Dominique C. Pfrang

1. ERES Conference 2009 Doctoral Session 2.4 / Chair: Mats Wilhelmsson Real Estate Branding Effects – A Neo-Behavioristic Analysis focusing on SustainabilityCertificates Dominique C. Pfrang

2. Content • Problem Set • Research Questions and Objectives • Theoretical Framework & Research Methodology • Preliminary Results • Expected Contribution to Real Estate Research and Practice • Back-Up: Time Frame / fMRI-Study / Literature References

3. 1. Problem Set IntensificationofCompetition Increasing Standardisation Market Environment Property Branding Possible Solutions SustainabilityCertificates Deficient Brand Management Deficient UseandPositioningofSustainabilityCertificates Deficient Implementation

4. 2. Research Questions and Objectives • How do property brands / sustainability certificates affect the behavior (attitude, desire, willingness-to-pay) of real estate professionals? • Which are the underlying cognitive and affective processes leading to the behavioral outcome? • Which are the particularities of real estate brands in comparison with consumer brands? • How do sustainability certificates support existing property brands? Investigation of the reasons underlying the effectiveness of property brands and sustainability certificates based on a neo-behavioristic approach 1. Deductionofkeysuccessfactorsforpropertybrandsandsustainabilitycertificates • What characterizes strong / successful property brands and sustainability certificates? 2. • How can real estate professionals build up strong property brands? • How can certification organisations improve the communication power and effectiveness of their certificates and accelerate their spread in the market? Development of a property branding model and deduction of practical recommendations for real estate practitioners (developers, owners, certification institutions) 3.

5. 3. Theoretical Framework & Research Methodology Neo-Behavioristic Approach Stimulus Organism Response • Attitude towards branded property / certificate • Appreciation of branded property / certificate • Trust in performance • Willingness-to-pay • Brand Knowledge as the core of all branding effects: • Brand / Certificate Recognition • Brand / Certificate Image • Brain Activity • Reactiveness Influences Influences Investigation using… • Traditional Approaches: • - Recall / Recognition Test • - Association Network Test • - Attitude / Appreciation Test • Neo-Behavioristic Approaches: • - Brain Scan • - Response Time 1. 2. 3. Property Branding Model Effectiveness Key Success Factors

6. 3. Theoretical Framework & Research Methodology Survey fMRI-Study (brain scan) • Online Survey targeting real estate professionals from the office real estate sector • Step 1: Recall and recognition test covering 50 international property brands and all sustainability certificates • Step 2: Association network test for known property brands / sustainability certificates • Target: 150 – 200 responses • Functional Magnetic Resonance Imaging (fMRI) study with 10-15 real estate professionals • Cooperation: Chair for Experimental Psychology (Prof. Dr. Greenlee), University of Regensburg • Measurement of the brain activity associated with the processing of property brands and sustainability certificates • Test 1: n-back Task (memory focus) • Test 2: Rating Task (attractiveness/desirability focus) • Additional measurement of response time (reactiveness) • Neo-Behavioristic Approach • Traditional Approaches Expert Round Table • Analysis of associations regarding uniqueness, accessability, cognition/affect • Experts: 2 Real Estate Researchers / 2 Brand Managers / 2 Psychologists Combination through Statistical Methods (Regression Analysis etc.)

7. 4. Preliminary Results • Pre-Test for the fMRI-Study with Real Estate Professional • Processing Property Brands • Confrontation with Unknown (Fictive) Property Brands • Higher cognitive efforts (in certain areas of lateral and parietal cortex) • [Strong real estate brands lead to a cognitive relief] • No / Negative emotional activation (Insula) • Activation of areas related to (visual) memory • Emotional valuation of memorized aspects (positive) •  Emotionalization of cognitive processing • Memorization of unknown vs. Known property brands • Simple recognition vs. Memorization of property brands

8. 4. Preliminary Results • Processing Sustainability Certificates • Tendency (preliminary!): • Effectiveness of strong property brands is based on an emotionalization of the property (even in the eyes of ‚rational‘ real estate professionals) • Sustainability certificates in the real estate industry do not yet evolve conventional brand effects • Sustainability certificates cannot compensate weak property brands • But: Sustainability certificates possess potential to become strong emotional components of property brands • High exposure of memory (verbal aspects); additional effort in cognitive processing • Slightly positive emotional activation • Memorization of certified vs. Uncertified properties

