Saqr Al-Qassimi is the CEO of RAK Real Estate, a family-owned real estate developer in the United Arab Emirates.
The pandemic has dramatically shifted business operations in several ways — there’s no doubt about that. Although the rapid changes have caused some people to hunker down and hide, I believe the shift has also prompted people to open up and consider new possibilities. Consumers are also learning how to live with safety practices such as social distancing and face covering guidelines, and they’re beginning to visit their favorite hospitality and tourist spots again. As businesses continue to pivot and figure out the best moves for the future, it’s an ideal time for the real estate industry to think creatively and try a new plan, too.
Traditionally, the real estate business has focused on straightforward transactions such as leases, renewals and payments. With new, indirect modes of interaction, though, that’s not enough anymore. Now we should focus on relationships, experiences and new ways of operating. This isn’t easy, but we should consider it.
Here’s why I think we’re in a great place to try new ideas:
1. We’re making new rules.
The pandemic has required the industry to be nimble. Some landlords decided to waive rent for a period of time to help with their tenants’ financial struggles. In some countries, renters needed a month or so to cope with the economic losses and get back on their feet, but in other countries, cases have continued to increase and affect business reopenings and financials. The decision to reduce or remove fees has required a delicate balance.
In our company, for instance, we’ve found it difficult to determine how to adjust pricing for businesses that continue to receive revenue, even if the original business model has changed. We’re now seeing that some companies are performing even better than before, and others that were underperforming at the beginning of the year have decided to close. We’ve learned that it’s hard to predict how companies are performing at face-value, and we’ve become more open to working with tenants to understand their financial numbers as we pivot our own decisions and financial risk models at the same time.
2. Overall industry trends are shifting.
In recent years, developers became more focused on short-term returns rather than a long-term view of a property 20-30 years from now. Sadly, real estate owners shifted to this mindset, too, and many of my fellow property owners were only interested in short-term projects. However, I’ve now seen several new development ideas contradict that trend this year, particularly where I live in Ras Al Khaimah in the United Arab Emirates.
For one, more real estate developers are beginning to operate their own businesses, such as an entertainment venue or a franchise. By both building and investing in a cinema, for instance, they’re not only earning revenue from the project itself but also the future sales from moviegoers. They also receive “live” feedback from the market based on increases or decreases in the revenue, which can provide better insight for future decisions rather than waiting to find out whether the rent will be paid or if the business must vacate the property.
3. Other industries are changing, too.
Naturally, companies across the world are reevaluating their plans and what services are needed for the future. With tourism on the rebound in my area, for instance, I’ve seen local hotels reopen, adjust their rates and create new packages for guests who want villas with ample room for social distancing.
Real estate offerings and tactics will shift to serve these needs, both online and offline. In a nearby mall development, for example, I’ve seen the mall operators, restaurant owners and major brands in the area work together on social media promotions. More companies are collaborating with brands and influencers to regrow their businesses, and the real estate industry should consider doing this, too.
4. Industry partnerships are also becoming more popular.
Real estate can be slow and traditional, which makes it difficult for landlords to communicate and collaborate. Each person lives in their own world and focuses on their own set of properties rather than a community-wide solution. During this time of change, however, I’ve seen various businesses work side-by-side on projects that improve the area as a whole.
We can replicate that idea in real estate. If we shift part of our focus to projects that are suitable for the current economy, we can come out ahead in the future. In my city, for instance, developing a project that combines the industrial sector with tourism could create more jobs, boost the value of properties (and rent) in the area, and drive a better economic recovery.
5. Customer experience is increasingly important.
Consumers have shifted their focus in recent years, and they’re leaning toward more experiential products and services. Younger generations build brand loyalty by seeing, feeling and enjoying unique memories that they can’t get anywhere else, and part of our job in the real estate industry is to create those moments.
Boutique coffee shops, for instance, allow consumers to see, smell and taste the coffee roasting process as they wait for the hot cup to arrive in their hands. Developers can get involved with partnerships that make these types of curated spaces available, potentially signing revenue-sharing agreements that go beyond the traditional tactic of simply collecting rent.
The opportunities are here, so it’s up to us to take them. There’s a huge hole in the market for investments and unique spaces that real estate owners can create for the businesses of the future. Changes have already begun at the consumer level, and they will soon shift the way that businesses — and ultimately, real estate owners and developers — operate. Now it’s time to recognize the signs and prepare for the economic growth to come.