McKinsey
2025
McKinsey and others
The article from McKinsey explores how the real estate investment sector can enhance customer experience (CX) and foster tenant loyalty by leveraging technology and branding strategies. While hospitality has long dominated the CX landscape, the article emphasizes that single-family and multifamily residential platforms can also create compelling experiences that resonate with tenants. By making strategic investments in technology and personalized services, real estate operators can elevate tenant satisfaction and drive economic returns. In today's competitive market, creating memorable moments for tenants is essential. The article outlines three paradigm shifts: moving from a commodity-based approach to fostering segment-specific communities, personalizing experiences to cater to individual tenant needs, and utilizing AI to provide timely responses and services. These shifts are crucial in a post-COVID-19 world where tenants increasingly value community and personalized interactions over standard offerings. To build loyalty-inspiring residential experiences, the article presents an eight-step framework. This includes identifying the target brand audience, defining what matters to the community, customizing experiences based on resident preferences, and leveraging technology to create meaningful interactions. The framework encourages real estate companies to be bold in their branding efforts, continuously measure results, and adapt to changing tenant expectations, ensuring they remain relevant in an evolving industry landscape. Ultimately, the call to action for real estate operators is clear: embrace innovation, prioritize tenant experience, and cultivate brand loyalty to thrive in an increasingly competitive market.
Customer experience (CX) and loyalty are ubiquitous concepts in consumer-facing industries. But in the real estate world, only the hospitality sector is known for a laser focus on consumer experiences that inspire customer loyalty and build brands. It doesn’t have to be this way. Large single-family residential (SFR) and multifamily residential (MFR) platforms now have the scale to build brands that clearly communicate a quality promise and make tenants want to stay.
With an array of premium finishes and residential amenities now commonplace, real estate operators are increasingly aware that economic returns often hinge on creating memorable moments for tenants. What might not be as obvious is the sea change in CX, which has long been understood to involve putting more money and personnel behind a property. The radical difference in 2024 is that operators can upgrade the tenant experience while also saving money—and in a way that can yield better returns for properties. At a time when the high cost of real estate is a major tenant concern, a way to improve the offering without increasing costs can be a welcome innovation for numerous stakeholders.
Memorable brand experiences, combined with the right data and technology to personalize touchpoints—including generative AI (gen AI) and digital marketing platforms—can stimulate willingness to choose a given property, higher renewal rates, and lifetime loyalty. Our experience working with numerous residential players has demonstrated that there is a premium of up to 15 percent between the highest- and lowest-performing players in a market, controlled for similar building characteristics (such as location, age, and amenities).
The highest-performing companies have numerous things in common, including technology investments that enable personalization (such as emails that remember a tenant’s birthday or pet’s name), new operating and staffing models (such as centralized leasing and renewals teams that serve multiple buildings), investments in brand advertising, and digital touchpoints that create transparency (such as an app for tenants to check on the status of maintenance requests). Tenants clearly perceive more value in buildings managed this way, and this value flows directly to top-line revenue and net operating income (NOI).
To be sure, technology is never the stand-alone superstar. Instead, when companies rewire to create new ways of working, tech can enable fresh ways to operate and serve residents. The key for residential real estate owners and operators is to define the CX moments that matter along a resident’s journey, underpinned by a branded North Star.
This article describes how real estate companies can approach CX to encourage loyalty and build brands imbued with meaning by using an eight-step framework. For the purposes of this article, loyalty refers to tenants who perceive value in a real estate brand and respond by either renewing leases or looking for their next home within the same family of brands.
How residential real estate can react to a shifting experiential landscape
Across industries, changing consumer interaction preferences and a proliferation of new technologies, including AI, are enabling companies to interact with customers in new and creative ways. In the post-COVID-19 landscape, proactive self-service that concretely answers specific questions is often customers’ first choice, preferred over interacting with a sales representative.1 Loyalty is an evolving concept, partly because consumers often drop out of loyalty programs after reaping the sign-up reward.2 Instead, an omnichannel strategy, whereby consumers interact with brands across platforms and continually receive personalized recognition for their engagement, has more impact.3
In light of these consumer landscape changes, real estate companies should contemplate three paradigm shifts.
