Market Research

REAL ESTATE MARKET RESEARCH FOR PERPETUAL GROWTH

Ahmad Khalaf - Latitude Developments - Ask Ahmad Khalaf - Strategic Real Estate Development Joint Venture Advisor

 

How to leave the competition behind and enjoy uncontested market spaces


Real Estate Market Research

How to spot untapped development opportunities, win the competitive race, enjoy booming markets and realize exceptional returns perpetually!

How to prosper with real estate market research, leave the competition behind you and capitalize on unspoiled market spaces. 


WHAT WILL YOU GET FROM THIS ARTICLE?

  • Use real estate market research to shift from a product-oriented to a market-oriented real estate development mindset.
  • Benefit from real estate market research to leave the competition behind and enjoy uncontested market spaces perpetually.
  • Utilize real estate market research to achieve above market returns from land and property development continuously.


ARE YOU GETTING VALUE OUT OF REAL ESTATE MARKET RESEARCH? 

If you are a real estate developer or a real estate investor, you should be continuously running a multitude of real estate market research exercises.

Most probably, you are not getting the insights and intelligence for which you are looking to get from your real estate market research activities.

More, you might experience slower absorption rates or high tenant turnover or possibly a lack of interest from investors and lenders.

Also, you may be still struggling to maintain previous yields and investment returns.

Besides, your latest real estate market research did not provide you with the practical answers to reverse this diminishing profitability trend.

Still, you might have hired the best real estate consultants, architects, designers, project managers, and contractors.

However, all value engineering tactics do not seem to work. Margins and yields continue to decline. Investors and lenders are reluctant. Buyers and tenants are harder to get.

But, does this mean that you should not expect significant advantages from real estate market research?

Further, should you be satisfied with lower margins, and reduced returns on your real estate development?

Of course not.

Instead, rather than thinking about real estate development as an end goal you should consider real estate development as the means to solve a problem.

In other words, real estate developers and investors must shift to a new paradigm and adopt a market-oriented real estate development mindset.

A real estate market research main objective should be to guide you from where you are right now to where you want to go.

Thus, real estate market research should create value for all stakeholders.


HOW CAN REAL ESTATE MARKET RESEARCH CREATE VALUE ACROSS THE DEVELOPMENT VALUE CHAIN? 

Let’s focus.

As a real estate developer, your objective is to develop properties that will continuously create value for investors, lenders, homeowners, and tenants while generating sustainable profits for you.

What is the challenge?

If you develop projects with the objective of meeting your needs (making a profit), not your customers’ (fulfilling their requirements, wants and desires) then you are competing with a multitude of other real estate developers who continue to flood the market with similar, monotonous and repetitive real estate developments.


WHY SHOULD YOU ADOPT A MARKET ORIENTED NOT A PRODUCT ORIENTED REAL ESTATE DEVELOPMENT APPROACH?

Today, expecting the same results from doing the same things is not realistic. Markets change so fast.

Further, most sectors are getting oversaturated.

Hence, by the time you deliver your next real estate development, you will find that most other developers are trying to sell the same product to the same customers at the same time.

No developer wishes to be selling in an oversupplied market.

Remember that real estate development is a three-year to five-year and sometimes seven-year process.

It is a long period during which markets can change dramatically, especially in our day and age.


WHAT’S THE POINT OF THAT? WHAT SHOULD YOU EXPECT FROM REAL ESTATE MARKET RESEARCH?

If you want to generate above-market returns, you will need to avoid battling highly competitive markets characterized by mass and monotonous development activity.

Instead, you should be in the business of continuously creating your own uncontested market spaces.

For this reason, to be successful as a developer, you should run real estate market research projects to help you to:

  1.  Respond to unique demand generators that are not addressed by other real estate developers.
  2. Fulfill a considerable and growing market gap that other real developers are still not able to fulfill.
  3. Differentiate your development by satisfying specific customer segment needs, wants, and aspirations.

