Applying Design Thinking in Real Estate Development

Abstract

In recent years, real estate development has become an investment hotspot. However, behind the thriving development, we also notice that real estate in our country is subject to traditional development mode at present. Based on the interests of enterprises, the products are developed at a maximum estimated value. Therefore, in essence, the mode has neglected the important value of the design. The traditional development mode tends to be problematic and flawed. “Design-oriented” real estate development mode boasts the advantages of wide–range applicability, short time and fast replication. In other industries, the “design-oriented” development mode is not yet highly appreciated and widely used because of its current lack of in-depth understanding and awareness. As China’s real estate industry leader, Vanke started early to explore the “design-oriented” development mode and this strategy gradually becomes clear in the challenging exploration. Through the actual cases of “design-oriented” development mode, the direction of a new real estate development mode is further verified to offer reference to other real estate companies in the future development process. In this way, “design” as the dominant means can essentially improve the development problems like waste of resources, inferior product quality, prolonged construction period and reduced design benefits, then give full play to the leading role of “design” in real estate development.

1 Preface

As we all know, the real estate industry has always been “the sunrise industry forever”, which is an important force for our country’s economic development. However, due to its recent rapid development, there have been a number of disadvantages, which brings difficulties to our real estate development. Information from the National Bureau of Statistics shows that since 2007, due to the improper real estate development mode, the resulting precarious situation is deteriorating year by year. It’s mainly caused by superficial market analysis, neglected actual needs of consumers, inferiorly designed products, low products standardization, inferior building quality, low technical innovation of building, irrational design management and failure in forming economies of scale. Due to these problems, the development of China’s real estate industry has been severely restricted.

At present, most domestic researches on real estate development mode center on management and sales and most of the research results mainly focus on procedural real estate management, scientific decision-making, specialized marketing and profit maximization to put forward reform and make adjustment, but rarely reflect on real estate development mode from the “design” perspective.

In such a severe situation, some real estate enterprises also put forward their own decisions to change the traditional development mode. However, most enterprises still rely on the traditional mode for improvement without any in-depth innovation. Vanke Real Estate Co., Ltd. (hereinafter referred to as: Vanke Real Estate) has gone deep in the study and found its own road to reform. It constantly improves and changes its traditional development model, and gradually transforms to “design-oriented” real estate development mode. It is this essential shift that makes Vanke’s real estate development mode unique in the industry, far ahead of other real estate developers.

As a pioneer of real estate based on the “design-oriented” development mode, Vanke Real Estate has explored and researched a lot based on “design-oriented” and has continuously stepped up its research efforts in recent years. As the first “design-oriented” product developed by Vanke Real Estate, “City Garden” series has also proved correct in Vanke’s real estate reform through its successful replication and promotion. The “City Garden” series is being extensively replicated throughout the country in this development mode and several projects have successfully replicated it (Fig. 1). This success marks that Vanke Real Estate’s “design-oriented” real estate development mode is worth the recognition and learning by other businesses. Vanke Real Estate will also fully implement it in all its future products to explore and improve this “design-oriented” real estate development mode. However, this exploration is time-consuming and requires perseverance and effort.

Fig. 1.

(source: self-photography, Vanke real estate official website)

Vanke Research Center

Vanke Real Estate’s “design-oriented” development mode is based on the “Six Design and Research Centers (hereinafter referred to as: Six Centers)” - design management center, design and industrialization center, design and standardization center, technology research and development center, new products R&D center and theory promotion center - as the core and decision-making in development. In reality, these “six centers” rely on each other and collaborate, making the concept of “design orientation” throughout the entire project development process.