- From commodity to segment-specific community. Scaled residential players can contemplate how to build meaningful experiences tailored to specific market segments. Communities can be based around shared values, interests, or priorities. For example, a brand could be known for focusing on providing goods and services (including furniture and recreation) that account for 38 percent of typical household spending.4
- From one-size-fits-all to personalized experiences. Once a resident chooses a home in which the brand dovetails with their lifestyle aspirations, they still want to be treated as an individual within that building. A resident who feels that the property owner handles the important moments (including when they move into the building, receive visitors, and need maintenance) in a way that caters to their individual needs is likely to feel more loyal to the brand behind that building. Not only could this make them want to stay, but when that tenant needs to move, they may be more likely to seek another home from within the brand family.
- From delayed and manual to AI-enabled instant gratification. Management activities including leasing, renewals, and completing service requests are often handled in an analog way. This can lead to wait times and experiences that don’t meet the on-demand mindsets of today’s consumers. Real estate companies can transform operations to blend the best of human and digital interaction, rising to the response expectations of residents. Leading real estate companies are already responding—we have seen companies automate more than 70 percent of interactions, using AI companions and other tools.
As companies think about building brands, it’s useful to consider sea changes reshaping tenant expectations. As more people work from home, residential complexes may be supplanting workplaces as places of interpersonal connection. A recent poll found that 55 percent of Americans in 2023 placed high importance on community activities, up from 29 percent in 2001.5 Brands could provide a sense of belonging that is increasingly important to consumers. Real estate companies tell us that when a resident reports that they know someone else in the community, they are more likely to renew their lease. It may be easier to leave four impersonal walls than it is to leave a social circle.
The result can be meaningful value: we have observed real estate companies digitally rewire and subsequently enjoy 2 to 4 percent NOI increases, plus additional value from the sale of ancillary services (including event space rentals, cleaning services, and grocery delivery). We’ve seen even further NOI gains from operating efficiencies.
Eight steps to building loyalty-inspiring residential experiences
Resident loyalty—and NOI growth—sprouts from a foundation made up of digitally enabled customer experiences and strong brand equity. The challenge for C-suite leaders is to pursue these objectives simultaneously while building an individual brand or brand network. Here’s an eight-step guide to tackling these objectives.
1. Determine the brand target (the ‘who’)
Using a combination of attitudinal, psychographic, and behavioral factors, identify the segment of residents a particular brand and associated set of properties are intended to serve. Properties can be thought of as giant, digitally enabled smart products built to serve a particular segment of residents. For example, an MFR-provided home can be oriented around a set of shared values (including sustainability), hobbies (including fitness), or lifestyle factors (including walkability or proximity to a highway), all of which can help attract more members of that figurative “tribe.”
2. Define what is meaningful to each community (the ‘why’)
Identify what the company is promoting that is distinctive now and is likely to remain so (see sidebar “Branded–owned residential blazes a trail”). As long as companies are tailored to a particular segment of interest, perceived benefits can be practical (such as being close to transportation) or emotional (such as joining a community of like-minded people). To illustrate the value that some tenants place on sustainability or technology features: renters report a willingness to pay 1.0 to 5.0 percent (average 1.8 percent) more for one level higher of energy efficiency6; renters interested in smart devices report being willing to pay 2 to 3 percent more for a single smart device (Exhibit 1).7
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3. Identify the moments that matter
For the segment a brand seeks to serve, measure resident satisfaction at each journey stage (such as moving in, midway through lease, and at lease renewal) and understand which steps of the journey are most important to eliciting desired behaviors (such as lease signing, decision to renew, or likelihood to recommend the community to a friend or family member). The goal is to land upon moments that delight, but also that elicit economic returns for the property (Exhibit 2).
Exhibit 2
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4. Customize the residential experience
Real estate is both physical and digital, therefore it’s critical to think about the product as the combination of a standout property and the human and technology-based interactions within it.
Smart technology is one increasingly attractive way to activate physical spaces. For example, a smart thermostat linked to a sensor on heating, ventilation, and air-conditioning (HVAC) units can allow a resident to turn on the air-conditioning before they get home, balancing comfort with sustainability. An automated nudge can inform a resident that turning down their thermostat by a few degrees could help them spend closer to the building average on heating and cooling and enable them to adjust the temperature remotely. Sensors can detect unusual behavior (for example, if the apartment takes too long to cool down) and alert maintenance teams to issues before they become problems. A leak sensor can play the same role, detecting small drips of water under the sink or behind the dishwasher before they become floods (Exhibit 3).
