficulties and sustain the required commitment over time. 4. Human-centric: people—as individuals in their different family and social roles and as citizens, customers and stakeholders—must be listened to, understood and helped to achieve their goals, satisfy their aspirations and solve their problems. 5. The “why”: a vision must originate and be based on the authentic, profound motivations of those who have defined it and those who will realize it. Why do we do what we do? 6. Authentic: both in the sense described in the previous point and in relation to the identity, vocation, traditions and culture of the place where the real estate product is created. 7. Rich in content and benefits: a vision should not be abstract and theoretical. The vision must pursue tangible objectives and bring technical, social and economic benefits. 8. Is the “leading light” that should be followed during the development phases and beyond. The vision must be sustainable and maintain its relevance, strength and energy in the long run. 9. Tangible and achievable: i.e. concrete, effectively achievable in view of the project’s fundamental attributes, opportunities and context and available resources. 10. Communicable effectively to customers and key stakeholders in a simple and immediately understandable way.

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7.5.2 Communicating the Vision Effectively A strong and courageous vision creates motivation, indicates the direction to follow, brings focus and alignment of available resources. A vision should be communicated effectively through short but vivid descriptions that visualise what the future will look like, i.e. what customers and stakeholders will feel, see, benefit and experience when the project is completed. It is essential to clearly communicate the benefits that the vision will bring to individual customers and stakeholders and the timeframe within which these benefits will materialise.

7.6 STEP 5: Defining Positioning and Objectives of the Initiative Once the vision has been crafted and its purpose established, the next step is to elaborate it further by defining the strategic market positioning of the real estate product and its high-level objectives and ESG compliance levels. These include identification of market segments of interest and target customers, as well as qualitative and quantitative objectives to be pursued, and relative metrics. These are fundamental decisions that make the vision real and make progress and success of the initiative “measurable”.8

7.6.1 Strategic Positioning in the Markets of Choice Defining the strategic positioning of a real estate solution in the chosen market means deciding in which “competitive arenas” and “how” the solution should be positioned with respect to competitors and attributes of perceived value to the various customers and stakeholders. Strategic positioning involves answering key questions such as: at what geographical scale do we want to compete? Local, regional, national or global? At what level of quality/performance/experience? Budget, mid-scale, high or luxury? How are we making money and what is the relevant pricing structure? Do we want to compete on “volume” or in a niche market? What should the level of standardisation or customisation be? What type and level of services are bundled within the proposed solution? By way of example, for the vision “regeneration of a distressed urban suburb into a new exemplary model of viable and sustainable community”, strategic positioning should address, among others, the following questions: “depth and scope” of the 8A

reflection on the aspects related to the definition of a strategy is provided in Hambrick D. C., Fredrickson J. W. (2001), Are you sure you have a strategy? In Academy of Management Executive, Vol. 15, No. 4, NY, USA, pp 48–59.

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regeneration (soft, hard or mixed?); scale of attractiveness and competitiveness (local, regional or international?); type of community to be created (demographic structure, spending power and diversity?) and what attributes (identity, culture and values?); what level of vitality (social, economic, cultural, artistic or professional?) are to be pursued; what are the sustainability and socio-economic objectives? With this vision, an example of positioning could therefore be: deep regeneration capable of creating a mixed-use, innovative and international level built environment in order to favour the settlement of a heterogeneous community that shares the value of social inclusiveness and that participates in economic and cultural vitality in full respect of the highest environmental standards. Again by way of example, in the case of the vision “transformation of an unused industrial compendium into the most important cluster of digital technological innovation”, positioning strategy should address the following: what should the “depth and scope” of the transformation be? What are the relevant competing projects and in which regions? Local, regional or global? What types of socio-economic activities should be attracted? Start-ups, SMEs, research laboratories or a combination of these? With what level of verticalization? Specialisation in one or more specific sectors, several complementary sectors or any sector? With this vision, an example of positioning could therefore be: light functional transformation of existing buildings aimed at creating shared spaces for small and medium-sized companies operating in various industrial sectors that express the same need to accelerate the digitalization of their business models, processes and products. Strategic positioning is a direct consequence of the vision and has the objective of defining how we plan to succeed in the chosen markets.

7.6.2 High Level Objectives: Let Us Make the Vision Real To give further concreteness, definition and strength to the vision, it is necessary to identify high-level objectives for each dimension of interest. Establishing objectives means defining the outcomes to be delivered in the medium-long term in both qualitative and quantitative terms. For example, for the vision “regeneration of a distressed urban suburb into a new exemplary model of a viable and sustainable community”, setting objectives should cover the following aspects: quality, attractiveness and variety of mix of uses (functions and services); quality of buildings, public spaces and infrastructure; technological infrastructure provision; diversity and integration of the community; socioeconomic output in terms of creation of jobs, additional demand and tax income; use of sustainable mobility systems, waste management, energy consumption; and finally the quality of the programme of cultural activities and entertainment. Similarly, for the vision “transformation of an unused industrial compendium into the most important hub of digital technological innovation”, objectives should include: timing and cost for repurposing existing buildings; flexibility and efficiency

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of the spaces to be created; level of service, infrastructure and technological systems; quality and variety of training, advisory and coaching services.

7.7 STEP 6: Benefits and Competitive Advantages Offered to Individual Stakeholders (the Value Propositions) High-level objectives of a real estate solution should be translated into tangible benefits for target customer segments and key stakeholders. Because of the diversity and multitude of customers and stakeholders, it is necessary to define customised value propositions. These should not be limited to physical characteristics and functional performance, and should focus on how the proposed solution can respond to the expectations in terms of benefits, advantages, tangible contributions and concrete results that the project is able to generate for customers and stakeholders.

7.7.1 Defining Benefits for Stakeholders Value propositions must be customized and must clearly explain how the project could help achieve, or exceed, customers’ and stakeholders’ objectives. It is a question of building trust and visualising the “promise” to successfully address aspects that are considered very important. In general terms, value propositions can cover a wide range of topics such as, for example, increasing productivity and competitiveness of tenants; generating positive exponential socio-economic impact for local communities; regenerating an area and improving its environmental conditions to quality levels that exceed by far the limits set by the authorities; creating a destination that offers rare, authentic experiences through a combination of top-quality built environment and exceptional place making and activation; guaranteeing investors higher returns than those generated by investments with a comparable risk profile. BOX: What can make the project truly unique? What are the priorities? Create attractive human experiences, deliver opportunities, resolve issues and provide advantages to customers and stakeholders. Think long term, identify clear, ambitious, yet achievable objectives for the project aligned with the value propositions. Extend the time horizon of the regeneration plan and understand the potential tangible consequences of environmental impacts on future generations. Have to take care of nature—keep doing the same things is not an option—internalize any negative externality and contribute to society. Concentrate on specific SDGs, identify focused indicators, deliver and measure progress. Explain why you want to achieve the

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overall project objectives, build a story, a vivid narrative for a consistent media campaign and a strong brand for the project. For example, in the case of the vision “regeneration of a distressed urban suburb into a new exemplary model of vital and sustainable community”, the value proposition referred to the segment “young family” could be of this nature: “contemporary, high-quality affordable housing in a context characterized by green spaces, amenities and excellent educational facilities”. For the same project, the value proposition offered to lenders and “investors” should refer to transparency and tax efficiency of the “vehicle”, guaranteed profitability over time, and consistency of risk profiles. Again by way of example, in the case of the vision of the “transformation of an unused industrial compendium into the most important cluster of digital technological innovation”, the value proposition for “Start-ups” could be: “flexible workspaces with cutting-edge technologies, available in the form of shared services, in a context characterized by high density of talents, research centres, leading global companies and venture capital investors”.