9. 5. Expected Contribution to Real Estate Research and Practice • Further professionalization of property brand management in the real estate industry • Providers of sustainability certificates: • Improvement of the brand management for green building certificates • Enhancement of the communication power of sustainability certificates • Acceleration of the spread of green building certificates in the market and the overall success of sustainable buildings •  Contribution to the overall economic success of certificate providers • Property developers and owners: • Improvement of property brand management (brand building; communication strategies etc.) • Strengthening of property brands‘ effectiveness (differenciation potential; behavioral impact on tenants and investors) • Support of an efficient incorporation of sustainability certificates in property brands •  Contribution to the overall economic success of developers and owners in times of the economic crisis Practice • Closing the knowledge gap regarding the effectiveness and mode of action of property brands and • sustainability certificates • Development of a neo-behavioristic model covering the particularities of property brands • First test of the applicability of neuro-scientific methods in real estate research Research

10. Contact Details Thank You very much for Your Attention! • Email: dominique.pfrang@irebs.de • Tel.: 0611/236809-5 • Fax.: 0611/236809-0 • IRE│BS Institut für Immobilienwirtschaft • Wilhelmstraße 12 • 65185 Wiesbaden • Markus Raabe (Dipl.-Psych. M.A.) • Email: markus@raabe.tv • Tel.: 0941/943-3869 • Chair for Experimental Psychology • Prof. Dr. Mark Greenlee • University of Regensburg

11. Back-Up: Time Frame • September 2008 Literature Research • Finalized • April 2009 Development of Experimental Design • Work in Progress (70% finalized) • June 2009 • Finalized Pre-Test forfMRI-Study • July 2009 fMRI-Study Survey • To Do • September 2009 Analysis oftheResults & Finalization • To Do • January 2010

12. Back-Up: fMRI • Functional Magnet Resonance Imaging (fMRI) • Allows to differenciate brain regions according to the degree of their activity • Based on the BOLD effect • Necessary to build „contrasts“ between different states of brain activation in order to determine the relative brain activity (subtraction principle) • Identification of underlying mental processes Drawbacks Advantages • Insight into the „Black Box“ • Socially acceptable/wanted answers impossible • Non-invasive • Small study population • Ethical Issues • Discomfort through magnetic field • Costs • Complex data analysis

13. Back-Up: Stimulus Material (n-back task) 1. 3. Hearst Tower 5. LAIM290 Hearst Tower 2. 4. 6. …

14. Back-Up: Building Contrasts • fMRI-Study: Stimuli & Contrast Analysis • Strong Brand / Certified • (e.g. DB Towers, FFM) • Strong Brand / Not Certified • (e.g.Westhafen Tower, FFM) • Weak Brand / Certified • (e.g. Regionshaus Hanover) • Weak Brand / Not Certified • (e.g.Leopoldstraße 7, München)

15. Back-Up: Building Contrasts • fMRI-Study: Stimuli & Contrast Analysis • Strong Brand / Certified • (e.g. DB Towers, FFM) • Strong Brand / Not Certified • (e.g.Westhafen Tower, FFM) • Weak Brand / Certified • (e.g. Regionshaus Hanover) • Weak Brand / Not Certified • (e.g.Leopoldstraße 7, München) Branding Effect

16. Back-Up: Building Contrasts • fMRI-Study: Stimuli & Contrast Analysis CertificationEffect • Strong Brand / Certified • (e.g. DB Towers, FFM) • Strong Brand / Not Certified • (e.g.Westhafen Tower, FFM) • Weak Brand / Certified • (e.g. Regionshaus Hanover) • Weak Brand / Not Certified • (e.g.Leopoldstraße 7, München)

17. Back-Up: Building Contrasts • fMRI-Study: Stimuli & Contrast Analysis Relative Strength: Branding/Certification • Strong Brand / Certified • (e.g. DB Towers, FFM) • Strong Brand / Not Certified • (e.g.Westhafen Tower, FFM) • Weak Brand / Certified • (e.g. Regionshaus Hanover) • Weak Brand / Not Certified • (e.g.Leopoldstraße 7, München) Consistency Control

18. Back-Up: Theoretical Framework • Development of a comprehensive real estate brand model requires an in-depth understanding of the characteristics of strong property brands • Brand Knowledge (brand recognition & brand image) in real estate professionals‘ minds is the core of branding effectiveness • Current body of knowledge in consumer research suggests to combine traditional and neo- behavioristic methods to investigate branding effects • Neo-Behaviorism / Neuro-Economics • Real Estate Marketing (Property Branding) • Interdisciplinary Approach