Accordingly, I define market-oriented real estate development as:

“A change from a previous form to a new form of land-use by either developing a new structure on an empty plot of land or by upgrading a current structure. This change in land-use must respond to an untapped market gap supported by specific demand generators and serves particular needs for a specific market segment thus creating value for buyers and tenants as well as the society, the economy, and the environment. Also, it must be profitable for the real estate developer in addition to his investors, and lenders.”

Ahmad Khalaf – Latitude Developments

Notice the emphasis on responding to untapped demand generators while serving a particular need for a specific market segment.


WHY YOU SHOULD FOCUS REAL ESTATE MARKET RESEARCH ACTIVITIES TO IDENTIFY UNIQUE MARKET GAPS

In a building environment of continuous, repetitive and monotonous construction all around us, experiencing an oversupplied market situation is very common.

Hence, to avoid competing in overcrowded markets, the successful real estate developer should focus on finding undersupplied market gaps, identifying exceptional demand generators and offering differentiated value propositions to buyers and tenants.

Further, in a period of too much of everything that was and too little of everything that should be, success lies in finding true demand generators.

Finding untapped demand is the difference between outstanding and mediocre real estate developers.

This thinking should be the primary guiding force of your real estate market research activities.

Additionally, like any other business in a highly competitive environment, the secret of success is in creating highly differentiated product offerings.

Consequently, when you build high levels of differentiation, you will capture a more significant market share, achieve faster absorption rates and demand better prices from the market.

From that place, you will be able to generate a superior return on investment.

In this way, differentiation is the result of dedicated market research and careful customer segment analysis.

In short, “Do not focus on the money, instead focus on demand and money will come.”


HOW TO EXECUTE REAL ESTATE MARKET RESEARCH IN FIVE STEPS SO THAT YOU WILL LEAVE THE COMPETITION BEHIND AND REALIZE EXCEPTIONAL RETURNS OVER AND OVER


STEP 1: UNDERSTAND YOUR MARKET

Where is the demand?

Your priority as a real estate developer is to look for demand, not for a land parcel to develop.

Do not start the process by searching for a plot of land to develop.

Instead, start by identifying demand.

Only when you recognize an undersupplied market segment (a market gap), you should search for the most suitable location to fulfill this particular market gap.

If you already own a piece of land, test the suitability of your estate for that specific market gap which you identified. If it is not a good fit for this particular market segment, check what other market gaps are appropriate for your location.

Remember that your primary objective from real estate market research is to identify undersupplied market segments (the demand).

Real estate market research should NOT be used to validate a pre-conceived development plan. Developers who do so are shooting themselves in the foot.

Developers who start by acquiring a plot of land or by developing a pre-determined project increase their risks tremendously.

Finding demand should always come first.

A successful project must prove to be in demand, doable and feasible.

Accordingly, as a real estate developer, you must ensure that customers not only need your offering but that they are willing and able to pay for it.


STEP 2: IDENTIFY DEMAND GENERATORS

What is a demand generator? Moreover, why it is essential?

So, you used your real estate market research to analyze the market.

You identified untapped market gaps, recognized prevailing trends, understood pricing structures, and gauged yields, absorption rates, and penetration rates.

Great!

It is now time to investigate what demand generators support your identified market gap.

Demand generators are market dynamics that create or support demand for a specific real estate use.

For example changes in regulations, zoning parameters, or economic conditions may trigger interest for an asset class or reduce the need for another.

Similarly, the construction of some developments may trigger demand for other properties. For example, the development of a new industrial area will create demand for housing and retail in the same or closeby locations.

You will need to find out what demand generators support your identified market gap?

Also, you must comprehend how do these demand generators back your identified market gap and by how much?

Hence, it is paramount to investigate all political, economic, social, environmental, regulative,  and technological demand generators relevant to your chosen market gap.

In conclusion, you must only develop properties that are backed by reliable and long-term demand generators.


STEP 3: ANSWER TO SPECIFIC NEEDS, WANTS, AND DESIRES

Believe it or not.

