6 Schooley’s Mountain Road
Long Valley, N.J. 07853
Download Word Doc: Click Here
Timely Analysis Can Mitigate Risk, Identify Opportunity and Establish Value
LONG VALLEY, N.J., June 19, 2015 – For a real estate project to reach its full investment potential in today’s economic environment, a more intelligent approach is essential. Independent market research provides timely analysis that will help to mitigate risk, identify opportunity and establish value, thereby allowing a real estate project to achieve maximum success.
In the following interview, John D. Sims, chairman and CEO of Long Valley, N.J.-based Marketlogics – a multi-faceted real estate market research company – discusses how custom advisory and consulting services are vital to assisting developers, residential home builders, lenders, investors and municipalities in making the best strategic decisions for their companies and communities.
Q: What role does market research play in helping new-home builders and developers create successful communities?
A: Market research – the strategic in-depth analysis of data – if followed, is an insurance policy for success that can guide a builder in deciding what and where to build in order to minimize risk and maximize profit. This research also can identify a target market of buyers for the housing to be built and determine how to best capture these buyers. Another important factor that comes from strategic-in-depth analysis of market research is the pricing and positioning of a new housing product as it comes out of the ground.
If a new housing community is not positioned correctly, one of two scenarios is likely to occur. First, if a product is priced too low, it leaves a lot of hard-worked income on the table. Second, if a new housing product is over-priced, it will languish on the market and the builder/developer will have to start fielding very low offers. Or, the builder/developer will have to lower product pricing, which essentially tells the marketplace that a real estate product isn’t worth what the developer originally thought. You only get one chance to make a great first impression, and in this case, that means coming into the real estate market with great product acceptance.
Q: How important is it for builders/developers to utilize key market research from a project’s onset?
A: Ideally market research should be done during a due-diligence period to help decide if a land purchase really will pencil out as a builder/developer thinks. Market research will help to decide what municipal approvals to go for (meaning what product type, size and number of homes/units). The market research also can paint a picture of the marketplace to help determine if there is a market and how deep that market potentially is for the product and prices needed to make the entire development a success.
Q: Can lenders and municipalities also benefit from timely market analysis, and if so, how?
A: Without a doubt. Lenders are at risk just as much as developers, and they also need to minimize their risk and uncover the unknowns. Municipalities can benefit from understanding the dynamics of their respective housing markets, local housing demand and location quotients that would compare a specific municipality’s housing composition to that of a larger, yet similar, area. Municipalities also should want to know if a particular proposed project is going to be a good fit or a mismatched eyesore for the community. Added value of a residential product can, and should, mean added ratables for a town.
Q: Can you provide examples of how Marketlogics’ research has helped to achieve successful results for a client or project?
Examples of Marketlogics’ recent studies include analyzing the best return on investment (ROI) options for an urban rental property; determining why a luxury condominium was selling slowly and recommending steps to create a better ROI; reviving a struggling master-planned golf community; and determining the best course of action for a failed age-restricted project that had been partially built and sold before running into market resistance.
Q: As we mark the half-way point of 2015, are there are notable trends you are seeing as relates to the new-home market?
A: The buzz word today is all about millennials, but this segment of the population (those ages 16 to 36) is made up of mostly renters, or buyers of entry-level priced housing stock. Five years from now that will change as millennials’ income increases and this segment of consumer begins to create household formations in earnest. Student loan debt also is a major economic factor for many millennials; as their student debt decreases, they will have more money for upgraded and improved housing expenses. In the meantime, we need to focus on move-up housing for people who have been out of the market during the recession, but whose family still has grown or expanded. There is strong pent-up demand for the right housing products in the right locations (near mass transportation or with commuting convenience).
Formed in 2012, Marketlogics provides independent real estate market advisory services focused on property development, new-home product analysis and evaluations. Marketlogics evolved from the market research division of Builder Marketing Services (BMS), a full-service new-home marketing and sales company founded in 1996. Both Marketlogics and BMS are headquartered in Long Valley, N.J.