"The marketing message needs to be structured for maximum impact to the particular target market."
To market smaller developments you must fully understand your target market
Over the past two decades there has been explosive growth in the supply of new apartments. Every capital city and many major regional centres have now experienced the spread and popularity of apartments, in particular projects in or close to the CBD.
Major apartment developments are now a central element of urban growth and planning. The Gold Coast is now home to one of the world’s tallest residential buildings. Q1 is an impressive 322.5 metres tall, but other cities, including Melbourne, Chicago and Dubai, also have impressive residential towers.
There are an estimated 100-plus very tall residential buildings across the globe, thus clearly establishing the trend of mega residential towers on our skylines. And while these are impressive projects with extensive marketing campaigns, there is another side of the market – the smaller, more boutique style of development that increasingly peppers our suburbs. In particular these are popular in our popular and more expensive inner suburbs, where there are many projects on the go.
It’s a trend that is evident in particular across many older established suburbs, but this is not a new fashion, as areas like Sydney’s inner east and Melbourne’s St Kilda have long been home to many apartment buildings. Located on what would have been seen as the fringes of the CBD, Sydney’s 13-level Astor (built in 1927, architect Donald Esplin) is a great example of how smaller projects stand the test of time.
These inner-city apartments used to offer a very wide spectrum of prices, from the modest and affordable to the opulent and very expensive, but the reality now days is that to be financially viable, smaller buildings, in particular new developments as opposed to refurbishment projects, need to attract high prices.
However these projects can still cover a generally wide cross section of developments that can range between six and 20-plus apartments, and they are almost always in very desirable and well-established locations.
There tends to be very expensive apartments in these smaller buildings, in highly sought-after locations with AAA finishes, close to the best of established amenities and accordingly with multimillion-dollar price tags – but this does not always have to be the case.
Where do the residents come from for these apartments? Experience shows that many of these projects have become attractive to older buyers trading down from large family homes, either in the immediate area or from other wealthy suburbs.
However, when it comes to marketing these and other smaller projects there is never a simple answer, as the buyers are a diverse group. Smaller developments still attract a wide cross section of people, and while there may be fewer first-time buyers with young families, the market will still represent a mixed community.
Experience also shows that while the market has depth and diversity, the buyers can be harder to find and engage. This partly reflects the limited nature of supply and frequently there is less urgency.
Because of the size of each project the number of apartments for sale will be limited in any one location, but there may be several small projects spread across the area and there is always the private treaty market to consider.
Unlike a large project that can accommodate varied needs and product with much more flexibility appealing to many different buyers, smaller buildings tend to have a more specific target demographic and so the marketing plan, budget and mix of activity is very different.
Commercially it is also necessary to accept that a larger development with wider appeal could have more avenues for success, as the market is bigger. However the development costs will be much higher. This risk is harder to package and requires years of experience by the project team to get it right.
However, in setting the marketing outcomes for any development it is always necessary to take into account the impact of how the mix of apartments and the size of the project will be received by the market.
In some locations, like those mentioned above, generally much higher prices will be required to justify the risk. The amount of capital involved is higher, including the reality that land costs per apartment will be more, alongside demolition and possibly extended holding charges.
In such a case the mix of apartments, their size and standard of finish will be central options to consider if the desired net return is to be achieved. Here again the marketing will be critical so that time on the market is limited, and this would include targeting early off-the-plan sales successfully.
Given the impact of the development costs involved and the resulting asking prices for the project the target demographic that have to be reached should be locked in well before any marketing is undertaken.
The apartments that are created will have to appeal to a very select market in order to be commercially viable. This may appear obvious, but highly focused and accountable marketing will be required to ensure the target is engaged. Be they owner-occupiers or investors, the high prices involved only further emphasise this reality.
Mistakes will be harder to undo. If the target is not engaged, prices will suffer and it will take more time to sell all apartments. Also if the target is engaged and sells fast then prices can be adjusted.
Smaller developments in prime locations simply have to deliver appropriate, quality apartments for sale to justify the development risk with products to precisely match market expectations.
The marketing message needs to be structured for maximum impact to the particular target market. It will also be important in a smaller development to maintain consistent brand values, as a mixed message will only create confusion in the eyes of a very observant buyer.
Peter Chittenden is managing director for residential of Colliers International.