Faced with the increasingly fierce competition in real estate market, real estate developers are also beginning to concentrate on improving their previous development model, thus enhancing their steady and rapid development in current real estate market with the fierce competition. In such situation, Vanke Real Estate adheres to the development mode of real estate from the “design-oriented” perspective and establishes its own “six centers” and puts “design” concept throughout the entire real estate development process. “Design-oriented” real estate development mode is constantly improving its design management, design standardization, industrial design, new products and technology research. Therefore, China’s real estate development mode develops in accordance with the traditional mode. In the face of the bottleneck now, the use of “design” to integrate is an inevitable trend of China’s real estate development mode with reference value (Fig. 2).

Fig. 2.

Main research framework of the paper

2 Discussion of Traditional Real Estate Development Mode

Throughout the country, the traditional real estate development mode in real estate market progresses gradually. This mode begins to show various disadvantages in the fierce competition: such as the lack of design management, economies of scale, design specialization, design standardization, industrial design and many other factors, resulting in the severely restricted development of real estate enterprises. The main types of traditional development mode are as follows (Table 1):

Table 1. Types of real estate development mode

Based on this, we can clearly understand the current common types of real estate development mode in China, clarify all relevant aspects of its development and then grasp the dominant idea of each development mode and the fundamental development knowledge.

2.1 General Process of Real Estate Development Mode

In the era of rapid real estate development, more and more enterprises are involved in real estate development. However, no matter how complex the development is, the basic steps of the real estate development process must be followed. From investment to completion of property, the logical development procedures must be followed. However, with the advancement of the times and the continuous development of science and technology, innovation should be added to the original steps in each development mode. For example, Vanke Real Estate adds “design” as the prerequisite of each step based on the traditional development mode, which results in the excellent quality of the designed products.

If a single traditional development mode is used to discuss real estate development steps, it will be easy to neglect the importance of “design” in it. The traditional development mode is basically based on the following mode:

Stage one: investment opportunities search and screening. On the basis of deep understanding and occupation of much local market information, the developers explore the possibility of investment and seek more available investment opportunities in the market.

Stage two: Refine the investment program. Developers choose the land to be developed to explore the feasibility of the design and make a relative preliminary plan design of feasibility and then further explore the feasibility report of developing land.

Stage three: Design feasibility study. Real estate developers conduct a formal market research, preliminary estimates of market absorption rate and determine the feasibility of the project from the legal, technical and economic aspects.

Stage four: Contract negotiation and signing. Real estate developers based on market research and customer needs to finalize the program design and then negotiate the contract with developers, clarify the lease side of the contract and obtain government land, planning permits.

Stage five: Construction. According to the budget, the real estate developers conduct preliminary real estate cost control, approve the marketing and change the project demands proposed by development team, make the early payment of the project and promote the progress management program of the construction.

Stage six: Completion and use. Real estate developers are responsible for organizing property management team, marketing it and obtaining the approval of government for occupancy and the owner occupancy.

2.2 Problems in the Traditional Development Mode

With the constant reform of real estate industry in recent years and blind pursuit of the maximized commercial profits, real estate development has caused many problems. For example, in the development, the design products advantage of it is not established, the important role of “design” in the real estate development mode is neglected and the research on real estate standardization and industrialization is not perfect, which results in many problems exposed in the product design and construction in the development process.

The inappropriate development mode leads to the high energy consumption in real estate development process, low productivity of commercial housing, delayed construction period, high risk of construction. At this point, through the analysis from the “design-oriented” real estate development mode, it is concluded that there are some problems in the overall development of real estate in China. The problems are mainly manifested as follows:

• (1) The analysis on real estate market fails to further explore: In the real estate industry development, market analysis is the basis of the entire business acquisition and plays a decisive role for determining the feasibility of real estate projects. If developers go directly to the design when they obtain the plot, instead of digging into what kind of “design products” are suitable for today’s market, it directly neglects the in-depth understanding of the market.

• (2) Neglect the customer demands: Most of our real estate enterprises have neglected the demand of customers, especially the individual needs. At present, the real estate investment return rate is significantly higher than other industry returns. As a result, many investors hold excessive expectation on the profits when operating projects, so that the market considers less about the demands of customers. The most concern lies in the sales of houses developed, followed by the profits earned. Others are all neglected.

