Behind every new residential project, there are a number of key players: the developer; the architect; the interior designer; the sales team; and, depending on how high-profile the project, others, like an A-list restaurateur and luxury concierge.
Many times, there’s someone else involved who gets little public credit but plays an integral role: the real estate consultant.
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Real estate consultants can have various types of expertise and fulfill myriad roles. Some advise developers on pre-development decisions, and become involved in a project before the land is secured, the feasibility reports are run and the architecture firm is hired. Others are brought into the process later to help guide decisions regarding unit mix, pricing and design. And others, still, are hired once these decisions have been made to help define the project’s brand, hone in on the target market and build an online presence.
Regardless of their area of expertise and how the developer uses their services, every consultant relies on data and strong industry connections to help the developer make decisions and ensure they’re working with the best team to achieve their goals.
"In today’s competitive market, where only the most unique and high quality projects are selling, consulting is a service that is very much required," said Becky Fatemi, managing director of London-based real estate consultancy Rokstone.
When a developer has failed to hire a consultant at an early stage, it’s obvious, Ms. Fatemi said, noting that she’s recently walked into Central London developments and seen major mistakes, like flats that have dark wood floors and dark kitchen cabinets and appliances—a trend from a year and a half ago, that’s already out of fashion.
"Without living and breathing luxury real estate, and walking the streets with these purchasers to understand their changing requirements, the developers don’t have a hold on the market," Ms. Fatemi said. "It definitely requires a specialist."
Engaging an expert consultant at the earliest stage possible is one way developers can guard against missteps, consultants say.
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Peggy Fucci, CEO of OneWorld Properties, a Miami-based real estate consulting firm that’s currently working on the 550-unit Paramount Miami WorldCenter complex and the smaller 100 Las Olas project in Fort Lauderdale, Florida, said that she recently got an early-stage call from a Chicago development firm who is interested in South Florida.
"They may not want to build until 2019, but they’re already coming down for a meeting," Ms. Fucci said, before which she’ll pull together some data on a few areas they might consider, detailing how quickly and at what price different types of units have been moving in other resale and new development projects.
Louise Sunshine, an independent real estate consultant with 40-plus years of experience, who worked alongside Donald Trump for well over a decade and founded the Sunshine Group, said that she is often also called upon from day one, before the developer even acquires the land. She helps make this decision, and works with the developer to conduct feasibility reports and run a competitive analysis, and later, works alongside the architecture and design teams to determine the floor plans and unit mix and pick finishes.
"These are decisions that have to be made from day one, and if they’re wrong, very often the development is wrong," Ms. Sunshine said.
Andres Asion, the founder of Miami Real Estate Group, a firm that handles sales as well as consulting, was recently brought onto a project where some of those early missteps—too small closets, among them—caused a luxury project to stagnate on the market.
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Because he was brought into the process after a year of work, his advice to increase the closet size and make other changes to appeal to Miami buyers, meant changing the plans and getting new permits.
While many consultants come from a sales background, like Mr. Asion, Ms. Fucci and Ms. Fatemi; or a development background, like Ms. Sunshine, it’s also common for developers to hire a consultant with marketing expertise. Steven Seghers, the president of HyperDisk Marketing in Irvine, California, is among this type of specialist.
Mr. Seghers’s area of specialty is developing a new project’s brand identity, and executing pre- and post-opening marketing. "Whether it’s for Mark Taylor Residential in Nevada and Arizona; Montage Deer Valley Residences in Utah or Irvine Company in Southern California, our focus is to create clear points of differentiation in the luxury market, and a positioning that allows for exceptionally strong brand resonance both on and offline," Mr. Seghers said.
This starts with the brand name itself. In many cases, Mr. Seghers said, the developer comes to him with a brand concept that’s come out of work by the design firm or the architecture firm. But when his firm looks at data on search and market saturation, they find that the proposed brand and online domain name is so highly competitive that it would be detrimental to a pre-sale campaign.