You may conclude thorough market research and identify several solid demand generators to back up your identified market gap.

Nevertheless, you may end up building a property only to discover that buyers and tenants are not willing to accommodate.

Moreover, they may not pay you the market rent you anticipated.

The number one cause of death for real estate developers is poor value propositions.

You may be shocked during this phase by how many gaps you may find in your value proposition!

The value proposition is your offering to the identified market segment. In plain English, it is what you intend to develop to satisfy the recognized market gap.

Thus, it is critical to assess how your development plan creates value for potential buyers and tenants.

Buyers and tenants perceive value through achieved differentiation levels.

Mainly, how better do you address your customer needs, aspirations, desires and wants in comparison to the competition.

Why is it crucial to create high differentiation levels?

Your development plan connects well with customers.

You are responding to a substantial, long-term and high growth market gap.

Perfect!

Even though, the competitive market could still crush your expectations!!!

It is time to assess the competition. It’s time to differentiate your development. It is time to create your market niche.

What should you differentiate and how?

Here you should zoom into the exact wants, and expectations of your target customer segment.

You identified a substantial market gap. You want to develop a project that responds to your specific market segment needs.

Your development plan or design should match the exact customer segment profile including their needs, wants, desires and expectations.

At this stage, it is crucial to investigate the competition.

More, understand what does the target market segment like and dislike about the currently available stock.

Also, what do they expect from a better property?

Accordingly, you will be able to differentiate your development plan, create higher value for your tenants and achieve better absorption rates and higher yields.


STEP 4: INITIATE THE CREATIVE PROCESS

How to translate your research into a highly differentiated project?

So far, you have answered all the critical questions.

At this stage, you can evaluate your value proposition. How do you compare to your competitors?

With all the information that you have, It is time for creation. You are the master of the development process. You need a team.

A successful team is a highly aligned one.

Make sure to choose the best architects, project managers, contractors, and suppliers who understand your market well.

More critical build 100% synergies across the real estate development process including all team members.

Your objective is to create a concept masterplan that translates your findings and solutions into a design.

Provide your architects with the complete market research and market analysis study.

Emphasise your value proposition and differentiation strategy. Explain how you would like to answer to your particular market segment needs, aspirations, likes and expectations.

Be specific about your objectives.

If you picked the right architects, they would successfully translate your solution into an efficient, functional and beautiful design.

More critical their design will match your specific target market segment profile.


STEP 5: BUILD ON YOUR REAL ESTATE MARKET RESEARCH AND MARKET ANALYSIS

Okay, It is time to build your development and phasing program, test the feasibility of your project, agree on the land acquisition strategy, design your financing structure, create your joint venture and secure the project’s funding.

READ MORE: REAL ESTATE FINANCIAL FEASIBILITY: THE ULTIMATE GUIDE


WHAT MAKES A SUSSESFULL DEVELOPMENT? HOW TO GROW YOUR REAL ESTATE DEVELOPMENT PORTFOLIO?

What makes a successful real estate development?

CREATING AND CAPTURING VALUE

How to create and capture value?

Carry detailed, comprehensive and accurate real estate market research to:

  • Identify an untapped or undersupplied market gap.
  • Make sure to back your market gap with robust, and long-term demand generators.
  • Understand your target customer segment needs, expectations, and desires.
  • Design to match your target customer segment profile.
  • Differentiate yourself from the competition.

Seriously, it’s that simple.

Once you understand how to offer more value than anyone else in your market consistently, you’re in a better position to generate higher yields and better returns in comparison to the competition.

Most importantly, you’ll understand how to leave the competition behind you and enjoy your own market spaces.

READY TO WIN THE MARKET? DO YOU WANT TO OUTBEAT THE COMPETITION?

Are you achieving optimal results from your real estate development market research?

It’s good to know where you stand now to learn what steps you need to take to get where you want to be.

Capitalize on Ahmad Khalaf’s online FREE assessment tool, designed for you and your journey.

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