Publications

- May 1, 2019: Vol. 6, Number 5

Pointing the way: Using behavioral science to generate value for real estate developments, communities and cities

by Anne Charon and Héber Delgado-Medrano

Are you more likely to drive or walk on a rainy day? Do you interact more with your neighbors if you live in an apartment or a stand-alone house? Both of these considerations are a testament to how our environment impacts our behavior to such an extent that our choices are often not driven by our preferences or intentions, but by our surroundings.

Sometimes we notice our behavior shifting. We stop using shared bikes because it is hard to find a place to park them, for example. Other times we don’t — such as when we unconsciously take the elevator at work without even considering taking the stairs, simply because the elevator is right in front of us.

Behavioral features that impact our choices are everywhere, and harnessing their power can have a strong impact on enhancing the overall value of real estate projects and cities. Cities today are facing tremendous challenges — from improving affordability and quality of life, to reducing energy use — and the cities that are best able to address these problems are the ones that will succeed in attracting residents and businesses and, consequently, in generating value.

As competition among cities, communities and developments becomes fiercer, we need to acknowledge the limitations of traditional approaches toward influencing choice and the behaviors that make developments and cities more livable, desirable and successful. At the same time, we need to realize we can use behavioral science to create healthier, happier and more efficient communities that improve the lives of residents and workers — and generate value for investors.

But what is behavioral science, and how can we use insights from this field to improve our buildings and cities, and make them more attractive?

THE BEHAVIORAL APPROACH

Behavioral science attempts to decode how humans make decisions and how we behave in real life, given our attributes and all of the influences that affect our choices and behaviors. Among the influences that nudge us are factors of which we are not totally aware: our emotions, mental shortcuts and habits, social influences and, importantly, the physical and environmental context in which we operate.

So how do these unconscious nudges work?  Imagine you are looking for a bottle of wine and you find two options — one bottle costs $10 and the other, $30. Given these options, you might consider the $30 bottle to be rather expensive. But imagine if the shopkeeper brings out a third bottle, priced at $50. Having introduced this third bottle, chances are you might now think that the $30 bottle is quite reasonable. Rational choice theory would suggest the introduction of a new element should not affect our decision, but behavioral science proves it often does. Simply reframing the choice set can influence our perceptions and our decisions of what to buy and how to act.

Ultimately, the fundamental conclusion we reach through the behavioral lens is that humans are extremely complex and that our choices and behaviors often deviate from what standard theories would suggest.

Understanding this complexity allows us to help people and organizations encourage desired behaviors and improve decision making. Successful applications of behavioral insights are already used in a wide array of sectors. In consumer finance, they are employed to encourage people to save more money for retirement. In public utilities, they nudge individuals to reduce their energy and water consumption. Behaviorally informed strategies also can help real estate developers, planners and municipal governments design and create buildings and communities that make living, commuting and working easier, more efficient and sustainable. Communities that make our lives easier and more enjoyable ultimately are more attractive and more successful, both socially and financially.

BEHAVIORAL BLUEPRINTS

Behavioral design can contribute to the value of any real estate initiative, from enhancing architectural designs and spatial planning to reducing congestion and encouraging the use of public transit and shared modes of transport.

Although the intersection between behavioral design and architecture is still relatively unexplored, the research and experience of behavioral scientists and practitioners has shed light on key principles and levers that we can use to improve the spaces in which we work and live. We know key spatial features such as room size, ceiling height, wall color, layout, temperature, access to nature, sounds and air quality can all affect our experience within buildings and even our performance at work. A bit of noise, or “ambient buzz,” is good for creativity; eight-foot high ceilings are most conducive to promoting focus and problem solving; arranging chairs in an angular shape reinforces the need to be unique, while arranging them in a circle promotes a sense of belonging, indirectly impacting openness and communication.

The idea behind behavioral science, however, is not to codify design principles as absolute best practices and apply them without any regard to context. Rather, behaviorally optimizing buildings, communities and cities requires an intimate understanding of the needs and concerns of individuals and communities within a particular context. This allows us to produce a set of behavioral design features that emerge from the process itself and that are much more likely to influence behavior than a blind prescription of best practices would.