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His team comes up with some alternative brand names that would complement the project’s focus, appeal to the target market, and allow for a strong digital presence, and advises the developer on which one made the most sense based on their objectives.
With that decision made, Mr. Seghers said his firm conducts a data-based competitive analysis to see who’s buying in the area, and what their story is. "Fifty percent of the time, a developer’s assumptions about who is likely to buy and from where are incorrect when we look at the data," Mr. Seghers said.
The most important thing in the luxury market, he said, is that the local market is national, and in many cases, international. At the Montage Deer Valley Residences, for instance, most buyers are coming from places like New York, Chicago, Houston and Southern California, while the Irvine Company sells a good number of units to Chinese buyers. "Knowing this impacts how you market to them," Mr. Seghers said.
Depending on how long the project is and whether or not they’re handling sales, consultants can be paid in a few ways. If someone is brought in to consult on specific details of a project, like determining the size of units or their layout, they might charge an hourly rate or a monthly retainer. Whereas, if they’re working on a long-term project that takes months of work, they might charge a flat fee.
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Ms. Fucci said that when she also handles the building’s sales, she’ll charge a flat fee of about $15,000 to $30,000 for early stage work, and then roll consulting services into the percent commission that she makes at sellout.
"Every deal is different, and there are many components to figuring out price," Ms. Fucci said. "Lately, I am working towards having some skin in the game and becoming a partner in all levels with the developer. That's my vision going forward."
Consultants say that when it comes to how long they work on a project, they most often continue with the project from whenever they’re brought on board through completion.
As a new project is being built, consultants rely on data to gain market insights, but also look to other industry experts for feedback, Ms. Fucci said, noting that she often pulls together focus groups composed of local brokers to hear about what’s selling, what the most in-demand finishes and amenities are, and what’s going out of style. Gathering this info frequently has her on the road, most recently in China and Brazil, to hear about what buyers from these countries want to see in South Florida and other U.S. markets where she works.
Other consultants say they rely on their extensive networks to advise the developer on who to hire when it comes to building scale models or creating a virtual reality story. "I’ve worked in this industry for long enough to know who does it all best," Mr. Asion said. "Passing this information onto the developer streamlines the process."
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In later phases of development, consultants often advise developers on unit pricing, help determine when units are released, and make real-time changes to the project—like splitting a line into two smaller units, if that’s where they see the demand. "At the end of the day, you want to make sure you’re maximizing the developer’s profit," Ms. Fucci said.
Here is a look at other news from around the world compiled by Mansion Global:
Developers Speculate That China’s ‘Second Tier’ Cities May Face Boom
With property and land prices already maxed out in the nation’s biggest cities, Chinese developer CIFI holdings is now looking toward growth in provincial capitals, where home prices could as much as double in the next three to five years, according to the company’s chairman Lin Zhong. "Second-tier cities, which have just begun to feel the heat, will usher in the peak season of home construction and sales, and we’re bullish on that," Mr. Lin said in a briefing this week. As such, CIFI—which posted 28% annual growth in 2016—is now focusing on smaller cities, including Shi Jiazhuan in the Hebei province, Chengdu in Sichuan, and Nanchang in Jiangzhi. The company is also eyeing an expansion of its current efforts in the Guangdong province.(South China Morning Post)
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Trump Tower In Toronto Failed To Find A Buyer At Auction
After a court-run sale of a Trump-branded high-rise in Toronto failed to attract any interest, ownership of the building will now likely transfer to its main debt holder. The Trump International Hotel & Tower is associated with the president in name only, and has been beset with problems since opening in 2012. Less than half of its residential units have been sold by the developer, Talon International Inc., and some investors have filed lawsuits against Talon on the grounds that they were misled into their purchases. After the unsuccessful auction, ownership will likely stay with JFC Capital ULC, an investment firm that bought the building’s $301 million construction loan in September and specializes in distressed properties or "out-of-favor assets" with high valuations. (Reuters)