  As the customers remain relatively rational when purchasing the property, in addition to the price factor, they tend to pursue the quality of the product with design. If this cannot be satisfied, the results are obvious. In addition to quality, the symbol of individualization and quality of design products is also the goal pursued by customers. The vast majority of real estate companies in China find it difficult to manage it. However, Vanke Real Estate achieved it as it firmly adheres to the customer-oriented and “design”-oriented development mode, which makes Vanke unique in the real estate industry.

• (3) Neglect the role of design standardization: Design standardization plays an important core role in real estate and saves cost from the design standardization. The lack of residential standardization system is the shortcoming of most of the current real estate. Most of the real estates fail to focus on product standardization and management standardization and so on, resulting in product variability, so that design costs soar. However, Vanke Real Estate takes product standardization as the core and top priority of corporate research. The excellent efficacy of Vanke Real Estate in management, products, services standardization enables the businesses to get more profits.

• (4) Lack of professional design industrial research: At present, China’s industrial research in real estate industry is minimal and real estate industrialization takes the demand for the product construction market as design orientation, design, materials, standardization as basis, factory mass production as the main mode of production. However, in our country, the systematic research of real estate enterprises is still in its infancy, which fails to form a corresponding system of research and fails to fully develop industrial system. As a result, China’s real estate product design and industrialization lags behind and fails to form a complete set of technology industrialization system.

• (5) Backward technology research: Due to differences in the level of economic development around the different regions, the maturity of building technology has large difference and real estate is an industry with wide coverage, high correlation and the use of social resources. Developers’ blind pursuit of speed in development projects makes it hard to guarantee the quality of houses. At present, there are still a few enterprises that insist on doing technical research which takes a long process.

In China, dangerous events due to nonconforming house quality occur every year. However, although the quality of some projects is high, the speed remains average, resulting in the slow return of funds and the inefficient use of funds. Only by accelerating technological research can we better solve the problems caused by building technology. Through technology upgrading, the construction cycle will be greatly shortened and the level of construction technology will be improved.

From the above problems, it can be seen that at present, we cannot stand out only by sales and advertisement. At the moment, China’s real estate industry must rethink the existing real estate development mode problem and thus changing the direction of its development mode. It should also realize that in the future development, “design” will gradually move to the leading position and bring new impetus and direction to the real estate industry.

3 Design-Oriented Real Estate Development Mode

“Design-oriented” development mode was first proposed by Abernathy and Utter back in the design of industrial products before it’s successfully replicated in the enterprise. “Design-oriented” development mode gradually penetrates into various industries and plays an important role in the real estate industry. “Design-oriented” mode has significantly changed the traditional real estate development mode and has a significant impact on the real estate development steps so as to promote the development of the real estate industry into a new era.

3.1 Design-Oriented Real Estate Development Mode Process

The core issue of the real estate development mode is to solve a complex, comprehensive and long-term development process that needs to address a wide range of issues arising from many development processes. The traditional development mode process is often described as developers obtain a piece of land, hire a “designer” before hiring sales planning expert for promotion. While the “design-oriented” real estate development mode is described as “product design” comes first before obtaining land to develop a series of feasible “design products” and combine it with the particularity in the specific projects and apply these characteristics in each single design programs and detailed design in the details design. Therefore, this “design-oriented” development mode has the advantages of a wide range, short time and fast replication.

The “design-oriented” development mode is not a one-way advancement in the real estate development process, but a hand-in-hand, three-dimensional and complete process concept. In this development mode, developers should timely integrate a variety of design content in advance to achieve an ideal state. For example, the research speed of new products, the rationality of the company’s design and management, the design standard formulation, the convergence of design commercialization, the research results of new technologies in the technology research center, the actual state of implementation, the construction efforts of factories, the actual use in products, the final product industrial chain development and the establishment of final theoretical study to a nationwide replication and promotion. These development processes are different from the traditional mode of the development process. Only by properly linking these steps can we effectively implement the “design-oriented” real estate development mode.

