Transcript Chapter 10 Marketing and Sales Property Development (6th Edition) Publisher: Routledge www.routledge.com Authors: Professor R.G.

Chapter 10 Marketing and Sales
Property Development (6th Edition)
Publisher: Routledge www.routledge.com
Authors: Professor R.G. Reed and Dr S. Sims
10.1 INTRODUCTION
• The final stage of the development, and hence the reason for undertaking
many of the stages in the development process, is the eventual sale (or lease)
of the completed project to a third party. To facilitate this process, marketing
is a key yet frequently misunderstood component.
• Where possible the dual objectives of the marketing plan will be to (a) sell or
lease the completed project as well as (b) achieving the predicted sale price or
rental level as originally forecast prior to commencing construction.
• Although marketing has a financial cost it has been proved that you have to
‘spend money to make money’.
• Marketing must be viewed as a priority that potentially will adversely affect
the success (or lack thereof) of every property development.
• The significance of the marketing phase has often been under-estimated by
property developers who may focus too much on the preceding steps of
property development, including land acquisition and construction, rather
than maximising the eventual return on disposal.
10.2 MARKETING APPROACHES
• As much as there are different land uses, there are a large number of different
marketing approaches which are tailor-made for each development.
• The underlying aim is to promote the development to potential purchasers
and tenants in this target market based on the highest level of efficiency, i.e.
not promoting to sectors outside the target market where possible.
• It is accepted that a developer has limited resources, especially financial, in
every stage of the development including the marketing phase. Therefore the
developer must establish a realistic budget to actively market the completed
development and be prepared to increase this allocation if deemed necessary.
• For a developer it can be frustrating that successful marketing is not an ‘exact
science’ and therefore the actual proportion of the development budget
spent on marketing will vary between projects.
• The amount of financial resources that a developer commits to promotion is
often based on their judgement, partly influenced by their past experiences
and expert advice received.
Discussion points:
Why is marketing and selling as important as
any other part of the property development
process?
How has technology changed the way that
property is marketed?
10.2 MARKETING APPROACHES
10.2.1 Site Boards and Site Hoardings
• Remains one of the oldest and cost-effective means of marketing a property
based on the location attributes. Other than the cost of manufacturing there
are no costs associated with advertising due the ‘free’ benefits attached to
the site.
• It is now standard procedure to include all communication mediums including
a website address, phone numbers, email addresses and barcodes.
10.2.2 Particulars and Brochures
• In today’s increasingly competitive marketing environment practically every
property development is supported by particulars and/or brochures of the
scheme. Internet marketing has reduced costs and also the push for
sustainability has decreased the importance of hard copy material.
• This approach is based on the marketing strategy of AIDA referring to creating
(A) attention, (I) interest, (D) desire and (A) action by the prospective
purchaser/tenant.
10.2 MARKETING APPROACHES
10.2.3 Advertisements
• Advertisements are still considered a cost-effective medium. Usually the
advertisements are aimed either directly at potential occupiers or indirectly
through their agents depending on the target market.
• Adverts are usually placed in the property sections of local and
national/international newspapers, as well as various industry property/real
estate journals. The internet has quickly overtaken the printing press as the
preferred medium for advertising a development due to (a) the lower cost, (b)
the wider audience, (c) the ability to update the advertisement instantly, (d) a
higher level of professionalism, (e) the ability to identify information about
viewers of the website.
10.2.4 Internet Presence
• A successful property development definitely must have a presence on the
internet in some form or another.
• Many developments have their own domain name or web address, which
provides detailed up-to-date information about the project and saves the cost
of printing expensive colour brochures.
Discussion point:
Why has the internet become the most popular
advertising medium?
10.2 MARKETING APPROACHES
10.2.5 Direct Mail
• Direct marketing via post is commonly used as it is targeted and relatively
cost-effective. Mail shots are aimed at a very carefully selected list of
potential occupiers and the success will depend very much on the compilation
of the mailing list and any follow-up procedures.
• To be effective the mail shot must reach the right person within the
organisation, who is responsible for property matters, and at the right
address.
10.2.6 Email Marketing
• Email has many benefits including low delivery cost, low maintenance/upkeep
costs and the ability to send out bulk emails.
• A balance must be struck between saturating the reader with too many
emails and not keeping them up to date with progress. The core aim should
be to encourage action by visiting the property development and/or
committing to a detailed discussion.
10.2 MARKETING APPROACHES
10.2.7 Opening Ceremonies
• For large-scale property developments it may be appropriate to launch the
development by conducting a ceremony during the course of construction or
when the building is completed and ready for occupation.
