A Developer's Guide to Surviving Today and Building for the Future
Despite 28 years of working in New York City's real estate industry, I am still amazed at how developers and brokers alike can be counted on to be resistant to changes and new ways of doing things. Some are complacent, sticking to old methods as if they were sacred traditions–"that's how we've been doing it for a long time, and we've done just fine." Others simply have no vision: their idea of real estate is to copy whatever it is their seemingly successful competitor is doing. They isolate the industry in a self-imposed boundary, opting for familiarity over innovation, and thus find themselves constantly decades behind other industries in terms of technology, products, and methods of reaching their targets.
What amazes me is how most real estate developers have the same limited vision as the brokers they hire. They think of lifestyle in terms of cabinetry, or placing a gym or a seldom used movie room in the building. They think of marketing as a bunch of fancy printed brochures few buyers ever look at after leaving a sales presentation. They think of online marketing as the same old boring websites, with ridiculous renderings that haven't been interesting since early 2000.
I believe the problem lies not in the lack of imagination, but rather in a somewhat flawed understanding of what real estate is and what it should be. So I've outlined six basic principles for developers who dare to remain relevant in the future, especially with the increasingly powerful millennial consumers.
1. STOP OVERPRICING, YOU'RE KILLING YOUR OWN MARKET
Yes, in the short term, you make great gains by pricing high...in a booming market. But that boom is short lived and when developers see a downturn, you should adjust accordingly. Information about sales is readily available now. Unlike before the internet, you can no longer fake-hype your way by telling people about "robust" sales, hoping that it becomes a self-fulfilling reality. It won't. Moreover, millennials in particular are not as keen on status spending. They have other interests like traveling and furthering their education. Most of the time, they see real estate as a short term investment. Few have emotional attachments to the homes they buy. They are not looking to hold on to it for generations. So paying high upfront doesn't make much sense. If you make slight adjustments in line with a logical return on investment, your product will always move quickly. Unfortunately, most developers hold out. You know what happens? Things take longer to sell. And when that happens, the market looks worse than it is.
2. DON'T FALL FOR YOUR OWN MARKETING SPIN, CREATE A UNIQUE PRODUCT
As an experienced onsite marketing expert of developments, I can create a compelling narrative for any project that I'm collaborating on. The stories I tell are always based on my vision of what residents might experience living in what my developer clients build. It doesn't matter whether it's a boutique building, a large complex, near the water or in the middle of a busy city block, I always find a way for potential residents to envision a wonderful life there. BUT you should at least give me something more than the same product another developer is building across from you. If you admire yourself for building an oddly shaped glass structure, look around. You can find those anywhere in the world, with the same amenities, even the same kitchens and finishes. Give your buildings its own personality. You never want it to come across with the message: "Live here. Be the same."
For several years now, I've been telling my clients to incorporate lifestyle services into their buildings. But there's another thing that's also important–innovation. Business in the information age doesn't reward the blissfully ignorant. If your idea of setting yourself apart is using Calacatta marble, well, you're in good 15th century company. Don't get me wrong, good materials are mandatory. As the global economy increasingly begins to lean more on businesses that are socially and environmentally positive, the real estate industry will itself be transformed, too. You should be thinking technology, efficiency, and sustainability. We're not talking just getting "Green" certification. It should go beyond a checklist for government and marketing purposes. Bettering the environment should be a prerequisite in your planning process, because sooner or later, this will be the standard for all buildings.
3. DON'T BUILD PRODUCTS, BUILD SERVICES
If your idea of a technology savvy real estate firm is having listings posted on a website or slide shows in a showroom, you should go home and get rid of your betamax and kitchen phone with the long cord. Imagine people living in your building in the future and figure out what things they might wish to do on a day to day basis, not just today but in the future. How will smart technology enable them to cook, to purchase groceries, to work out, to maintain their homes? How will it relate to their passion for art, music or fashion? How will they get their news, media broadcasts, etc.? And what can you do to help with these? When you build, pay less focus on product fads and gimmicks. Direct your eye instead towards, if not providing services, being a conduit for them.