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Zilele Biz - Cluj-Napoca – 12.11.2008
How to design an efficient strategy for real
estate investments?
Doru Lupeanu
Senior consultant
Fix Up marketing
Contents
The need for strategy on the real estate market
Relevant questions for an optimal strategy
Zilele Biz - Cluj-Napoca – 12.11.2008
Rates of yields and risks
The development of Cluj real estate market
Target audience
Choosing the location
The mixes involved
Zilele Biz - Cluj-Napoca – 12.11.2008
The need for strategy on the real estate market
Riding the wave – the usual situation in the growing
markets
Most often used strategy is copying the “success stories”
Zilele Biz - Cluj-Napoca – 12.11.2008
The need for strategy
on the real estate market
Under the wave – usual situation in the downturn markets
To survive you have to know at least how to swim
Relevant questions for an optimal strategy
- Real estate market has in general a cyclical evolution
There are many opportunities for those who can forecast the upturns and
downturns of the market
Zilele Biz - Cluj-Napoca – 12.11.2008
-Any strategy involves a differentiation and a positioning for
each and every company
- The optimal strategy is not necessary the most expensive
one:
“ You don’t have to swim faster than the shark, but only faster than those
around you”
-The foundation of every strategy is the information
-Relevant information can be obtained by answering the questions:
Who am I? What do I build? To whom? Where? How?
Who am I?
What are my skills?
Zilele Biz - Cluj-Napoca – 12.11.2008
What experience I have in
this field?
What are my objectives?
What kind of financing
resources I have?
Developer vs. Investor
Zilele Biz - Cluj-Napoca – 12.11.2008
What do I do?
What sector do I target?
What kind of risks are involved?
What yields can I expect?
What is the dynamic of my market?
What do I do?
What is my segment:
Segment
Residential
Zilele Biz - Cluj-Napoca – 12.11.2008
Offices
Commercial
Industrial
Options
DEVELOPER
Returns
Options
INVESTOR
Returns
Build
to sale
100%
Build
to sale
80%
Build
to lease
10%
Build
to lease
7-8%
Build
to sale
100%
Build
to lease
7-8%
Build
to lease
6.5-7%
Build
to lease
12%
Build
to lease
20%
Build
to sale
100%
Build
to lease
22%
Build
to sale
100%
Build
to lease
20%
- Risks involved
Zilele Biz - Cluj-Napoca – 12.11.2008
Cluj-Napoca
- Second city in Romania as economic potential after
Bucharest
-Most new start-ups after the capital
81.766 new companies registered between 1990-2008
- Population
between ages 15 to 35 represents
approximately 40% of the city population
- The most important university center din Transylvania
approximately 100.000 students
The development of Cluj real estate market
Residential:
-increase in the number of constructions starting 2003
Zilele Biz - Cluj-Napoca – 12.11.2008
-in 2005 were launched approx. 1000 new units
(400% increase from 2001)
-in 2006 were issued
1456 building
permits for new
housing units
-in 2007 were issued
3359 building
permits for new
housing units
-in 2008 it is said
that ~25000 housing
units “exist” on the
market in a project
faze or in different
fazes of construction
The development of Cluj real estate market
Offices:
Zilele Biz - Cluj-Napoca – 12.11.2008
- Starting 2006 we can say there is
a real offices market in Cluj
- 2 class A offices buildings in Cluj:
Power Business Center and
Maestro Business Center
(according to BOMA standards)
- 110000 sq meters office space
existing in 2008
The development of Cluj real estate market
Commercial:
-Clujul is the most developed city in
Romania regarding commercial spaces
- 400 sq meters of commercial space to
1000 inhabitants
Zilele Biz - Cluj-Napoca – 12.11.2008
- 2 malls existing
-(Polus Shopping Center and Iulius Mall)
- 2 malls in construction stages
(Atrium Center and Akademia)
- Other projects with notable surfaces
(Central, Sigma and Hotel Continental)
The development of Cluj real estate market
Industrial:
- Approx. 350000 sq meters industrial spaces of which only 40% new or modernized
spaces
Zilele Biz - Cluj-Napoca – 12.11.2008
-Tetarom: “success
stories ”, a model
copied by other
cities
- Nokia
-We expect positive
evolution of the
logistic sub
segment
To whom?
Target audience
Private persons:
- Higher risks corroborated
with higher yields and a high
level of demand
Zilele Biz - Cluj-Napoca – 12.11.2008
Juridical persons:
-Increased stability but a
more specialized
audience
The structure of
demand :
- depends on a series of
factors: offer, substitute
demand, buying power
How many square meters can a person with medium income can afford in Cluj
18
16
14
12
10
square meters
relaxarea
creditarii
8
Zilele Biz - Cluj-Napoca – 12.11.2008
6
mentinerea
nivelului de
creditare
4
2
0
2002
2003
2004
2005
2006
year
2007
2008
2009
2010
2002
2003
2004
2005
2006
2007
2008
2009
2010
relaxarea creditarii
6.22
7.44
7.14
11.32
12.72
13.86
9.1
15.09
16.47
mentinerea nivelului de creditare
6.22
7.44
7.14
11.32
12.72
13.86
9.1
10.56
11.52
Where?
Choosing the location
Depends on various
factors out of which :
-the migration of
population
Zilele Biz - Cluj-Napoca – 12.11.2008
towards and inside the city
-infrastructure; PUG
Transport and utilities
-the potential of the area
Dorobantilor, Calea Turzii…
-commercial potential
Napoca, Eroilor, Ferdinand…
How do I do it?
Financial mix:
-financing sources, price policies
construction budgets
Product mix:
-surfaces, finishing, facilities
Zilele Biz - Cluj-Napoca – 12.11.2008
Distribution mix:
-own sales force vs. real estate
agency
Promotional mix:
-promotional channels, budgets
allocated to promotions
Contents
The need for strategy on the real estate market
Relevant questions for an optimal strategy
Zilele Biz - Cluj-Napoca – 12.11.2008
Rates of yields and risks
The development of Cluj real estate market
Target audience
Choosing the location
The mixes involved
Instead of conclusions
Tactics for the current situation :
-There is no generally applicable recipe
The information is important and it has to be integrated in an optimal
strategy tailored for everyone’s needs
Zilele Biz - Cluj-Napoca – 12.11.2008
-From forced awaiting to a planned action
The re-evaluation of the costs involved in maintaining the investment
and the desired exit point from the market
-Differentiation through price, quality or adjacent
services
Accent on pricing seems a simple solution but not necessary efficient
-Analyzing all options, including those less attractive
Renegotiation of the contracts, bankruptcy, sale to other investors
within the margin of recuperating the initial investment
Zilele Biz - Cluj-Napoca – 12.11.2008
Thank you!
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is posible only with the written permission from Fix Up Marketing.