7.7.2 Finding the Correct Balance Among Multiple Expectations Customers and stakeholders by nature may have conflicting interests and needs. In defining value propositions, it is necessary to make choices in such a way as to ensure the right balance between the various expectations. For example, on a specific real estate development project the expectations of Authorities, in relation to provision of public infrastructure and services, might not be consistent with tenants’ needs and investors’ risk/return objectives. A large urban scheme that drives substantial demand for mobility could generate negative externalities, such as traffic congestion and pollution, and be in conflict with the expectations of local communities. Furthermore, conflicts of interests may arise between shareholders and stakeholders of a specific project, for instance the divergence of interests between short-term shareholders’ return targets and the need to generate sustainable long-term benefits for society. Managing the trade-offs and striking the right balance can be quite challenging. Strebel et al. (2020) suggest that when pursuing long-term strategies leaders should make an assessment of individual stakeholders and develop virtuous win-win strategies with those that create sustainable value over time.

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7.8 STEP 7: Defining Strategies and Action Plans Step 7 is of crucial importance as it represents both a point of arrival for this simple Framework and a starting point for the following development phases. This Step can be divided into two main stages. The first is the creation of the final “Executive Framework”, which distils the key findings of all the activities carried out in the previous Steps. The second is the creation of the “Executive Strategic Plan”, which includes all high-level decisions and activities that should be carried out to realize the vision, position the product correctly, achieve the objectives and generate the tangible benefits promised to customers and stakeholders. The Executive Framework and the Executive Strategic Plan must be created with a unitary logic integrating both the “hard” aspects related to the built environment and the “soft” aspects related to the socio-economic ecosystem. Step 7 is a milestone of primary importance because it is the moment in which a developer demonstrates with courage and determination the leadership needed to make strategic decisions, commit resources, take risks and identify the concrete actions that will lead to the creation of the product and its introduction into the chosen market.

7.8.1 Creating the Executive Framework The Executive Framework should address the following five key areas. 1. Summary of the information, data, assumptions and key findings. Vision, strategy and design of a new real estate solution must be based on a solid, complete and objective set of information. This is a key prerequisite for building credibility, positive reputation and success. 2. Critical review and resolution of complexities to eliminate “background noise”, create a simple and clear scenario, and highlight the key strong fundamentals and substantial aspects for success. 3. Cross check that all assumptions and decisions are aligned and coherent, from identification of strengths (Step 1) to definition of benefits offered to target customers and key stakeholders (Step 6). In short, consistency and alignment are confirmed when the vision leverages on the strengths to meet the needs through customised value propositions. 4. Assess and confirm developers’ capability to successfully execute. This should include three main aspects: a. Alignment of the real estate initiative with purpose, values and culture. This demonstrates authenticity, which is a fundamental attribute to ensure attractiveness on the market. b. Consistency with technical, financial, commercial and organizational capabilities. This shows credibility and ability to deliver, which are of primary importance in discussions with stakeholders such as investors and lenders.

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c. Consistency with medium to long-term strategies of a developer and exit strategy for the specific initiative. This provides indications on the level of commitment, and the sustainability of the initiative over time. 5. Check resilience in relation to volatility of external scenarios over time (the forces of change, competition and local cultural aspects). This is not the standard sensitivity analysis to assess performance of a real estate product in “best” and “worst” case scenarios. Developing such analyses in a credible way would require the ability to accurately predict future scenarios, which is not possible because of rapid and unpredictable changes. In this context, therefore, the resilience test is rather aimed at verifying the intrinsic capacity of the product (vision, purpose, positioning, objectives and value proposition) and the developer to react positively to changing external conditions by virtue of its agility and flexibility. In our proposed Framework, Steps 1–6 involve in depth analysis and identification of strengths, expectations, opportunities, vision, positioning, objectives and value proposition. The analysis of each of these aspects—as there are no mathematical formulas—gives rise to several complete sets of attributes that are coherent and aligned with each other, and that generate different alternative options that must be tested and compared. In favour of simplicity, the activities from Step 1 to Step 6 have been described sequentially. In real life, the conception of a new real estate solution requires prototyping, testing and reviewing. This means that some of these activities should be carried out in parallel, by multidisciplinary teams, throughout repeated iterations and verifications to identify the best possible solution.

7.8.2 Execution Is King: Creating the Executive Strategic Plan The Executive Strategic Plan is not the result of an abstract exercise of data extrapolation and projection, it is not the product of theoretical reasoning, it is not a planning document, a budget, a feasibility study nor, even less, a business plan with the ambition to forecast future medium and long-term scenarios. The Executive Strategic Plan is the logical consequence of the research, analysis and evaluation activities carried out in Steps 1 to 6. It is a very real-life operational tool based on the Executive Framework presenting the strategic decisions and actions a developer must take to realize the vision.9 The Plan, in alignment with the unitary vision for the project, defines multiple strategies related to the socio-economic and physical dimensions based on solid market analysis and in-depth, intimate knowledge of the aspects that are important 9 The

importance of creating a fully operational strategic plan that sets out the concrete decisions that need to be taken is very clearly explained in Gerstner L.V.Jr. (1973), Can strategy planning pay off? McKinsey Quarterly, December 1973, McKinsey & Company, US.

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for customers and stakeholders. In addition, the Plan should provide the high-level operational decisions referring to the three macro phases: Conception, Construction and Go-To-Market. At this stage, a useful practical reference that systematically addresses some of the most important aspects is the “Business Model Canvas” proposed by Osterwalder A. and Pigneur Y. (2010). By way of example, referring explicitly to the model proposed by these authors, a good executive Strategic Plan should address the following areas: – Target customers and stakeholders: these are tenants, end-users, buyers, visitors, public sector Institutions, local community, investors and in general all parties who should benefit directly or indirectly from the real estate solution that will be developed. – Personalized value propositions defined for each customer and stakeholders. It is the integrated product, service and experience offering that makes the proposition unique and generates exceptional value. – The channels, i.e. the tools and methods of interaction through which the value generated by the real estate product is communicated and transferred to customers and stakeholders. – Modes of relationship with target customers and stakeholders, i.e. defining the various types of relationship that should be established with each party, such as partnership, community, “tribe”, customer, sponsorships, as well as ways of sharing risks and earnings. – Organisation of the entire supply chain necessary to implement the project and thus generate sustainable shared value over time. – Resources, tools, tangible and intangible assets needed across all development phases and beyond practical completion. – Activities of crucial importance for the success of the initiative that must be given the utmost attention and considered a priority. – Key partners needed to realise the value proposition as this usually involves entire supply chains and therefore requires the collaborative participation of several entities. – Economic framework of investments, costs and revenues of the initiative. Another useful reference to the practical preparation of a business model is proposed by De Reuver et al (2013),10 who are taking a creative approach.

10 De Reuver, Mark, Harry Bouwman e Timber Haaker. “Business model roadmapping: A practical approach to come from an existing to a desired business model”. International Journal of Innovation Management 17.01 (2013): They describe the canvas of the business model as the “most popular tool in the world… popular tool that makes it easy for professionals to design business models in a creative session”.

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References Brown T (2008) Design thinking, in “Harvard Business Review”, June 2008, Harvard Business Publishing, Brighton, USA Brown T. (2015) When everyone is doing design thinking, is it still a competitive advantage? in “Harvard Business Review”, August 2015, Harvard Business Publishing, Brighton, USA Chan Kim W., Mauborgne R (1998), Creating new market space, in “Harvard Business Review”, January-February 1999, Harvard Business Publishing, Brighton, USA Chan Kim W, Mauborgne R (2004) Blue ocean strategy, in “Harvard Business Review”, October 2004, Harvard Business Publishing, Brighton, USA De Reuver M, Bouwman H, Haaker T (2013) Business model roadmapping: A practical approach to come from an existing to a desired business model. Int J Innov Manag 17:01 Gerstner LV Jr (1973, December) Can strategy planning pay off? McKinsey Quarterly, McKinsey & Company, US Hambrick DC, Fredrickson JW (2001) Are you sure you have a strategy? In: Academy of management executive, vol. 15, no. 4, NY, USA, pp 48–59 Osterwalder A, Pigneur Y (2010) Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons Inc, Hoboken, USA Sinek S (2011) Start with why: how great leaders inspire everyone to take action. Penguin, UK Strebel P, Cossin D, Khan M (2020) How to reconcile your shareholders with other stakeholders, Magazine Fall 2020 issue, MIT Sloan Management Review, Cambridge, USA

