Survival Strategies in Today’s Real Estate Market

In a real estate world that sometimes seems a bit like Oz, developers are utilizing creative strategies to survive the current market.  The goal is to create some cash flow and to reduce inventory, with the added long range benefit of stabilizing prices in a sector still in free-fall.

One of the biggest trends in owning real estate today is in not owning it.  From Xer’s to Ruppies (see our earlier blog item on retired urban professionals) the move is to the new building lining great downtown locations in San Francisco, Chicago, Miami and even pricey DC and NYC.  Some developers are even offering rent to own options, allowing renters to build equity toward a future purchase.  “Renters get to test drive buildings and save up for a down payment. They don’t have to worry about units going into foreclosure and they get a high-end, luxury building with low move-in cost. It’s a no-brainer,” said Jonathan Mann to the Miami Herald, a real estate agent with Grove Town Properties, who specializes in leasing developer-owned condos.

Another hot strategy is auctioning property at prices up to 60% the peak boom prices. The low and mid range markets are seeing blocks of lots, houses and condos often without reserve pricing.  And the luxury market is seeing auction action as well.   A recent auction in Los Angeles generated almost $15 million in under 90 minutes, proving that value conscious buyers are very much in the market if they think the numbers are right.

But perhaps the most bizarre strategy of the moment, one frantic property developer in Spain resorted to kidnapping a bank manager’s family with a demand for his Rolls Royce and a 50,000 euro loan to have his family released. We are quite sure that funding by kidnapping will hardly be a trend that will last.

The real message of these stories is that creative thinking is more necessary than ever in tough times and developers will continue to seek new ways to survive until the market stabilizes. Building teams of experienced and innovative counselors has never been more important.

By: Sandy Carrier
VP Real Estate Division