19. Back-Up: Theoretical Framework • Interdisciplinary Approach / Real Estate Marketing / Neo-Behaviorism Branding Effects Particularitiesof Real Estate as a Product Brand Knowledge Consumer Behaviour Operationalization on thebasisof Neo-Behavioristic Approach Stimulus (Independent Variables) Organism (Dependent Variables) Response (Dependent Variables) • Brand / CertificateKnowledge • a) Brand / Certificate Image • Type ofAssociations (emotional/cognitive) • StrengthofAssociations • RepresentationofAssociations (verbal/non-verbal) • AmountofAssociations • UniquenessofAssociations • DirectionofAssociations (positive/negative) • AccessabilityofAssociations • b) Brand / CertificateAwareness • Bio-Signals • Brain Activity • Response Time • [ Eye Activity ] • Behaviour • Attitude towards Property • Property Desirousness • Willingness-to-Pay

20. 1. Problem Set • Tighteningofspaceandtransactionmarkets • Differenciationofpropertiesfromcompetingoffersisofutmostimpor- tancefordevelopersandownerstoensureeconomicsuccess Intensification of Competition Increasing Standardisation • Ongoing standardisation of office buildings (functionality, flexibility, equipment, etc.) conflicts the need for uniqueness • „Location“ is still a necessary but not a sufficient condition to reach sustainable success Market Environment • Some developers and owners try to develop property brands (The Gherkin; Kista Science Tower; Turning Torso; etc.) to break through the clutter • Increase in tenants‘ perceived utility loyalty and trust • Reduction of perceived risk in leasing and purchase situations Property Branding • „Green Building Trend“ as new possibility to differenciate from competitors • Sustainability Certificates as visible cue for sustainability as a brand component Possible Solutions SustainabilityCertificates • Developers andownersoftenfailtodevelop strong brands (deal-orientedmarketing; „creativenames“ asbrandbuilding) • Positioning, differenciationandeconomicsuccess not atoptimum • Insufficient communication of advantages (mostly technical) • Incertitude concerning the marketing effects of sustainability certificates • Deceleration of the spread of sustainability certificates in the market Deficient Brand Management Deficient UseandPositioningofSustainabilityCertificates Deficient Implementation

21. Back-Up: Literature References (Excerpt) Aguirre, Geoffrey K. (2006): Experimental Design and Data Analysis for fMRI, in: Faro, Scott H./Mohammed, Feroze B.: Functional MRI – Basic Principles and Clinical Applications, New York. Breiter, Hans C./Aharon, Itzhak/Kahnemann, Daniel/Dale, Andreas/Shizgal, Peter (2001): Functional Imaging of neuronal Responses to Expectancy and Experience of Monetary Gains and Losses, in: Neuron, Volume 30, Cell Press, pp. 619-639. Camerer, Colin F. (2007):Neuroeconomics: Using Neuroscience to make Economic Predictions, in: The Economic Journal, Volume 117, Number 519, pp. 26-42. Camerer, Colin/Loewenstein, George/Prelec, Drazen (2004):Neuroeconomics: Why Economics Needs Brains, in: Scandinavian Journal of Economics, Volume 106, Issue 3, pp. 555-579. CoStar Group – Real Estate Information (2008): Study on Green Buildings, URL: www.costar.com. Davis Langdon & Seah International (2007): Cost of Green Revisited – Reexamining the Feasibility and Cost Impact of Sustainable Design in the Light of Increased Market Adoption, URL: www.davislangdon.com. Fuerst, Franz/McAllister, Patrick (2008): Doest it Pay to Be Green? – Connecting Economic and Environmental Performance in Commercial Real Estate Markets, Paper presented at the 2008 IREBS Conference on Real Estate Economics and Finance. Kim, Yeonshin/Choi, Sejung M. (2005): Antecedents of Green Purchase Behaviour: An Examination of Collectivism, Environmental Concern, and PCE, in: Advances in Consumer Research, Volume 32, pp. 592-599. Mainieri, Tina et al. (1997): Green Buying: The Influence of Environmental Concern on Consumer Behavior, in: Journal of Social Psychology, Volume 132, Issue 2, pp. 189-204. Xiao, Chenyang/Dunlap, Riley E. (2007): Validating a Comprehensive Model of Environmental Concern Cross-Nationally: A U.S. – Canadian Comparison, in: Social Science Quarterly, Volume 88, Issue 2, pp. 471-493.