Chapter 8

The Importance of a High Performing Team: Quality, Diversity and Alignment of Objectives

8.1 Leadership and Teamwork Successful real estate projects have been conceived and implemented thanks to the commitment of successful leaders and great multidisciplinary teams with experience and skills capable of orchestrating the various aspects of the value chain, from conception to go-to-market. The ability and track record of leaders1 and key people are the most reliable indicators of the probability of success of a project and are the aspects investors, lenders and main stakeholders consider most when assessing the feasibility of a real estate development initiative. The quality of people is even more crucial today than in the past. In a very volatile and unpredictable market context, one must necessarily rely on the ability of people to “navigate” change and ensure the achievement of project objectives. Leadership and high-quality teams are therefore the main ingredients for success. The key question posed here is whether “traditional” leadership skills and team attributes are still effective enough to ensure the success of real estate projects in the future. What are the characteristics that define the quality of leadership and project teams? How can we ensure performance consistency in the medium to long term across the various stages of development? What tools are available and useful for supporting leadership and teams? First of all, we believe it is necessary to create a working environment that is able to evolve naturally in “sync” with change. It is also important to eliminate all those “frictions” that make it difficult to respond proactively to disruptive innovations, seize opportunities, compete and stay relevant. The creation of a context of this nature requires a fundamental leap from the past in terms of leadership skills, team attributes and the way decisions are taken. So far we have mainly relied upon our experience, our beliefs, the analysis of available information and data to navigate 1 The

description of the meaning of the term “leadership” and the difference between leaders and managers has been the subject of numerous studies and publications, including Zaleznik A. (1992), Managers and leaders: Are they different? in “Harvard Business Review”, HBR Classic, MarchApril 1992, Harvard Business School Publishing, Brighton, USA.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_8

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variable market scenarios, sometimes characterized by major uncertainties. We have identified and adopted, with confidence, the most suitable tactics and strategies to keep our initiatives in the right direction to pursue success. The extent of change taking place today is such that we are rapidly moving from “uncertain” to “unknown” territories. This means that experience, beliefs and past performance do not guarantee future results, and that new approaches, skills and leadership styles will be needed to thrive.

8.1.1 Leadership in Real Estate Development What are the ideal leadership traits that real estate development and urban regeneration leaders should possess to succeed in the future? Traditionally, the sector has rewarded authoritarian leaders focused on amassing “power”, command and control mechanisms and pyramidal organisations. Within a well-known, familiar business context, these approaches and attributes have made it possible to manage complexity and coordinate and control multiple actors involved in the development process. In the future, to be protagonists of change, we must first of all change ourselves, our leadership styles, the logic with which we create project teams, we take risks and make our own choices. Leaders of the future must feel at ease in unfamiliar, constantly evolving context characterized by sudden changes, ambiguities and contradictions, in which the ability to come up with “good” innovation is one of the main ingredients for competitiveness. A “culture” of innovation can be applied to business models, value chains, value propositions, products, services, relationships with partners, but also to the various systems, procedures and business functions at all levels. Therefore, it is necessary to mature the conviction that within an organization and a project team every aspect can be improved, and every person can be an innovator. The role of leadership in real estate development initiatives, therefore, is also to create the conditions that foster this culture. Some of the main characteristics of future leadership are briefly described below2 : – Visionary and well-grounded on hard data. Ability to create a strong, clear, inspiring, ambitious but attainable vision for the project. – Effective communicator, able to engage internal and external stakeholders, create positive energy and build consensus. – Adaptable: able to adopt different leadership styles and techniques to suit specific situations and needs. Successful leaders show authentic and consistent behaviours. They focus on the way people are treated and avoid using authority conferred by

2 An

interesting description of leaders’ behaviours is presented in Kotter J.P. (2001), What leaders really do, in “Harvard Business Review”, December 2001, Harvard Business School Publishing Corporation, Brighton, USA. Further reflections on leadership can be found in Tichy N. M., Bennis G. W. (2007), Making judgment calls: The ultimate act of leadership, in “Harvard Business Review”, October 2007, Harvard Business Publishing, Brighton, USA.

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hierarchical or contractual relationships (Goffee and Jones 2005).3 This involves moving away from command and control mechanisms, embracing decentralisation and delegation of powers to the most capable and trustworthy people who are granted direct responsibility and autonomy over certain activities. We expect a fundamental shift from “control” of talents to “access” to talents. Ability to balance top-down and bottom-up. Moving from an “inside-out” approach to an “outside-in” approach. Leaders should not just develop ideas within the top management team and give instructions to the outside world. Leaders should be prepared to listen and should create conditions that favour bottom-up generation of ideas, leaving talents enough freedom to express themselves. Exploratory, to encourage innovative models and solutions and promote their prototyping and experimentation, rather than making decisions simply based on past experience. This requires accepting trials and errors, successive repetitions, sometimes without having clear results, and accepting a certain number of failures. Open minded, approachable and receptive, avoiding isolation and widening as much as possible the audience of selected people with whom to confront directly, exchange opinions and information. This creates an open architecture context that supports collaboration and inclusion.4 Generator of positive energy and motivator of people. This trait is particularly important and hard to exhibit because development projects take long time to complete, and concrete results are achieved following several years of intense work. A leader must therefore be able to maintain the motivation of the team and stakeholders involved throughout the process, identifying intermediate milestones of success over shorter time horizons, aligned with the final goal. Team builder, able to assemble the best possible people for the project and for each specific stage of development and quickly create team spirit, identity, recognition, respect, mutual trust and shared motivation. These attributes and values should be extended to partners and stakeholders. Valuing diversity and inclusion, and generating extraordinary performance. Understanding and valuing the differences within multidisciplinary teams, favouring the presentation of different points of view, absolutely avoiding retaliations and “collective consensus” dynamics, recognising everyone’s contribution with authenticity and loyalty and creating conditions so that each team member can express him/herself to the best of their potential. Expressing inclusive leadership, i.e. characterized by commitment to characteristics such as modesty and the courage to admit one’s limits and therefore accept help from others, the curiosity to listen and understand different points of view

3 The characteristics of

successful leadership and in particular the relationship between this and the attributes of authenticity are described in Goffee R., Jones G. (2005), Managing authenticity: The paradox of great leadership, in “Harvard Business Review”, December 2005, Harvard Business Publishing, Brighton, USA. 4 More bright minds are better than one, more intelligent ideas are better than one. The careful selection of people to deal with is the real strategic activity leaders should focus on to generate ideas that can drive competitive advantages and steer decisions in the right direction.

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and finally the willingness to delegate and create the conditions for people’s professional growth. – Maintaining lucidity, governing tensions by facing reality even in difficult moments which, given the duration and complexity of real estate development and urban regeneration projects, are inevitable.

8.1.2 The Importance of Individuals and the Importance of the Team Choosing the right people and creating a team that can generate high performance at various stages of the development process is the single most important activity for the leader who wants to create a real estate product. Successful real estate projects are carried out by teams of people able to effectively orchestrate all phases, from product conception to its construction and subsequent marketing and operation. The development process is characterized by mediumlong term timescales and—depending on the complexity and scale of the initiative—the need to involve multi-disciplinary professionals. A multi-disciplinary team includes internal and external professionals able to manage conception, feasibility, design, authorization, construction and marketing in compliance with acceptable risk profiles, timing, budget costs, safety requirements and performance objectives. The team is also responsible for effectively dealing with key stakeholders, advisors and partners. While ensuring the integration and continuity of information and knowledge flows, different skills and attitudes are required across each of the main development phases (Fig. 8.1).5 The initial Conception phase can be relatively short compared to the overall duration of the entire development process but is absolutely crucial for the success of a project. This is a creative phase, ideas come to light, strengths, fundamental attributes and vision are identified, the product is designed in terms of market positioning, and winning value propositions that make the offering different and better than that of competitors. This phase is an adventure, a discovery expedition that requires creativity and strategic thinking, but also energy, courage and skills of superexperts in the various disciplines of interest. A team of bright minds, “superstars”, the best possible people in their respective fields, selected one by one, an ambitious, combative and competitive elite, created specifically with the aim of capitalizing exponentially on all the strengths of the initiative and achieving extraordinary and innovative results. The role of leadership in this phase is to “manage” the egos, the attitudinal and character aspects, the behaviour of the individual team members creating the optimal conditions for each talent to express themselves to the best of 5 Each

phase in the development of a real estate product is characterized by distinct timescales, challenges and objectives. The developer must organize the best team in consideration of the specific phase. The complexity lies in ensuring the continuity of the flow of information and knowledge from one phase to another. The use of a shared digital platform can be of great help in this respect.