London’s Property Market Is Expected To Remain ‘Challenging’
After a rocky 2016, London property broker Foxtons has warned that London’s market will continue to be "challenging" in the coming year, with sales volumes potentially even falling below the levels seen last year.. Shares in the company have fallen more than 41% since Brexit, and thus far in 2017 have missed pre-tax profit estimates, clocking in at £18.8 million instead of the expected £19.5 million. "We don’t see any near-term recovery in the investment case," said analyst Clyde Lewis in a note to clients. All told, London home sales fell by a quarter last year compared with 2015. On a brighter note, however, Foxtons reports that its rental and mortgage broking businesses have continued to perform well. (Business Times)
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Generation X Americans Are Buying Homes In Larger Numbers
As millennials famously struggle to afford home purchases (or even rent), an increasing number of Gen Xers—those born after the mid-1960s but before 1980—are buying homes these days, after being battered by the recession and housing crash, according to research from the National Association of Realtors. While many Gen X Americans bought their first homes right before property values declined, NAR Chief Economist Lawrence Yun said in the latest report, "Fortunately, the much stronger job market and 41% cumulative rise in home prices since 2011 have helped a growing number build enough equity to finally sell and trade up to a larger home." Gen X buyers represented 28% of the market this year, their highest rate since 2014, and an uptick from last year’s 26%. Millennials, however, remained the largest group of recent buyers for the fourth year in a row, representing 34% of the market. (World Property Journal)
After 2016 Slowdown, Australian Sellers Are Returning To The Market
Australian homeowners who were taking a "wait-and-see" approach last year seem to be heading back to the market, with February numbers from SQM Research indicating an increase in residential listings in every major capital other than Darwin for the month. Sydney, Melbourne, and Canberra saw listing numbers increase by more than 16% compared to January, and could ease some pain in cities that have been seeing runaway prices in part due to lack of supply. Canberra saw the largest monthly increase, at 21.1%, but experts are particularly interested in the effect of more supply on chronically overpriced Sydney (which saw an 18% inventory increase) and Melbourne (where listings rose 16.4%). "Asking prices are still rising in the nation’s two biggest cities, which highlights just how strong these property markets are," said SQM Managing Director Louis Christopher. "This momentum is likely to continue this year with interest rates hovering at very low levels." (news.com.au)
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Thousands Of New Condos Will Hit The Slowing Miami Market in 2017
With resale prices already dropping thanks to an overload of inventory, nearly 3,500 new condos are expected to come on the market in Miami in 2017, according to data from the Miami Downtown Development Authority report authored by Integra Realty Resources. Growth is expected to slow after this year, with 2,846 new condos expected to be delivered in 2018, and 1,960 in 2019. All told, between 2014 and 2019, 12,257 new units will have been completed in the city, where high inventory has already led to a 7% year-over-year price decrease as of January. "I think we are going to see indexes down another 5% or 6% this year," said Anthony Graziano, who authored the report. "I keep telling everyone, don’t wait for ‘the crash.’ Take advantage of the interest rates now." While the flood of new units is certainly dramatic, it’s still nowhere near the 21,000 new condos that hit the city’s market between 2004 and 2009. (The Real Deal Miami)
Education Is The Top Motivation For Chinese Buyers In Canada
Chinese buyers in Canada may be more interested in properties for personal use than has widely been assumed, according to data released by Juwai.com in partnership with Sotheby’s International Realty Canada. Findings showed that the majority of Chinese users who viewed property listings in major cities cited educational purposes as a reason (i.e. the need for a place to live while completing school), followed by "own use" (i.e. use as a second or third family property) as the second most popular reason. The motivations varied by city, however—46% of users searching in Montreal cited education as a reason, followed by 44% in Vancouver, 41% in Toronto, and 9% in Calgary. Personal use was given as the reason by 62% of users in Calgary, however, compared to 37% in Toronto, 25% in Vancouver, and 34% in Montreal. Meanwhile, 25% of home seekers across the board cited investment as a reason for purchasing. (Vancouver Sun)