“Design-oriented” development mode requires real estate enterprises to have a certain degree of co-ordination, integration, integration capabilities. To run the mode in enterprise, it should always put “design” as the core throughout the process and follow the development process to deepen the product (Fig. 3).

Fig. 3.

Design-oriented standard process

• (1) First, determine the basic content of real estate development. If possible, establish the enterprises’ “residence use standards”, “residential performance standards”, “new product research” and other pre-development research and requirements and then further improve and transit to actual projects.

• (2) Second, carry out product standardization of management, design, engineering of enterprise in light of the development of enterprise. Only by establishing a standardized system can enterprises achieve maturity, reduce unnecessary waste and standardize their own enterprises. Vanke Real Estate follows the standardization of housing to achieve the standardization of residential product system, while forming standardized design and design management system. Standardized residential product design and design management system are based on current market customer base and the actual need and continue to deepen understanding of the market and design requirements for product positioning and comprehensive upgrading.

• (3) Thirdly, set up the relevant departments to study the product new technologies and products industrialized manufacturing. Through industrial transformation, real estate development will become a standard process for digital lean management and it is a scalable, reproducible, sustainable and streamlined construction program that carries out industrialized manufacturing with standardization.

• (4) In addition, after achievement of industrialized manufacturing, carry out integration of product series and overall combination of standardization and industrialized manufacturing, so that the “design” is merged in the “design-oriented” development mode and can be applied to the entire real estate development mode.

• (5) Finally, under the condition of mature standardization and industrialization, the theoretical research is carried out and the feasible series of “design-oriented” development mode theory is put forward to fully replicate and promote the products so as to reduce the resources waste and improper development efforts brought by the development mode.

Only by managing the links among each step, focusing on “design-oriented” development mode process can design-oriented mode be gradually approached and ultimately improve development mode continuously.

3.2 Importance of Design-Oriented Real Estate Development Mode

In the future real estate development mode, real estate enterprises focus on “design-oriented” development mode to develop products and its important necessity can be presented from the following aspects:

• (1) From the development environment, the real estate product can be described as a microcosm of the city and society. Its level of development and construction reflects the local people’s pursuit of life and culture. It is an important benchmark for the development of social material civilization and spiritual civilization. In addition, people spend most of the time in residential area. Its design features, building quality are related to people’s physical and mental health and safety. Therefore, improving the level of real estate development and improving the real estate development mode are of great social significance.

• (2) Shorten the construction cycle, improve yield. With the substantial increase in land costs, the deepening of 7090, the policy of price-capped housing and threat of meager profits of real estate, the threshold for real estate access is getting higher and higher, making it increasingly difficult for SMEs to survive. With the rapid expansion of scale, the difficulty in design and construction will surely increase. It is possible to achieve rapid growth under limited conditions by adopting a “design-oriented” development mode to improve construction efficiency and construction time.

• (3) The impact of “design” on the market is immeasurable. At this stage, emphasis on the “design” has become the basic idea of today’s developers and a sound design system has become an important bargaining chip of real estate industry in the diversity competition.

• (4) From the standardization, industrialization perspective, “design-oriented” development promotes resource integration, improves the efficiency of real estate development. One-time “design”, factory-like production have brought insurmountable quality problem of the design and construction. In the future, after all-round construction and implementation of industrialization, construction of houses and sale of houses are just like the purchasing in IKEA. The components are uniform standards and the building structure can be easily assembled. The assembly can be completed easily.

  As the standardization and industrialization under “design-oriented” mode of development are the assembly of buildings and combination of components to some extent, it will be easier and convenient to manage, thus saving a lot of resources. Mature replication is conducive to ensuring the design level and reducing development risk.

