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Marketlogics’ Strategy Focused on Turnaround for Underperforming Asset
LONG VALLEY, N.J., Dec. 7, 2015 –The potential risk and reward of any real estate deal is always part of the matrix. To strike the right balance, companies are relying on customized market research as an intelligent approach to identifying obstacles and opportunities in the marketplace, according to Michael A. Kehl, president of Marketlogics, an independent firm, which specializes in property development research.
“Market research is a crucial step in determining what and where to build in order to minimize risk and maximize profit,” said Kehl. “Strategic-in-depth analysis of market research can identify a target market of buyers for a new housing project and help create a strategy to best capture these buyers. Another key factor is the pricing and positioning of a new housing product as it comes out of the ground.”
When a new housing community is not positioned correctly, it could languish on the market. When this happens a developer may have to lower pricing, which essentially tells the marketplace that a real estate product isn’t worth what the developer originally thought, explained Kehl.
“The real estate market will shift and change over time, which is why market data is critical in helping a company understand how to shift strategies,” said Kehl. This was the scenario when a new condominium building emerged in the midst of a changing market back in 2010. Although the transit-oriented, mixed-use project was located in a lively downtown community in Essex County, the developer was faced with lagging sales. Marketlogics stepped in with a market assessment and a repositioning strategy to boost the performance of the property.
Original Plan Called for Luxury Residential with Retail
When the mixed-use project was originally planned in 2003, it was envisioned as a luxury residential building with a gourmet grocer on the ground floor. It is situated just two blocks from the town train station, making it ideal for commuters into Manhattan. Construction began in 2007 as part of a revitalization effort that was underway in the downtown. But by the time the project came online, the residential market had shifted, and apartment complexes were gaining ground over condominium projects.
The Township in 2010 had a population of about 16,316 people, and demographic trends supported the demand for apartment housing, according to Marketlogics. The firm conducted a market and competitive analysis to determine the highest and best use for the planned development.
“Based on our information, we provided a number of pro formas, which indicated there would be strong demand for the units, and the building could successfully rent out rather quickly. In addition, this product would generate strong cash flow ongoing for the developer,” said Kehl.
As a result of Marketlogics’ in-depth market analysis, the developer initiated a turnaround. The Company converted its plans for a for-sale building into a luxury apartment complex. Consequently, through Marketlogics’ parent company Builder Marketing Services’ (BMS) handling of the leasing, it leased-out within six months and became a very successful project, according to Kehl.
“We work with developers at all stages of planning and design to help them make more fact-based decisions,” added Kehl. “Analyzing markets, demographics and timely economic trends are part of the equation for any project, and a flexible developer can be confident that the plan going forward has been created in order to succeed in the location and the economic regional marketplace.”