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Fig. 8.1 Characteristics and composition of the work teams in relation to the development phase and its objectives (Source created by the authors)

their ability. At the same time, the leader must also create a sense of urgency, team spirit, unity of purpose and sharing the “why”, i.e. the profound motivations that inspire the initiative undertaken. The initial phase is like a “sprint” relay race in which “athletes” have to give their best in a relatively short period of time and in which everyone is a winner if the team succeeds in generating a unique and successful product. The attributes and dynamics of high-performing “virtuoso” teams are very well described by Fischer and Boyton.6 The Construction phase, which includes planning and building consent procedures, design and construction, takes up a large part of the development process over several years. During this phase, demanding negotiations are carried out with multiple public sector institutions and key stakeholders in order to obtain consent to develop the concept design into a buildable real estate product. Subsequently, technical and performance specifications are detailed, and design and construction activities are carried out in compliance with time and budget. These activities require, in addition to the various specialised technical skills, the ability to effectively manage relations with the various public and private stakeholders and the ability to orchestrate the implementation process with the aim of achieving the objectives while maintaining control of risks. This phase requires the creation of a team that can work in harmony and with maximum collaboration over a long period of time. The multi-disciplinary team must be made up mainly of professionals who focus on specific tasks and who 6 Fischer e Boyton describe, by means of a series of concrete examples, the characteristics of teams

that are called upon to generate extraordinary performance in the short term. The authors call them “virtuous” teams in Fischer B., Boynton A. (2007), Virtuoso teams, in “Harvard Business Review”, July-August 2005, Harvard Business Publishing, Brighton, USA.

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guarantee their coordinated execution and completion within the set deadlines. Team members should focus on execution, operational action and possess a very strong determination to achieve the objectives and ability to share and collaborate, with greatest efficiency, albeit sometimes working individually and remotely. The leadership in this phase should concentrate on effectively communicating and “translating” the vision and strategy for the product at operational level, which means breaking down works, assigning tasks and ensuring alignment towards the final objective. One of the most important responsibilities, moreover, is to maintain high levels of energy, motivation, positivity and confidence throughout the development process and when difficult situations and conflicts arise. To this end, a leader should create conditions that allow individual team members to further enhance their technical skills, should grant them adequate autonomy of action and make explicit and visible how each team member contributes to the achievement of the project objectives. In addition, the definition of intermediate milestones and the recognition of merits in achieving objectives contribute to maintaining motivation during a multiyear development process. The implementation phase is like a “marathon” during which it is essential to “visualize” the final result and set a time target, maintain motivation and optimism even in times of great difficulty, and manage the available resources with the utmost discipline. In this long phase of product development it can happen that team members working together for many years develop the same logic of reasoning and then find themselves thinking in the same way and facing the problems with the same point of view. This phenomenon of “collective thinking”, i.e. the lack of different opinions and therefore of constructive debate within the team, not only does not favour innovation but can also be very negative for the project as it can be the cause of the lack of prior identification of opportunities or even serious critical factors. To avoid this phenomenon, it can be useful to foresee a periodic renewal of the team through rotation mechanisms and the inclusion of new members. Marketing and operational activities should be performed throughout the entire development process. In the initial phase, market intelligence is key for the creation of the product’s vision and strategies by providing real life knowledge of markets, competitors and target customers. In addition, marketing is typically charged with the responsibility of acquiring binding preliminary commitments with target customers to enable positioning of the product and mitigate development risks. Once development is completed, marketing and community management activities must ensure full occupation of space and the operational and functional quality of the product. These activities require a team that is passionate about market dynamics, customer experience and stakeholder relationships in general. The team must be composed of capable, service-oriented professionals with the ambition to systematically exceed customers’ expectations. To this end, the team, in addition to being a recognised expert in the real estate markets of choice, must also have intimate knowledge of the industry and business models of tenants, customer segments, spending profiles and habits of consumers, users and visitors. The role of leadership in this phase is to create the conditions for value propositions to materialize and to make tangible the benefits offered by the real estate product to the customers and stakeholders in

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terms of user experience, operational efficiency and services. The leader, moreover, must guarantee the product’s attractiveness over time and therefore must push the team to pursue a constant increase in the levels of services provided to clients, the transformation and rarity of the experiences, and the social and economic vitality of the socio-economic ecosystem. Diversity is an attribute of value in teams because, if it is “artfully” created and wisely managed, it allows to generate different points of view, comparisons and constructive discussions which, ultimately, generate innovation, better strategies, risk control and extraordinary performance.7 This refers not only to differences in age, gender and culture, but also and above all to differences in cognition, approach, logic, thinking and therefore in general how problems are perceived and tackled, and opportunities are seized. However, creating demographic and cognitive diversity is not enough. To transform team diversity into “exponential” performance and “extraordinary” results, it is necessary to create a strong “culture of inclusion”. It is necessary to create an authentic working environment where everyone can express themselves without fear of embarrassment or retaliation, everyone feels valued, listened to, respected and belonging to the group without discrimination. In many corporate environments, and particularly in the more mature ones, creating a context characterised by diversity and inclusion requires a total “cultural reset” and the questioning of beliefs and behaviours consolidated over the years. These are some of the main challenges that real estate developers must face to ensure their survival and competitiveness in the future. How is it possible to kick start such a deep renewal process, which is a real revolution, within an industry traditionally not very innovative and prone to change? An obvious approach could be to start experimenting these principles on a project by project basis, and then transfer and implement what works within the entire developer’s organization and across key partners in the supply chain.

8.2 Share Values, Goals, Challenges and Successes The context in which we are operating favours the transition from a traditional authoritarian leadership, based on command and control, to an “enlightened” one that delegates, “gives up” power, creates autonomy and focuses on creating the best conditions to “free up” the performance of talents and exploit their abilities to innovate. So how is it possible to retain control over complex development processes, manage conflicts and multiplicity of actors, adopting a leadership with these “soft” characteristics? It is necessary to leverage those deep “emotional” aspects and “intangible” attributes that create a “motivational drive” even stronger than hierarchical authority. The leadership of a real estate initiative must build the culture, define the values, create the 7 The dynamics of teams characterized by high diversity, the criticality and the extraordinary poten-

tial that these can generate, if directed following certain principles, are described very well in Distefano J.J., Maznewski M. L. (2000), Creating value with diverse teams in global management, in “Organisational Dynamics”, Vol. 29, No. 1, pp 45-63, Elsevier Science Inc., Oxford, UK.

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vision, set the objectives and communicate it all in a simple and clear way to the various parties involved. Key talents should be directly involved and encouraged through “tangible” incentive mechanisms of financial participation in the risks and rewards of the initiative. In this way, one can create a stimulating context that, if skilfully managed, allows to maintain high energy and motivation for the entire duration of the project.