• (5) From the sales level, the “design-oriented” development mode and the project success are directly linked. “Design-oriented” development mode can be designed to enhance the quality of products in essence and lay basis for achieving good performance in sales process of design products so that products constitute product line and form design brand benefits to increase the added value of design products.

• (6) From the profit point of view, “design-oriented” mode of development greatly reduces the cost of development, saves considerable funds for the project compared with previous construction methods. However, the real estate industry is a capital-intensive industry. The capital turnover rate and the speed of capital recovery play a decisive role. The “design-oriented” development mode can quickly improve the construction speed, which is directly related to the recovery of funds to enhance the efficiency of real estate (Fig. 4).

  Fig. 4.

  

  Residential industrialization implementation site

3.3 “Design-Oriented” Development Mode in Vanke Real Estate

“Making a house like building a car” is the dream of Wang Shi, chairman of Vanke Real Estate. Now this dream is gradually becoming clear in the difficult exploration.

As a leader enterprise in China real estate industry, Vanke Real Estate has long explored the “design-oriented” development mode and stepped up research efforts in recent years. The replication and promotion of its design products Vanke “City Garden” mark that the Vanke Real Estate has completed the initial exploration with “design-oriented” development mode. Nowadays, Vanke Real Estate is still continuing to study and improve its “design-oriented” real estate development mode. In the future, the “design-oriented” product development mode will be fully realized in Vanke Real Estate enterprises.

As a pioneer in the “design-oriented” development mode, Vanke Real Estate has persisted in using “design techniques” for many years to solve problems in real estate development and continuously explored and perfected the work. As early as November 1994, Vanke Real Estate set up a design platform for close communication with design units—Wanchuang Architectural Design Consultants Co., Ltd. to further refine design product competitiveness from the design. In 1998, a design engineering department was formed and a building research center was set up under the design engineering department. Vanke Real Estate at this time focused on the details of consumer demand and product design itself and greatly adjusted “design-oriented” mode. With the further specialization of Vanke Real Estate, in 2001, the design engineering department was further improved and the design engineering department was recomposed of design department and project management department. In 2002, Vanke Real Estate took the lead to start the housing industrialization, standardized production scale exploration nationwide. These are all researches carried out around “design”.

With the unremitting efforts, Vanke Real Estate gradually clarifies a set of process to promote the construction industry and development with design, emphasizes the coordinated operation, so that the development process tends to simplified, industrial standardization, design controllable system. Therefore, “design-oriented” development mode further develops and strengthens in the Vanke Real Estate and becomes leading development mode system. Vanke Real Estate has always input “80% of the energy to do 20% of the products,” spent lots of research and development efforts to design products to ensure the leading place of Vanke Real Estate in the industry. It is also the emphasis of Vanke Real Estate on the design and the accurate mastery that leads Vanke Real Estate to successfully explore “design-oriented” real estate development mode. At the same time, it also promotes the “design-oriented” development mode to be identified in Vanke Real Estate.

In order to further develop and improve the “design-oriented” development mode, Vanke Real Estate has preliminarily subdivided the “design-oriented” mode into six core components and set up six corresponding research centers - design management center and new products R&D center, technology research center, design standardization center, industrialization center, theory promotion center. These “six major centers” all focus on “design” as a prerequisite for research and exploration of real estate development. However, these “six major design research centers” are not “design” in the traditional sense, nor “design” that can be replaced by design institutes.

The core development functions of the “six major centers” in the “design-oriented” development mode in the real estate project development process are as follows:

• (1) Design management center: that is, for the whole process tracking of each project design, use “design” to guide and manage the entire project design development and construction process.

• (2) New product R&D center: To solve the relationship between Vanke Real Estate and customers and professional architects, the key point is to redesign a customer-oriented design-oriented design product system in the way of “design” according to customer needs and market demands, which covers the design of product innovation and new product design as a whole, finally formulates feasible new product design report (Fig. 5).

  Fig. 5.

