Do the emerging markets have a future?

Recent worldwide economics have, of course, affected the real estate development industry. But, the problem of lacking liquidity and wary funding entities has been further compounded by the instability of the final consumer who, due to their own personal circumstances, have been incapable of providing sufficient funds to the developer at time of completion.

And it is the property developers focused on the emerging markets who have suffered the most. Whilst the end consumer in an established market may be purchasing for personal use as a family home, the likelihood in an emerging market is that the property is intended for buy-to-let or second home purposes and therefore, is immediately considered “not a priority”.
 

Construction India – PWC

Yet, recent stats hint at a speedy recovery for the developer in emerging markets – perhaps even more so than those taking the “safer” option in the established market. The UNWTO states  “While all regions posted growth in international tourist arrivals, emerging economies remain the main drivers of this recovery. This multi-speed recovery—slower in advanced economies (up 5%) and faster in emerging ones (up 8%)—is a reflection of the broader global economic situation.” It is also thought that the growing requirements for commodities will act as a catalyst for the product-rich regions such as China and India.

Tourism, Spain

Whilst the emerging markets throughout North and Sub-Saharan Africa were relatively unaffected by the world’s economic crisis (with 2010 figures exceeding pre-crisis), the immediate future of the MENA region is now obviously in question.. “Short-haul destinations with a history of tourism demand show the most promise for the 2011-2012 period; Spain or Croatia for Europeans, the Caribbean and Mexican destinations  (Baja or Mexican Riviera) for US and Canada, South Brazil (Santa Catarina) and Uruguay for South Americans” says Alvaro Hidalgo of First Logic Consulting.

Hidalgo continues to state “a real estate investor interested in the emerging markets should seek a destination with the capacity to attract the originating markets. As in any other sector, the key factor in real estate development  is to identify a niche and develop a product that is fitted to that niche.”

Contact  FIRSTLOGIC Consulting for more detailed advice on real estate development in the emerging markets www.first-logic.com




Do brands really add property value? (I)

Brands are not created overnight. It is with forethought, planning and customer loyalty that a brand becomes popular. Obviously, all of this groundwork leads to a consumer bond that is not easy to attain and difficult to compete with. And that bond can be transferred to related products as the brand cannot risk its reputation by producing or endorsing any product that is sub-standard. 

In challenging times every industry faces a mounting pressure for fresh ideas, and one of the solutions to the 2008 crisis brought up by the property market was “property branding”.
As in any other field, the execution of the idea or guideline is as important of the idea itself. And it seems as if some believed that by simply bellowing “branded property” via any medium that would have them, would easily salvage a sorely damaged bank account. Of course, the truth is that it would be difficult to resurrect a failing resort that was constructed with peak costs and copy-cat planning by just adding a brand name above the door.
It should be remembered that it is not the logo of the brand that adds the value, but the strategy that the brand will bring (with equal emphasis on an accurate selection).

The undeniable fact is that branded hotels are more profitable in all economic conditions – most especially during the downturn as customers are more risk adverse and therefore need to be reassured by the familiarity of a known name. A recent example of a brand that has pushed its boundaries is the fashion-house Missoni. The initial Hotel Missoni in Edinburgh proved to be so superbly popular that the bold, dynamic designs have now also been applied in Kuwait with establishments also planned for Oman and Brazil. 

 

This is a clear example of how branding works. It is the brand that links the facts with the emotion. Knowing that a second-home development in an emerging district will have on-site facilities such as a swimming pool and a sauna is one thing. Knowing that it will be inspired, designed and run by a luxury name such as Versace is quite another. http://www.palazzoversace.com/

Branded properties provide added security as the management companies place importance on consistent management and worldwide marketing. This in turn results in higher returns over a longer period of time.

And, of course, we are all human. It would take a quite a stern investor who did not crack a small smile at the mention of his exclusive retreat on the delectable shores of some-such coast… oh, yes, and it just happens to be managed by the World’s Number One Coolest brand…

FIRSTLOGIC Consulting can identify and implement the management agreement of top brands to transform your property development. For more information www.first-logic.com

The role of the project manager

Until the late 80’s, the position of Project Manager did not exist in the construction industry as a distinct occupation.  Their tasks as we know them today were carried out by the Lead Consultant, normally the appointed Architect, as an inherent part of the design and construction process.  As Lead Consultant, the architect’s role during the construction phrase was far more managerial and consequently their knowledge of the Design Team was better informed.  By introducing a new member of the team, the Project Manager, it was possible to focus on the role of project control and make non-bias decisions whilst allowing the architect to concentrate ongoing design and detailing works.  

However as a direct result, statistics indicate that during the 1990’s, there was an increase in both construction delays and cost overruns which can be attributed to the introduction of this alien development style.  The project manager was seen as a glorified accountant or elevated clerk of works, and design team meetings went from the normal slight disarray into complete farce, when members felt the pressure of a new hierarchy and it necessary to showcase their abilities and would expect regular accolades for their achievement of what were typically contracted goals. 

In today’s marketplace, development projects are becoming more and more complex and the role of project management is widely appreciated.  However the role has commonly changed its title to ‘construction management’,  not only to differentiate between other industries who use similar names such as the software industry, but also because in general the project manager (as first referred)  is employed to oversee solely the construction process. Reaching far beyond the realms of construction management, the need for investment, legal and financial considerations, partnering, project branding, market research, feasibility designs, sales campaigns and PR has grown as the industry has grown, as does the competition and conversely the profit margin which has lead to the emergence of another new role:  The development consultant. 

In a difficult and ever changing marketplace, the need for pre-planning is paramount to a project’s success, proven by the frequency of developments failing by not following clear ‘development/business strategies’. An initial outlay to conduct the required feasibility studies and an associated business plan can reap rewards during the construction process as the project will be designed to suit the market enabling it to sell out off-plan,  provide self- investment and be completed on time and on budget.  Each day a construction project is halted on site, the project cost rises exponentially which is simply avoidable by pre-planning.
As my father always says, in order for the prudent man to ‘sit back to reap the rewards of a successful project,  he must ‘measure twice and cut once’ 

Let us measure for you, so that you can sit back and reap the rewards:  www.first-logic.com

Would you risk your money today?

Current owners/investors of distressed projects are desperately looking for an exit, some of them incapable to complete their projects, others seeing how their completed developments lie unoccupied and wondering how to fulfill financial obligations. From their side, banks, lenders and investors are desperate to prove to boards, shareholders and more importantly, supervision and rating agencies that they do not hold bad debt… and they dread the moment in which they will have to cover them with provisions putting additional stress in balance sheet and banking ratios.

It is no news that cash is king nowadays, and everyone with cash (BTW, anyone with cash?)  will do better by keeping it safe. But until when? Aggressive investors are obsessively looking for the forerunners of economic take-off; prudent investors will not risk a penny until the recovery is really up and running and will nonchalantly let the first wave pass and will only enter after.

But, what about remodeling/ regenerating projects?
Restructuring projects can be done with very little investment in remodeling. Basic configurations can be destined for alternative uses capable to generate revenue… And if revenue is predictable, banks and investors will make an effort to extend/modify the conditions. And most importantly, the project can again be reconfigured to its original destination once the economy has recovered

Regenerating projects is a win-win situation. Not much additional cash is needed and all involved will benefit.

First Logic can assist you in regenerating near to completion or recently completed developments: www.first-logic.com