8.2.1 Creating Team Spirit, Identity, Values and Shared Objectives Building the right culture and values, crafting the vision and setting purposeful objectives are essential prerequisites for creating the ideal context for success. Building these intangible attributes takes time and requires special commitment from the very beginning. These are the glue that holds together the project team, which is typically assembled for a specific initiative and includes internal and external professionals with diverse backgrounds, attitudes and skills. The intangible aspects not only help to create cohesion, aggregation and team spirit, but also represent, for each team member, the shared “toolbox” needed to steer day-to-day choices and decisions in the right direction. Having to “navigate” new and unknown “market oceans” characterized by turbulence and poor visibility, these tools represent the “compass” that allows leadership and team members to maintain the direction towards the chosen destination. These considerations are even more important today than in the past as we shift from a centralized and vertical organizational model to a decentralized and horizontal one with delegation of powers. The objective would be to position key talents as close as possible to action, giving them responsibility, trust, freedom of action and, indeed, equipping them with the best tools for self-orientating when making important decisions. One of the new and fundamental aspects that must permeate culture, values, vision and objectives across a project organisation is the “human factor”, which is the recognition of the paramount importance of customers’ and stakeholders’ experience in using the proposed real estate solution.8

8 Successful

developers focus on the users’ experience—the “customer journey”—which involves optimising the entire value chain of a real estate solution. They also recognize that it is necessary to invest to eliminate those factors that cause frustration or fatigue to customers and stakeholders, the so-called “pain points”. Faithfully following these principles, a new breed of operators have developed innovative business models and managed to quickly gain large market shares to the detriment of traditional players who have remained anchored to the logic of the past.

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8.2.2 Sharing Risks and Rewards of the Initiative No leader or real estate developer has all the knowledge, experience, relationships and resources needed to achieve the levels of competitiveness and speed required by the market. To become really competitive a developer needs to aggregate resources, skills and capabilities throughout the creation of extraordinary strong alliances both within the project team and with leading external partners. For instance, with valuable true talents, the standard contract between employer and employee should evolve towards a risk and rewards sharing relationship. Similarly, with those external strategic players who can make a significant contribution to generating value for the initiative, the standard contract between customer and supplier should evolve towards a partnerships or co-development relationship. In short, successful real estate initiatives are the result of complex synergetic collaborations among different complementary actors, each of which contributes to the achievement of their overall objectives. To put this approach effectively into practice, it is necessary to “align” the individual objectives of talents and strategic partners with those of the project through mechanisms of risk sharing, participation and incentives. This model requires a certain amount of understanding and generosity by all parties involved. To make sure this set of strategic alliances is robust and stable in the long term, one should create an ideal context by acting on those “internal” and “external” factors that support the desired behaviours of the various parties involved and that favour success.9 Internal or “intrinsic” factors include personal traits such as self-esteem, willpower and perseverance of individuals. In order to increase internal motivation, it is necessary to create a sense of autonomy, recognize and value people’s skills, and create a clear connection between the tasks performed by the individual and the overall objectives of the project. Therefore, in order to motivate people one should grant them a certain independence and freedom of making choices to nurture their passions, attitudes and skills and put them in a position to make a tangible contribution to the results of the initiative. Intrinsic motivations generally last for a very long time and therefore are essential for real estate development projects whose objectives are achieved over several years. The external or “extrinsic” factors come from outside the person and include various forms of incentives of a positive nature such as economic bonuses, praise and recognition or of a negative nature such as penalties, criticism and punishment. External factors can be leveraged to encourage/disincentivise certain behaviours or to push people for certain professional performance.10 9 The

internal and external motivational aspects as well as the techniques for understanding, correcting and directing people’s behaviour are very well described in a comprehensible and complete way, also through the use of numerous concrete examples, in Kinley N., Ben-Hur S. (2015), Changing employee behaviour, Palgrave and Macmillan, Basingstoke, UK. 10 According to Kinley and Ben-Hur (2015) the use of external motivation factors must follow six fundamental principles: people are different and respond differently to external motivational

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In general, the best technique is to create a balanced and personalised combination of internal and external motivational factors. Finally, special attention must be paid to the intermediate management levels within an organisation, to whom the day-today execution of strategies is delegated. These levels need to be carefully involved, informed and motivated, as the success or failure of an initiative may depend on their concrete commitment.

References Distefano JJ, Maznewski ML (2000) Creating value with diverse teams in global management, in “Organisational Dynamics”, Vol. 29, No. 1, Elsevier Science Inc., Oxford, UK, pp 45–63 Fischer B, Boynton A (2007) Virtuoso teams, in “Harvard Business Review”, July–August 2005, Harvard Business Publishing, Brighton, USA Goffee R, Jones G (2005) Managing authenticity: the paradox of great leadership, in “Harvard Business Review”, December 2005, Harvard Business Publishing, Brighton, USA Kinley N, Ben-Hur S (2015) Changing employee behaviour, Palgrave and Macmillan, Basingstoke, UK Kotter JP (2001) What leaders really do, in “Harvard Business Review”, December 2001, Harvard Business School Publishing Corporation, Brighton, USA Tichy NM, Bennis GW (2007) Making judgment calls: the ultimate act of leadership, in “Harvard Business Review”, October 2007, Harvard Business Publishing, Brighton, USA Zaleznik A (1992) Managers and leaders: Are they different? in “Harvard Business Review”, HBR Classic, March–April 1992, Harvard Business School Publishing, Brighton, USA

factors, therefore it is first of all necessary to fully understand the personality, level of experience and approach of each individual and then define a personalized motivation technique; “soft” external factors, such as praise and recognition, must be used before “hard” factors, such as economic incentives; feedback on people’s behaviour and performance must be given immediately; moreover, feedback must not always be positive: it is preferable to report constructive criticism; positive external factors must be made unpredictable and unexpected, while negative factors must be predictable; motivation techniques that leverage the aversion to loss (in fact, people perceive losses 2.5 times more intensely than gains) must be put into practice.

Chapter 9

Positioning and Marketing of Real Estate Products

9.1 Market Positioning: Leveraging Your Very Own Skills to Create Unique Value Propositions The market positioning of a new real estate solution is probably the most critical and important strategic activity a developer must face in the initial phase of the development process. Indeed, as this industry operates predominantly for large orders, the success or failure of a single project can substantially affect the balance sheet of an entire company and, under certain circumstances, determine its success or failure. The past experience of a developer and its partners certainly helps in the pursuit of the optimal market positioning, but it is not a guarantee and complacency can be very dangerous. The changes taking place are redefining markets and technological innovation is drastically reducing barriers to entry by facilitating the adoption of disruptive business models developed by new entrants. Digital models of the built and socio-economic environment provide an extremely useful “picture” of the current context for a specific project, but there are no mathematical formulas for predicting future market scenarios with reasonable certainty. In this extremely complex business environment, real estate developers must address several crucial questions. What are my competitive advantages? In which markets do I want to operate? Who are my target clients and key stakeholders? What value proposition do I want to offer? With which business model? Is the initiative sustainable?

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 A. Ciaramella and M. Dall’Orso, Urban Regeneration and Real Estate Development, PoliMI SpringerBriefs, https://doi.org/10.1007/978-3-030-67623-0_9

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Fig. 9.1 How to correctly position the product starting from the “key” skills, advantages and available resources of its creator (Source created by the authors)

9.1.1 Competences, Competitive Advantages and Available Resources Successful real estate initiatives originate from an enlightened and proactive approach based on a systematic and objective assessment of the skills, competitive advantages and available resources of the developer and its partners. The objective of this approach is to correctly direct strategic marketing choices towards those “competitive arenas” (markets) in which a developer, leveraging its distinctive skills, advantages and resources is able to create attractive products that meet demand and beat competition (Fig. 9.1). In defining a marketing strategy, therefore, the first step a developer has to take is to answer three fundamental questions: why am I doing this, what are my “key” skills and how can I turn them into competitive advantages? The answer to the first question, although it may seem trivial and obvious, is instead of great importance and requires a developer to research and analyse its authentic motivations and sincere goals. In general terms, a developer’s key competences can be defined as those distinctive skills that are difficult to create, imitate or acquire. Those are the crucial capabilities that make it feasible to access and conquer interesting markets, and that contribute substantially to the uniqueness of value propositions. Key competencies are valuable resources that are made available across the entire organization, give credibility and contribute to the reputation of a developer.1 These skills and competencies concern not only the creation of tangible “physical and technical” features of a product but also, and in equal measure, the intangible “experiential, social and economic” aspects. In addition to “vertical” specialist skills, a developer must also 1 On

this topic see Prahalad C. K., Hamel G. (1990), The core competence of the corporation, in “Harvard Business Review”, May-June 1990, Harvard Business Publishing, Brighton, USA.