  

  Six design-oriented development modes

• (3) Technology research center: Vanke Real Estate is researching the application of new materials, new technologies, energy saving and green environment in residential buildings. It puts forward the design-oriented research on materials, technology, energy conservation and green environmental protection to reduce the troubles caused by technology and work hard to improve the quality and technology of design products.

• (4) Designing standardization center: The purpose of Vanke’s establishment of this center is to start research on the premise of “design-oriented” development mode, to provide standard procedures and systems for the possibility of housing construction, and to establish a standardized and modeled modern design patterns that can be continuously developed, to achieve the simple programming and unity of product in the design and construction process.

• (5) Industrialization center: On the basis of the standardized mode, carry out factory mass production on residential products and components. Through industrialization, products can be connected, replicated and promoted, so that product efficiency and quality are improved and guaranteed.

• (6) Theory promotion center: Through the residence problems obtained from the successful cases developed by Vanke Real Estate, from the “design” point of view, it can solve the problem effectively and finally form the feasibility development system of Vanke Real Estate itself: “design-oriented” development mode, and then replicate and promote it nationwide (Fig. 6).

  Fig. 6.

  

  Development model process

Vanke Real Estate “six centers” ideas are guiding the realization of “design-oriented” development mode, mainly from several aspects: First, solve the complex problems in the development process to make it simple through the design. Second, achieve the standardization of design, establish relevant design standardization and system to set prerequisite for industrialization through the research of new product design; third, gradually realize the production and industrialization through standardized design, thus promoting the development of the industry, promoting industrialization. Fourth, apply the latest design forms to reflect the contemporary real estate product design. Finally, carry out theoretical research on product and carry out design management implementation and replication nationwide.

4 Conclusion

After years of strategic practice, Vanke Real Estate has preliminarily established a “design-oriented” development mode and taken “design strategy” as the core to gradually form its own development theory system, to give full play to commercial advantages and realize the rational allocation of resources. Vanke Real Estate’s mature “design” theory also makes it a leader in the domestic real estate industry in the long run. “Design-oriented” mode of development will be the future development trend of the real estate industry. At present, in light of the current situation in China, the following issue need to be addressed to vigorously promote this mode:

• (1) Expand coverage

  “Design-oriented” development mode is applied in Vanke Real Estate to certain extent, but it’s not popular in other real estate companies. The important reason for this is that the “design-oriented” research mainly focuses on the real estate enterprises like Vanke Real Estate, which has its own testing base. For other real estate companies without “design-oriented” development mode, the problem lies in only focusing on the current large investment and slow return, which leads to failure to actually establish the corresponding design research process in enterprises.

• (2) Correct design awareness

  Some enterprises assume that “design-oriented” is to manage “design” well, which is only suitable for the application of real estate development mode in a certain stage. In other aspects, the application will not have much effect, so that the mode can’t be understood and applied in reality. Most real estate companies believe that the implementation of a “good design” is equal to the implementation of the “design-oriented” mode, so they fail to make any adjustment and improvement on the existing design methods and simply make good “design”, ultimately failing to achieve the desired effect.

• (3) Mechanical application

  “Design-oriented” mode requires a certain degree of corporate awareness. When applying the mode, the real estate enterprises in our country fail to have a deep understanding of “design-oriented” and their specific application environment. Instead, they apply mechanically or in isolation, then the promotion of the development mode is just a mere formality.

• (4) Lack of overall consistency

  Many real estate enterprises in our country are divided by functional departments in implementation of design, project management, technological transformation and market research. They even set up specialized leading bodies, which is against the normal development of enterprises. The above work should be integrated with the “design” to form a unified enterprise process, establish the enterprise’s norms of “design-oriented” development. Through continuous efforts and dedication to improve, the performance of the enterprise can be finally improved.

In short, the “design-oriented” real estate development mode in China is in the ascendant, plays a good supplementary role for the real estate companies with good prospects and great market potential, which is the new beacon for future development of real estate enterprises.