• In an increasingly competitive environment in the real estate market,
developers have had to make their opening event both increasingly
imaginative and innovative in order to encourage agents to attend.
10.2 MARKETING APPROACHES
10.2.9 Public Relations
• Larger developers (particularly public quoted companies and REITs) place a
large amount of focus on ensuring they undertake effective public relations.
• Usually they either retain external public relation (PR) consultants or employ
their own in-house staff responsible for liaising with stakeholders, the general
public and the media.
• Through their press contacts the public relations consultants can achieve
effective media press editorial at significant stages in the development
programme.
• Editorial coverage is often offered by a publication or on a website if
advertising space has been booked to coincide with coverage of a particular
geographical area or a particular type of property.
• Promotional material should be on display at every public relations event
where either the developer or the development itself is being promoted.
Discussion point:
List the various types of promotion available
and the positive and negative aspects of each
option.
10.3 THE ROLE OF THE AGENT
• A real estate agent is usually directly responsible for selling/leasing a
particular property and they are engaged by the developer.
• Although some developers may have their own experienced in-house
marketing team, it is not always possible to rely 100% on their efforts alone.
Many agents offer certain advantages over an in-house agent and this is an
important consideration.
• A successful agent must be active and continuously involved in the market
place so they are aware of all changes in market conditions.
• A developer may employ a national or regional firm of agents operating either
with or without the input of a local firm.
• It is recommended the agent/s are engaged at an early stage, which will allow
them to become thoroughly familiar with the property they are going to sell
or lease.
• The smarter agents will devote their resources to potential sales/lettings
where they have the highest likelihood of success, i.e. not shared with a large
body of other agents with associated risk.
10.4 SALES/LETTINGS
• After a potential occupier or an applicant has expressed their initial interest in
inspecting a property, the next step is for the agent to show it to them at a
mutually agreed time.
• During the on-going regular meetings the agent/s will be able to advise the
developer when it is appropriate to quote terms and financial information (i.e.
relating to the final purchase or leasing price).
• If the intention of the developer is to fully on-sell the completed development
to an investor, it is essential for the leasing terms for all tenants (i.e. tenant
risk) to be acceptable to the investment market at which it is aimed.
10.4.1 The Demise
• The accommodation space being let needs to be clearly defined; this is known
as the ‘demise’.
• A decision needs to be made, in the case of an office development, as to
whether it is possible to lease/sell only whole individual floors or lease/sell a
portion of a floor.
• In some instances agents will be instructed to pursue a single letting of a
building.
10.4 SALES/LETTINGS
10.4.2 Rent
• The developer will usually quote an advertised rental value for the
accommodation in consultation with the agent. The developer will also
calculate the rent required, which when capitalised at the appropriate
market-derived yield will provide the developer with a satisfactory return on
investment (ROI).
• The developer may consider offering incentives in order to maintain the
required rental value for the property.
10.4.3 Lease Terms
• The strength and value of the lease (i.e. the income flow) will be linked to the
level of perceived risk affecting a reliable source of future cash flow.
• Some institutions may, depending on the circumstances, agree to such clauses
provided the tenants also agree to the lease terms.
• Where the likely tenants are small businesses or sole traders with little or no
financial track record, the developer will often be more flexible due to the
limited market demand.
10.4 SALES/LETTINGS
10.4.4 The Tenant
• The final value of the development will be linked to its ability to earn money
and the strength (i.e. reliability and security) of the tenant.
• The financial status and background of all potential tenants will need to be
checked by the developer to ensure they have the ability to pay not only the
agreed rent, but also outgoings related to the property.
• Tenancies of different areas (m2) will be more attractive to the varying
demands of multiple tenants than if there was only one size available.
10.4.5 Repair Obligations
• The responsibility for repairs and maintenance during the term will depend
largely on whether the property unit is self-contained. For a single building
the sole tenant will usually be responsible for all internal and external repairs.
• The landlord’s expenses associated with repairing, servicing and maintaining
the common areas will usually be recovered from the tenants, most often in
proportion to the area of their demise.
10.4 SALES/LETTINGS
10.4.6 Other Considerations
• The development process does not end the once the documentation has been
completed and the keys are eventually handed over to the tenant or
purchaser.
• Even if there is no continuing contractual relationship, the developer should
maintain contact with all their tenants or occupiers and provide an after-sale
service. It will pay future dividends and help the reputation of the developer
in the market, as failure to protect a reputation can adversely affect future
proposals although the developer may never find out the reason.
Chapter 10 Marketing and Sales
Property Development (6th Edition)
Publisher: Routledge www.routledge.com
Authors: Professor R.G. Reed and Dr S. Sims