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possess those “horizontal” skills that are needed to establish relationships, forge alliances and create networks of collaboration with valuable partners. In fact, developers rarely have in-house all the skills needed to conceive, construct and market new products and therefore must necessarily complement them through alliances. Carefully selected strategic partnerships not only complete core competencies but also amplify competitive advantages. Sometimes, rather than spending time and resources trying to manage conflicting relationships with suppliers and fighting competition in overcrowded markets, it may be cheaper and more rewarding to establish alliances, create new opportunities and new markets.

9.1.2 Choosing Target Markets: Improving the Present or Creating the Future? Once a developer has identified its core competences, some fundamental strategic decisions have to be made on which target markets to enter and invest in and, vice versa, which markets to exit and disinvest from. Usually, it is only worth continuing to operate in a market if one can maintain a competitive advantage over other players. These are the markets in which a developer is always able to stay ahead of the competition thanks to the value generated for its customers and stakeholders, rather than the pricing level of its offering. A marketing strategy should address two possible scenarios: – Identifying existing markets where core competencies can be transformed into competitive advantages. – Using core competences to create innovative products and thus new demand and new markets (Fig. 9.2). Existing markets, particularly mature markets, are characterised by fierce competition and consequent pressure on pricing and margins. Moreover, in the current scenario, customers are in control, since, also thanks to technology, they can access and evaluate multiple options, make quick comparisons and choose the solution that best meets their needs. In this context, developers must use their expertise to differentiate from competition, through increased productivity, improved product quality, integration of value-added services, brand fortification and the creation of effective marketing and communication campaigns. In this ordinary context, a marketing strategy should consist of reliable predictions about demand expectations, ideal positioning of the product in terms of benefits for customers and stakeholders, and related economic aspects. With regard to the latter, when a market entry strategy is based on pricing, it may be convenient to position the product at a significantly low level and such that existing players are unable to match and any other potential competitors are discouraged from entering. In mature markets, real estate developers leverage their distinctive capabilities to continuously improve their products and refine value propositions to maintain or increase competitiveness.

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Fig. 9.2 Disruptive innovation and the creation of new demand and new markets. The opportunity to leap from one crowded arena to a new unexploited market space (Source created by the authors)

As an alternative, or in addition to the traditional market strategy described above, real estate developers today, thanks to the rapid technological evolution, have a oncein-a-lifetime opportunity to invest in research and development, facilitate transfer and mashing-up of technologies, generate ideas and produce innovation. The marketing strategy in this case is based on the ability to generate new demand, attract new customer segments, develop new business models and thus create new products and new markets. The challenge is to drive innovations that generate products and services that customers and stakeholders need but have not yet experienced or even imagined and thus create non-existent, unknown markets, disrupting the status quo. The player that creates a new market, if successful, enjoys a first-mover advantage as competing players have to chase and follow. In this attractive market context developers have the opportunity to create future scenarios rather than trying to predict them.

9.1.3 Understanding and Learning from Your Target Customers Similarly to successful industrial products, marketing strategies of successful real estate projects put customers and stakeholders at the centre with the goal of defining appealing value propositions that are more attractive than those of the competition. Once the markets of interest have been chosen, the next step is to identify the target clients within these markets. Compared to most industrial products, however, real estate has to address the complexity of having to simultaneously satisfy several

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Fig. 9.3 Learning from your customers and stakeholders. Hypothesis of direct survey methodology to acquire information about the experiences of using the product by target customers and key stakeholders (Source created by the authors)

diverse customers and stakeholders, both BtoB and BtoC, including buyers, tenants, end users, local communities, public sector Institutions, lenders and investors. The difficulty is to create well balanced, customized value propositions for each customer and stakeholder, ensuring that they do not conflict but rather reinforce each other in line with the positioning of the product. In general terms, three categories of customers can be identified: those whose needs are not met, those whose needs are not adequately met and, finally, those whose needs are not yet expressed and therefore represent a new potential demand. The objective of the marketing strategy at the initial stage of a development process is to generate in-depth understanding of customers and stakeholders and to acquire feedback on their real-life experiences when using the product. What are the business models and operational mechanisms of the sector in which customers and stakeholders operate? What are their inner drivers and deep motivations? What works and what does not work in the sectors in which they do business? What do they need in order to succeed? What are the critical aspects they have to resolve and what are the potential opportunities to seize? How can their lives be improved? These are some of the questions that need to be answered to correctly address the value propositions for the products to be developed. Quantitative and qualitative market surveys and techniques involving big data, focus groups and motivational analysis, can provide useful data and information to create the reference context. These must be integrated through direct interviews with individual customers and stakeholders within the chosen segments. The aim is to create favourable conditions for customers and stakeholders to express and share their authentic feelings, frustrations or satisfaction in a transparent way. This feedback represents invaluable insights that can be used to both improve existing products and to create innovative ones (Fig. 9.3).2 The aim of this exercise is not to get solu-

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tions from customers and stakeholders but rather to see a real estate product from their point of view and understand what their desired outcomes are. What do they want the product to do for them? What do they really want to get out of the product? What are the issues and difficulties they experience when using the product? According to Ulwick (2002), in this direct survey activity the first thing to do is to carefully select a representative sample of customers and stakeholders. The interviews must be carried out in a context that comes as close as possible to the reallife context where customers and stakeholders experience the product. The technique involves asking open questions, using anecdotes, asking the interviewee to tell true stories regarding their experiences using the product, to make comparisons with competing products and to freely express their impressions, feelings and experiences related to the use of the product. The most acute quotations, the clearest descriptions, the most vivid stories are collected, classified, filtered, grouped and then discussed and “translated” into specific requirements. These requirements must then be assessed and listed according to their importance. The final step is to identify concrete solutions for each of the specific requirements and how these solutions can be incorporated into the real estate product design process. In a nutshell, the aim is to collaboratively engage a diverse client base and, under certain circumstances, even involve it in co-creation activities.3 The info and data generated from this approach should be used to progressively improve the attractiveness of the offering. For real estate development projects it might be useful to elaborate quantitative and qualitative data to create marketing “personas”. We refer to the creation of ideal profiles for target customer segments. These fictional profiles should include information such as names, key behaviours and motivations, age group, personality, background, culture, lifestyle, buying preferences and spending power, preferred activities, needs and challenges. Well-crafted personas distil all the key traits that are important when designing customer-centered products.

9.1.4 Creating Value Propositions: Which Distinctive Aspects? Customers and stakeholders of a real estate project have their own specific needs, expectations and aspirations. The goal is to fully understand the point of view of target customers and key stakeholders and create products that generate lasting tangible value and benefits for each of them.

2 This approach is very well presented by Ulwick A. W. (2002), Turn customer input into innovation,

in “Harvard Business Review”, January 2002, Harvard Business Publishing, Brighton, USA. sintesi descrittiva di questo approccio alla creazione di valore è riportata in Ranjan K., Read S. (2017), The six faces of value co-creation: A field guide for executives, in “Rutgers Business Review”, Vol. 2, No. 1, pp 23–31, Newark, USA.