One of the approaches the BVA Nudge Unit has developed for optimizing real estate developments is the Behavioral Blueprint. This process includes five stages:

(1) Behavioral catalogue: Identifying and understanding the uses, functions and behaviors we would like to encourage and discourage within a development, based on the values of the relevant users and stakeholders.

(2) Spatial correlation: Mapping out the uses, functions and behaviors within the physical space.

(3) Hotspotting: Carrying out a diagnosis that identifies potential conflicts and opportunities within the space and establishing the behavioral barriers and levers driving them.

(4) Design: Executing a behavioral design strategy that complements architectural and engineering plans by directly addressing the behavioral conflicts and opportunities identified.

(5) Implementation and monitoring: Deploying the new design features and measuring their impact over time.

This behavioral blueprint approach can be used to drive choices and behavior within any real estate development — from designing new projects to renovating existing buildings — in an effort to improve the experience of residents, workers and other occupants. Ultimately, by addressing behavioral concerns that improve well-being, the behavioral blueprint approach allows developments to differentiate themselves and generate value.

IMPROVING REAL ESTATE DESIGN AT ANY SCALE

By way of illustration, take a project we carried out recently in a co-working space. Housed within what used to be a bank in a beautiful, early 20th century building, this new co-working space caters to the rapidly growing tech community in a mid-size U.S. city.

The space offers offices for rent, as well as dedicated desks, community working spaces, meeting rooms and recreational spaces. As an adaptive re-use of an existing structure built for other purposes, the space lacked an intuitive layout that would allow co-workers to navigate effectively. What’s more, the sharing of resources that comes as a key feature of a co-working space sometimes led to conflict. Addressing these issues was critical for the co-working space, as this would improve the experience and the value they add to their tenants and other stakeholders.

To help in this effort, we created a behavioral blueprint for the client, comprehensively identifying all possible uses, functions and behaviors within the four floors of the space and defining which were desirable and which were not. Subsequently, we carried out a spatial analysis of where those uses and functions might take place and, through a series of engagements with occupants and stakeholders, we were able to identify risks and opportunities that could arise in hotspots within the building.

Through this process and a subsequent diagnosis, we discovered that some of these behavioral risks and opportunities could be addressed through a signage system. As a result, we developed a series of guidelines for ensuring the design of that system was geared not just toward providing information, but also toward nudging behavior. Ultimately, the insights from our behavioral blueprint are a living tool that the client is now able to use as they expand to inform their decisions on layout, furniture and even ambience elements, such as music, vegetation and lighting.

Another example, on a much larger scale, is the work we carried out for a developer bidding on the greenfield development of a seaside mixed-use community. Wanting to differentiate his bid, the developer asked us to collaborate on a proposal that focused on improving well-being by encouraging more active lifestyles, healthier habits and more meaningful interactions between residents.

Our behavioral blueprint approach allowed us to first identify key behavioral objectives for the district (e.g., encouraging walking, eating healthier foods and connecting with others), and from that basis we were able to map out and recommend new design features to directly address each of those behaviors. Outdoor gyms and shower facilities were scattered throughout the community; walkways were flanked by accessible community gardens where residents could harvest fruits and vegetables; and shared roof-top gardens, libraries and children’s activity rooms were created, as well as community hobby spaces and small, tented activity spaces throughout the development.

All of these features are designs that respond directly to the behavioral values of the community and play on the key drivers of influence that are best able to nudge residents toward the desired behaviors: ease (making it easy to meet others by creating multiple recreation spaces); salience (making harvest gardens visible and ubiquitous) and framing (redefining gyms as social spaces).

As we continue to develop the buildings and cities of tomorrow, it will be critical that developers and stakeholders concerned with increasing value for investors do so by improving the experience of residents, workers and occupants. This requires designers and architects responding to those concerns obtain a deeper understanding of the behavioral values that drive quality of life and well-being for citizens, workers and tenants. The behavioral blueprint approach and behavioral analysis, more generally, are new tools that can be used to this end.

Ultimately, insights from behavioral science will become the critical tools that will ensure successful real estate developments with sustainable returns.

 

Anne Charon is head of transformational change at BVA Nudge Unit, and Héber Delgado-Medrano is vice president at BVA Nudge Unit USA.

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