5 Immutable Laws of Condominium Marketing

5 immutable laws of condominium marketing

With more than three decades of marketing condominiums, I feel as though I can speak with some degree of authority on the subject.  However, this is not a testament to what I’ve done right all of those years, but a function of all the things that I’ve done wrong and, hopefully, learned from along the way.  In the interest of helping you avoid the metaphorical re-invention of the wheel (clue: think round), I’m delighted to share the first 5 of the 10 immutable laws of condominium marketing.  The final 5 will appear in the next blog…

1. Pre-Sales Are Your Friend

Obtaining pre-sales used to be relatively optional in the days before the end of the world as we once knew it, i.e. prior to the near total collapse of the economy and the real estate market in October of 2008.  During those heady days when marketing often meant order-taking, a relatively modest degree of equity could secure financing for speculative development projects, large condominium projects included.  The result, in the absence of a pre-sale requirement, was often a roll of the dice in terms of whether the product was a match for the market.  My personal experience is that pre-sales, even if not a lender-based requirement, are invaluable in terms of providing the ultimate marketing study regarding pricing, unit design and, of course, the location of a given project.  The streets of Boston are currently littered with struggling condominium developments that didn’t need to achieve a certain level of pre-sales and, equally important, locked-in Purchase & Sale Agreements with sizable, non-refundable deposits that are lost if the Buyer walks from the transaction.  Don’t think that you’re smarter than the market and that, “If I build it, they will come.”  That kind of hubris is the most basic blueprint for disaster for any large condominium project.

2. Your Pricing Strategy Will Make Or Break Your Project

This is such basic advise that it’s hard to believe that many developers go the other way, i.e. they start their pricing at or higher than the pricing that their pro forma suggests.   If the market and the location are hot and if the project has been well conceived, this method of pricing can work just fine – if you like gambling instead of planning.  It’s a mistake to think that you’ve hit a home run before the project hits the market and, once you’re committed to a pricing schedule, you’re locked in relative to the ultimate public perception of the project.  If, on the other hand, you start your pricing a bit lower than suggested by your pro forma, there are two distinct advantages: 1) You can create a sense of urgency by noting that prices will be going up after a certain bench mark is reached; and 2) You can keep the prices lower if you’ve incorrectly judged the strength of the market or the strength of your project.  The alternative, pricing the units higher to start, leaves nowhere to go but down.  And once initial prices are lowered, it takes no time at all for the word to get out that the project is in trouble.  The developer, in that instance, is unlikely to see offers at anything near the asking price for the duration of the project.  Momentum works in both directions.

3. Overlook Product Differentiation At Your Own Peril

You are rarely alone in the marketplace, whether you’re developing apartment or condominium complexes.  Even as I write this, there are more than 6000 apartment units in the pipeline at the Boston Redevelopment Authority…and, in a few years, there will likely be a similar number of condominium units in the permitting process.  Thus, it makes sense to determine in advance those aspects of your project that make it special (your “unique selling proposition”) and then to determine how to best communicate that difference to the marketplace.   Product differentiation can take many forms, from a pricing advantage to a superior location.  None of this matters much unless the renting or buying public is aware of your development and, equally important, taught how to think about it in a crowded arena of competing voices.  Much of this can be accomplished through the primary branding of the project, inclusive of the name, the logo, the brochure, other collateral materials and the overall look and nature of the advertising and public relations.   Sometimes it means branding the host neighborhood as well as the project itself. Considering all of this as an afterthought and nothing more than a marketing line item in the project budget is a sure way of ensuring disaster.

4. Local Brokers Are Your Best Friend Or Your Worst Enemy

Many marketers of multifamily projects attempt to maximize the take from their commissions by preventing participation from the greater brokerage community.  This is a HUGE mistake and a classic example of being “penny-wise and pound-foolish” (I made that up, but feel free to use it with proper attribution).  There is an army of brokers out there and you risk alienating all of them with such a policy.  Instead of inviting their participation for a reasonable co-commission and having this army tout the benefits of a particular project, to their customers, shutting them out creates an army of detractors whose opinion matters – especially in the age of web-based marketing.   It’s important to remember that, while brokerage commissions are critically important to anyone working on the marketing of the project, they constitute a very small part of the developer’s pro forma.  I’ve seen projects fail because marketers were greedy and did not properly prioritize the most important aspect of their obligation to any developer, i.e., making certain that everything is done to maximize the chances of selling out the project for the projected prices in the least amount of time possible.

Speaking of being greedy…

5. Don’t Be Greedy

Here I can speak from direct, albeit embarrassing experience.  I once developed and marketed a 240-unit condominium project that was 80% pre-sold prior to beginning construction.  Because of the success of the pre-sale campaign and in order to maximize my profit, I made the decision to hold almost 50 Penthouses off the market under the theory that, once the building was constructed, these units would command far more money than the price point at which we would have sold them on a pre-sale basis.  And then God punished me for being greedy.   President Reagan changed the tax laws related to buying units as tax shelters, the entire condominium market disappeared along with the investor market, and I was left with…50 unsold penthouses.   The lesson here is that you never know. It’s very easy to outsmart yourself and, as I did way back then, learn the valuable lesson that the real estate market is fluid and subject to change at a moment’s notice.

So there you have it, the first 5 of the 10 Immutable Laws of Condominium Marketing.  If you learned anything from this, please stay tuned for the final 5 laws which will appear here.  And, if you didn’t, stay tuned anyway because, like the infinite number of monkeys sitting at an infinite number of typewriters, I’m bound to write something of value here….eventually.

 

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About Merrill Diamond

Merrill H. Diamond is a trained architect and a founding principal of IGNITION Residential, an interdisciplinary multi-family marketing firm. He is also a founding partner of Diamond/Sinacori, a Boston-based real estate development company founded in 1978. Mr. Diamond has been the recipient of numerous local and national awards for both development and marketing. He has served as both a gubernatorial appointee to the Massachusetts Historical Commission and to the Senate Special Commission on Historic Preservation. In addition, Mr. Diamond has been named “Entrepreneur of the Year” by Arthur Young / “Venture Magazine;” “Merchant Builder of the Year” by the National Association of Homebuilders (NAHB), and one of “America’s Most Valuable People” by “USA Today".

One Response to “5 Immutable Laws of Condominium Marketing”

  1. Kennith Kisielewski March 26, 2012 at 6:45 pm #

    You’re crushing it on this blog, man.

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