Customization can also be about highlighting building amenities that matter to specific tenants. For example, a couple of weeks before a child’s birthday, a tenant could receive an offer to book the building’s party room. Or if the building is aware that a tenant is interested in fitness or nutrition, it can send out an invitation to a special yoga class or cooking demonstration that lets the tenant live their values.
Exhibit 3
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5. Enable CX differentiators with technology, people, and processes
To deliver memorable, branded touchpoints, operators will need an operating platform consisting of the right people, processes, data, and technology. This platform should enable the correct use of resident data and technology so that staff is empowered to make the best decisions. These will likely involve reimagining typical workforce operations and transforming day-to-day tasks with new tools (see sidebar “Incorporating automation can yield better service”). But a word of caution: parachuting new technology into a building that has a long-standing operating model in place won’t propel innovation. Instead, it’s important for a company or brand to be open to changing long-held processes, be willing to test and learn through pilots on a small subset of properties, and understand that not every experiment will succeed.
Tools may include the following:
- Analytics-enabled services can recognize and reward milestones (such as birthdays and anniversaries, or years of occupancy in the building) to optimize the customer experience.
- AI-powered copilots can improve prospective residents’ experiences and free up frontline employees’ time by empowering them with better information (Exhibit 4). AI-powered workflow tools can provide coaching and insights that help building teams make better decisions about everything from capital expenditures for new building features to better revenue management.
- AI-enabled workload forecasting and dynamic scheduling models can optimize labor levels based on seasonal demand, enabling intelligent labor forecasting and budgeting.
- Intelligent, self-serve resident support portals can answer frequently asked questions and enable digital workflows (including rent payments and maintenance request submissions).
- Digitally enabled community activation, delivered through a mobile app, enables residents to learn about and RSVP to events that help them feel connected to their neighbors.
Exhibit 4
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6. Define the governing brand architecture
Real estate companies can create their own brands or partner with established brands that already enjoy strong public recognition. Brand strategy decisions should be made after researching conversion, loyalty, pricing premiums, and retention. If there is a loyalty program, decide whether it relates to the specific building or to the parent brand. Creating brand families starts with deciding which of the following models is most beneficial:
- Brand house. All subbrands are logically associated with the parent brand, enabling strong network lifestyle recognition that is consistent across geographies. This approach is most effective when:
- resident segment needs are almost identical
- the brand contains and communicates all relevant dimensions and benefits
- Endorsed model. Subbrands resemble the parent brand, exhibiting some overlap in user segments, user needs, or product offerings. This is most effective when:
- resident segments share few comparable needs
- subbrand identities are loosely based on the parent brand
- the parent brand imparts trust and credibility to the subbrands
- House of brands. This refers to a brand umbrella, in which sub-building brands have stronger recognition than the network parent brand. Each brand has a different user segment and brand ethos. This is most effective when:
- each brand addresses a segment with unique needs
- brands are perceived as most relevant to consumer segments when positioned individually
7. Be bold
Highly creative brands consistently outperform their peers, with 67 percent achieving above-average organic revenue growth. Building an engaging, high-performing brand is an agile exercise, and brands have to evolve to maintain relevance and meaning for the communities they serve.
8. Measure and focus on data
Bold experimentation is crucial but can only yield results when it’s measured. Companies have to be able to quantify the impact of their experiments to know what worked, what didn’t, and how to adjust. This requires investing in data, the bedrock of loyalty. Companies need data to understand their residents’ habits, values, and behaviors. Data collection and synthesis tools include customer relationship management technologies, sensors that measure amenity use, social media listening tools, and surveys.
In the new world of customer experience, resident expectations are evolving. Residents live in a world where hotels, cars, fitness communities, and more are imbued with polished self-service, nuanced brand identities, and sophisticated loyalty programs. It’s logical that they should want these same attributes in the places they call home. Now it’s up to real estate owners and operators to recognize the call for change and to deliver it through branded moments that matter.