3 Una

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The creation of successful and innovative real estate products therefore always originates from direct observation and careful analysis of customers’ and stakeholders’ behaviours, perceptions and feelings when using the product (the customer journey). The direct observation allows to identify those aspects of the product that generate satisfaction, those that represent a barrier and a difficulty and that generate frustration and dissatisfaction, those that generate emotions and rare experiences and therefore motivation and desire for repeated use. Creating, innovating and improving the attractiveness of a real estate product means looking at the product, and the services associated with it, with the eyes of the users, considering not just the product itself, but also the entire value chain and all the points of contact that the product will have with the various customers and stakeholders. This extended and integrated vision requires an extraordinary commitment from the developer and its partners that, if well directed, generates unique and distinctive value propositions that users are willing to recognize and reward. To maximise impact of this “holistic” approach, developer and partners must align their strategies, resources, business models and organizations to deliver the value propositions. The value propositions must be consistent with the brand, simple, clear and as flexible and customized as possible in order to best meet the expectations, differentiating themselves from the competition. In the current context it would be too risky to place a “standard” real estate product on the market, even if it is technologically advanced. To be successful, it is necessary to create products that are purposely designed to meet needs, create authentic experiences and improve lives, in line with local cultural aspects and the changing external context (still preserving their flexibility to adapt). Developers should focus on acquiring and maintaining deep understanding and “control” of target markets and customers, not specific individual products. The complication consists in having to satisfy simultaneously multiple customers and stakeholders (Fig. 9.4). By way of example, for a mixed-use urban regeneration program, the local community requires maximum positive social and economic impact (spaces for socialization and leisure, jobs creation, accessibility to public services, etc.) and minimum negative externalities (traffic congestion, pollution, etc.). Investors are looking for a product that delivers sustainable profits consistent with the risk profile, a tax efficient vehicle, a transparent and simple management fees structure, a professional and stable development and asset management team capable of guaranteeing compliance with performance targets. Tenants are looking for a context that contributes to the competitiveness of their core business (in terms of space efficiency, flexibility, footfall and therefore productivity and turnover), value for money, image consistent with the company brand, accessibility to growth drivers and value-added services. Obviously, when defining tailored value propositions, not all aspects, features and benefits provided are of equal importance to customers and stakeholders. At product Conception phase, developers must understand which are those aspects that are perceived of greatest value to each individual user, and focus creativity, resources, investment and innovation in that direction.

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Fig. 9.4 Create and deliver carefully customized value propositions for target customers and key stakeholders (Source created by the authors)

For example, in the creation of a real estate product in the entertainment sector, let’s say an amusement or theme park, it is necessary to focus resources, commitment and capacity for innovation mainly towards those aspects that are important for the guests. In this case visitors are looking for rare interactive and immersive emotions, experiences, surprises, frictionless and pain points free environment and extraordinary customer care services. This means investing primarily in what visitors see, feel and perceive and therefore in creating the most beautiful scenography, sensational multimedia technologies, distinctive attractions, rides and shows, quality of service and personalised customer relationships before, during and after the visit. In this case, aligning strategies, resources, business models and organisations means, for example, creating a culture and value system that grant staff in direct contact with guests the “power” to make immediate autonomous decisions in order to ensure that visitors are always looked after and fully satisfied. In addition, procedures should include the systematic acquisition of customer preferences and feedback to nurture a culture of continuous improvement in the visitors’ experience. Creating unique and personalized value propositions is not enough. Real estate developers must continue investing to improve and renew their offering and maintain competitiveness in the chosen markets (Fig. 9.5). The goal should not be to simply add new features, devices or technologies with the risk of over-engineering

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Fig. 9.5 The evolution of value propositions over time in order to continue to generate value and uniqueness with respect to competitors and market scenarios (Source created by the authors)

and making the product too sophisticated for the target users. Product improvement and innovation efforts should always be directed towards the creation of a portfolio of distinctive attributes that generate concrete benefits and opportunities for customers and stakeholders. The relentless endeavour to renew the value propositions should consider both “hard” aspects (technical specifications, functionality, efficiency) and “soft” aspects (experience, emotions, services, customer care). This dynamic evolutionary approach should be applied both to existing real estate products (e.g. the periodic repositioning of a shopping centre, the cyclical renovation of attractions in an amusement park, the regeneration or retrofitting of functionally obsolete buildings, the transformation of roads and squares into lively pedestrian areas) and to new projects that must be designed to meet future needs. Value propositions could evolve from the basic provision of functional real estate space into a strategic resource to become an integral part of a complex ecosystem capable of generating social and economic progress. The real estate product is transformed from “condominium” to “community” to “ecosystem”. It is pretty obvious that, in order to be able to conceive and deliver value propositions that generate superior benefits, the capabilities, roles and scopes of real estate developers should substantially evolve. In particular, developers must acquire the ability to be not just creators and intermediaries of physical spaces, but also creators and intermediaries of relationships and socio-economic activities. They must be able to create and activate places (not just construct buildings), orchestrate community activities (not just facility management), govern and facilitate synergetic collaborations among diverse private and

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public actors (not just managing tenants and consent procedures). If we look at the bigger picture, public sector institutions must, on the one hand become aware of the changes taking place and, consequently, promote a structural reform of the existing regulations, on the other hand they must build skills, tools and culture that allow them to relate in an agile and efficient way with the private sector.

9.2 Marketing, Branding and Communication Marketing, brand creation and enhancement, and communication are strategic activities capable of generating considerable added value for the specific real estate initiative, the developer and its partners. The essential tactic to this end is to highlight and communicate in a simple but evident way the value and benefits that the product can generate for everyone. The creation of a strong and successful corporate and project brand contributes to the strength of the message, as it introduces positive associations between the proposed real estate product and certain attributes that increase the value perceived by customers.

9.2.1 Communicating Value and Benefits for Stakeholders By way of example, the commercial value of a real estate product is strictly correlated to the three “C’s”: the Container (intrinsic physical characteristics of the building such as architectural style, iconicity, layout, building fabric, materials, finishes, operational performance, etc.), the Context (the attributes of the location in terms of accessibility, safety, security, amenities, views corridors, environmental quality, vitality of the local socio-economic ecosystem, etc.) and the Contents (the activities that are performed within the building itself, type of uses, quality of tenants and occupiers, occupancy rate, revenues sustainability, etc.). The combination of these three aspects determines the product’s ability to generate sustainable income and maintain or increase its value over time. The relative importance of these three aspects varies according to the type of real estate asset: historically, the value of urban residential properties is strictly dependent on the location and quality of the building, while for commercial or logistic properties the value is more closely related to their ability to generate sustainable income. All aspects being equal and therefore for a specific product in a given market situation, the value perceived by various customers and stakeholders may be different as they relate the price to the specific advantages and benefits that the product might generate for them. Finally, in addition to these aspects of a rational nature, the way in which the value of a property is perceived may also vary depending on contingent factors, for example, urgency to sell or to buy and emotional factors (O’Konnel et al 2011).

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BOX: Pricing for value and not for quantity As with most products and services, when marketing a real estate product, whether it is for sale, to let or offered in another contractual form, developers must focus on the benefits it generates for customers and stakeholders. The objective is to understand the “economic”, “personal” or “emotional” value that the real estate product can generate for the specific buyers and users, its perceived value, and consequently determine the price level in relation to the market situation. What are the unique benefits generated in relation to needs? How do they differ from those offered by competitors? What is the economic value of the benefits? What is the most effective way to communicate the value of the benefits? These are some of the questions that developers must address at the Go-to-Market phase. It is clear once again that knowing customers and stakeholders is crucial, also in the commercialization phase, as it allows us to understand how a product can generate the expected benefits and therefore allows us to anchor its price to them. The pricing level signals the level of quality of a real estate product and its market positioning. When defining the price, it is always necessary to verify in advance the best possible alternatives available on the market, highlighting the distinctive aspects and the advantages for customers. It is absolutely necessary to avoid the mistake of focusing only on oneself (the company and its real estate projects). It is essential to maintain an open broad view of the external scenarios, monitor the moves of the competition and market trends. Without prejudice to the general principles set out above, the communication strategy varies according to the positioning of the real estate product. For high-end products, the emphasis should be on quality, benefits, emotions, authenticity and exclusivity. For low-end products, the emphasis should be on price, also intended in terms of value-for-money for the specific target customer segment. To communicate the value propositions effectively, an authentic and persuasive narrative must be developed. This “story telling” should be rooted in the deep values and deep motivations of the developer and should focus on the emotional aspects.4 Technical specifications and performance data, business plans, KPIs, statistics and projections are not always convincing, can be manipulated and, above all, in the current market scenario, are not considered to be very reliable to predict the future. This “rational” information and these “hard” data must be used to support the narrative and make it real. One possible approach would be to imagine the future, visualise and describe it in a convincing way, and explain why and how customers’ 4 Fiction as an effective tool for marketing and communication, defined as a “story telling” technique,

has already been highlighted some time ago and has been well described in Lieber R. B. (1997), Storytelling: A new way to get close to your customer, in “Fortune”, pp 102–108, February 1997, Time Inc.’s Fortune, NY, USA. Another interesting reference can be found in McKee R. (2003), Story telling that moves people, in “Harvard Business Review”, Different Voice, June 2003, Harvard Business Publishing, Brighton, USA.

