Changing Alliances

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Sitting in the audience at a recent real estate forecast meeting, one of the speakers offered this insight: "The lack of prime terra firma on which to build and develop is one of the biggest problems confronting industry players." Not exactly news, is it? However, what followed the statement, which by now sounds obvious to most builders, cast a new light on the land issue.

April 01, 2005

Heather McCune
Heather McCune
630.288.8190
[email protected]

Sitting in the audience at a recent real estate forecast meeting, one of the speakers offered this insight:

"The lack of prime terra firma on which to build and develop is one of the biggest problems confronting industry players."

Not exactly news, is it? However, what followed the statement, which by now sounds obvious to most builders, cast a new light on the land issue.

"I believe we will see a continued strong trend in a combination of residential, retail and commercial mixed-use projects. Many municipalities are looking to redevelop themselves and their downtown districts to better meet the needs of their community.

"How should builders/developers position themselves to capitalize on this trend? Relationships are the key. Some builders and developers may need to team up with commercial builders and retailers or other specialists to obtain mixed-use projects. For large projects, the lone builder may not be able to secure the approvals needed unless they are a multi-faceted organization."

Listen to the buzz in industry, read deep into the data in the 2005 edition of the GIANT 400 and a business wake-up call can be heard: the alliances that spelled success in the past won't be the same ones that drive profitability in the future.

Consider the hurdles companies included in the 2004 class of home building GIANTS identify as roadblocks to growth and profit improvement in 2005 and beyond:

  1. Land issues — availability, acquisition and prices — garners 237 mentions, 26.4% of all respondents.
  2. Management issues — managing and directing growth, scheduling, new competition and internal company issues — capture second place with 162 mentions, or 18.1% of the total.
  3. Profitability — preserving the bottom line in light of rising costs on nearly every front (building materials, fees, labor, land, etc.) — rounds out the top three with 136 mentions or 15.2% of the total.
  • Turn the coin over now and look at what this same group identifies as the new opportunities to preserve growth and profitability in this year and in years to come:

    1. Market expansion — new locations, new product lines and a greater share of the new housing pie in existing markets — earns the top spot with 194 mentions or 35% of total respondents.
    2. Operational efficiencies — new technology applications to speed communications, manage and schedule projects and better quality control measures to reduce cost and increase customer satisfaction — comes in second with 116 mentions, 20.9% of the total.
    3. Niche market opportunities — expansion into market segments such as active adult, high rise, urban or suburban infill and land development — rounds out the top three with 98 mentions or 17.7%.
  • Blend the predictions made at the real estate conference with the builder-supplied data from PB's annual GIANTS research project and the picture of a changing industry becomes clearer. As home building continues in uncharted water — by that I mean year 12 of a boom that has had market-specific ebbs and flows but no real slow down — the call for change continues to echo. Each year, builders — and not just the GIANTS — discover the new face of opportunity. Opportunity has many faces. Look for your opportunity in these areas:

    • new design and material choices that increase consumer demand and builder profitability
    • construction innovations and improvements that result in better quality in less time
    • underserved niches and new alliances open to the nimble and not just the large
  • Study your business and your marketplace. Get the information required to balance the hurdle that comes from doing something new with the opportunity the same presents. And in tipping the scale in favor of new — in favor of grabbing the opportunity — I suggest remembering that there is nothing static in the world of business. Find your opportunity to innovate.

    630.288.8190, [email protected]

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