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THREE LESSONS I LEARNED FROM MAKING FEW MISTAKES AS WELL AS LANDING $12B+ IN PROJECT VALUE, ACHIEVING 85% REDUCTION IN ACQUISITION COST & REALIZING 250%+ ROI

Ahmad Khalaf - Latitude Developments - Ask Ahmad Khalaf - Strategic Real Estate Development Joint Venture Advisor

BELOW ARE FEW THINGS I LEARNED ABOUT SUCCESS IN REAL ESTATE DEVELOPMENT, SOMETIMES THE HARDWAY!

 

Lesson 1:

I should NOT make real estate development decisions based on creative decision-making processes. Whatever that process may be!

Why?

Because if I start getting creative in taking a real estate development decision, I will be MISSING the point.

“IT IS NOT ABOUT WHAT THE DEVELOPER THINKS. RATHER, IT IS ABOUT WHAT THE MARKET WANTS.” – Ahmad Khalaf

To generate extraordinary returns in real estate development, real estate developers should first and foremost identify untapped market gaps and different demand generators. This way they will supply what the market requires most. Only then, the market will pay a premium.

 

Lesson 2:

I should not compete with other developers in the same market niche.

Why?

Because if I copy the competition, it will be nearly impossible to make MORE money.

“BIG MONEY IS IN CREATING YOUR OWN SPACES, NOT IN COMPETING IN OVERCROWDED MARKETS” – Ahmad Khalaf

Differentiation is key. Once the developer identifies a real value generator, he should respond with a highly differentiated development. Value generators are changes in the market that create new demand. These changes could be economic, legal, technical, social or merely a reaction to other development activity in the market.

At this stage the developer should answer the following questions:

  • What is the market gap?
  • Why does it exist?
  • What value generators support this demand?
  • How are other developers currently responding?
  • What is the level of satisfaction from the current tenant?
  • What are the tenents expectations, aspirations, wants, needs, likes and dislikes from current options?
  • How to design a development that answers directly to the identified gap and the tenant’s profile?
  • How to communicate this value proposition to the market?

By following the above thought process, the successful developer will bypass the competition and enjoy his own uncontested market space. Therefore, he will enjoy higher yields, faster absorption rates, and lower vacancies.

 

Lesson 3:

To generate SUPERIOR GAINS, I should identify substantial, valid and long-term demand generators.

Why?

Because if I develop in-demand projects that answer to a specific target segment profile, I will reduce my market risk.

“IF THE PROJECT IS NOT IN DEMAND, THEN IT IS NOT WORTH THE TROUBLE; BUT WHEN IT IS IN DEMAND THEN ALL THAT IT NEED IS TO BE REVEALED” – Ahmad Khalaf

It is not enough to identify a market gap. This gap should be substantial in size and long-term in nature. Real estate development is a three to five-year process. In some cases, it is longer than that. It is essential to make sure that by the time the project is delivered to the market the same conditions still apply. Thus, marker gaps and value generators should yet exist in five years.

The one thing successful developers should always do is to avoid playing catch-up with the market. 

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