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and stakeholders’ lives will change thanks to the proposed real estate product. The narrative can be created by highlighting the conflict between expectations and the reality of the facts and telling how it has been possible, or will be possible, to overcome adversity and antagonistic forces using the resources, inner energies, courage and dynamism of all those involved in the initiative.

9.2.2 Managing Company and Project Brands In general terms, with some exceptions, real estate developers have not devoted much attention and resources into the creation of strong corporate brands. In recent times, more attention has been devoted to the creation and development of brands for specific real estate projects. This lack of attention, compared to other industries, is probably rooted in past market scenarios when most developers focused primarily on maximizing the buildable area, as formats were pretty standard and demand was growing and able to take up the development pipeline. In this context, main players operated on the supply side with a favourable balance of power in relation to demand, which acted with limited room for manoeuvre and discretion. The current market context is quite the opposite. Demand is in charge. To be successful, real estate projects must be conceived, built and marketed to compete and win customers, and therefore can benefit from the advantages that a strong recognisable brand can bring. In fact, the benefits of strong brands, for both the developer and its real estate products, are multiple and substantial, perhaps today essential for the success of an initiative.5 A strong brand acts as a “multiplier” of attractiveness, effectiveness and opportunities on a number of aspects of great value to the developer. First, a strong brand helps to create sense of belonging and motivation of the team, facilitates the attraction of talents and the creation of partnerships with valuable market players. In addition, a strong brand communicates reputation and reliability and facilitates access to credit, fund raising and the attraction of venture capital. Finally, a strong and visible brand on the market accelerates product adoption by target customers and thus accelerates business growth and helps to enter new markets. How can a successful brand be created? What does the brand communicate and how does it inspire employees, stakeholders and the market in general? Through which channels? Successful brands communicate deep values, clear and well-defined purposes and goals. Strong brands have a clear focus, they are a “leading light” that guides decisions and ensures consistency in corporate and project choices. In some cases, brands focus

5 The

principles underlying the correct and effective management of brands, strengthening and revitalisation techniques are described in Keller K. L. (1999), Managing brands for the long run: Brand reinforcement and revitalization strategies, in “California Management Review”, Vo. 41, No. 3, pp 102–124, Spring 1999, University of California, Berkeley, Haas School of Business, USA.

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on the product, the extraordinary quality of design and materials, ease of use, reliability and performance. For some brands the focus is on authenticity of experience, sharing and opportunities for relationships and socialization. In other cases, the focus is on innovation and the desire to constantly explore opportunities, going beyond the familiar spaces and venturing into the unknown. Some brands have built their reputation around their ability to challenge the status-quo, to question established beliefs with the aim of creating different and better value propositions. Finally, some brands are based on history, tradition, passion, character, their resiliency, determination and the willpower shown in rising from lost battles to create legends. In most cases, established brands originate from deep analyses and reflections on intrinsic motivations, on “why you do what you do”, on the mission and purpose of the company and people and therefore on what you want to become. Brands also communicate the way things are done, the culture, the values and the quality of the people who work to create the product. Generally, these brands are associated with value propositions that are complete, generous and accurate in every detail. All these aspects characterize the brand and must be represented consistently. The tone of communications, i.e. the way things are said, the choice of names and graphics determine the “personality” of the brand, while the identification of communication channels must be consistent with the positioning, target customers and key stakeholders. From a users’ point of view, corporate and project brands are “associated” with certain attributes that can be perceived positively, hopefully, but also negatively. These associations can be of various kinds, they contribute to the reputation of the brand and once they are created in the customers’ mind, they are very difficult to change. Associations may relate to “tangible” aspects such as quality, level of innovation, reliability, performance and price of the product, or intangible aspects related to specific target users, usage experience, service and customer focus. Associations also allow the differentiation of one brand from others and therefore represent a critical aspect of competitiveness. It is quite clear that positive associations contribute to increasing the value of the brand while negative associations erode it. For example, some leading global operators in hospitality, leisure and entertainment base their value propositions primarily on the superior quality of the service offered to their customers, on extraordinary attention and personalization, rather than on the physical product as such. Business activities, external factors of change and extraordinary events can have a significant and sometimes extremely rapid impact on a brand’s strength, reputation and attractiveness. Some brands, even important ones, have disappeared from the market and others have undergone revitalisation, repositioning or rejuvenation, having exhausted their appeal. Vision, corporate strategies, organization and resources must be consistent with the brand positioning and contribute to its strengthening over time. Marketing strategies may involve different tactics, but behaviour, messages and tone of voice must always remain consistent. In fact, all successful brands have been built through long-term marketing strategies with the aim of consolidating their positioning over time as the external context changes.

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Fig. 9.6 Maximising Gross Development Value through branding, intelligent development phasing, pricing strategy and context repositioning (Source created by the authors)

Creating a strong brand for both the developer and the specific project is vital also for boosting the Gross Development Value. For large-scale initiatives that aim at creating new markets and new offerings that command premium prices, establishing a recognisable brand from the beginning can be very challenging. One of the reasons is that these large-scale projects are usually developed in phases and it is not always possible to deliver the full value proposition from completion of phase one (Fig. 9.6). Another issue is that if the differential between the pricing levels of the new development and the existing products is too high, it might deter potential buyers. The consequence is that in most cases, to get momentum, visibility and cashflow, first units must be offered at lower price levels. In some circumstances it might even be worth offering special conditions to attract “anchor” buyers/tenants that help build brand equity and achieve the target market positioning for the scheme. The strategy then could be to gradually increase price levels in line with the demand, without flooding the market, and launch the highest value phases/units when the real estate product gets traction. In this pricing strategy, the quality of the context (in terms of both soft and hard attributes) plays a critical role. The reason being that, at initial stage, the new initiative is still rooted in the perceived quality of the specific location. If the initiative is located in a non-prime and non-established area, which is the case for most urban regeneration projects, the pricing levels for the new development will rapidly hit a “glass ceiling” until conditions are created for a widespread repositioning of the area.

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References Keller KL (1999) Managing brands for the long run: Brand reinforcement and revitalization strategies, in “California Management Review”, Vol. 41, No. 3, pp 102–124, Spring 1999, University of California, Berkeley, Haas School of Business, USA Lieber RB (1997) Storytelling: a new way to get close to your customer, in “Fortune”, pp 102–108, February 1997, Time Inc.’s Fortune, NY, USA McKee R (2003) Storytelling that moves people, in “Harvard Business Review”, Different Voice, June 2003, Harvard Business Publishing, Brighton, USA O’Konnel B, Walden S, Pohlmann A (2011) Marketing and neuroscience, what drives customer decisions?, White paper, American Marketing Association, Chicago, USA Prahalad CK, Hamel G (1990) The core competence of the corporation, in “Harvard Business Review”, May-June 1990, Harvard Business Publishing, Brighton, USA Ranjan K, Read S (2017) The six faces of value co-creation: A field guide for executives, in “Rutgers Business Review”, Vol. 2, No. 1, pp 23–31, Newark, USA Ulwick AW (2002) Turn customer input into innovation, in “Harvard Business Review”, January 2002, Harvard Business Publishing, Brighton, USA