Too many times developers have implemented their real estate program without laying the foundation through proper market research. Because a neighboring property has met with some success may not be enough justification to duplicate it in the same market. Nor does the success of a particular development in a different region or country translate into success elsewhere. There are times when the new development survives but with a few adjustments in the initial program it might have been a stellar investment; and there are the times when a development doesn’t survive its first year.
Market research can do so much more than determine that there is a demand for a particular product in a particular market. The research can provide a guideline as to the size of the new building and the features that can drive customers to the core business or provide the basis for increasing the rents in a commercial property. In the case of a hotel, identification of the profile mix of guests in the marketplace will help determine the brand, the food & beverage strategies, desired amenities such as spas, meeting rooms, retail, recreation and total number and type of guest rooms.
In addition to defining the physical improvements, a determination of “warranted investment” will be become apparent. In order to meet your specific return on investment goals, containing the cost of the improvements through an accurate determination of likely net operating profit and development costs are essential. Once you have determined the right product, with the right amenities, at the right time, and with the right investment you can move on to the next three keys to successful development:
- the right team
- the right legal agreements
- the right financial structure