Product Innovation, Availability Spurs Master Planned Community Sales in U.S.

Product Innovation, Availability Spurs Master Planned Community Sales in U.S.

Residential News » North America Residential News Edition | By Scott Kauffman | April 3, 2012 8:56 AM ET

(Orlando, FL) -- Sales at America's master-planned communities are the strongest in three years, according to the latest study from Robert Charles & Lesser Co. (RCLCO), a real estate advisory company. To be sure, the country's improving economy and job growth are leading factors spurring this bump in sales, but there are numerous other strategies being deployed by some of the country's leading developers.

One successful strategy, based on extensive interviews by RCLCO's Community and Resort Advisory Group, is product innovation. According to RCLCO, developers and builders in top communities have recognized that to compete with the overhang of "recently new homes" and distressed resales, their product not only needs to be competitively priced, it really needs to be a new product. That means the product is not just new relative to year built, but truly better, with floor plans that better address how people want to live, including better technology, greater energy efficiency, and new spaces in the plans.

Product availability, or the ability to provide an inventory of speculative homes across multiple price points and orientations, is also critical to the success of top-selling MPCs today.  Most buyers are not willing and/or able to wait for a home to be built, but even the best MPCs are still struggling to carry speculative inventory as many builders remain cautious.

In terms of marketing, most MPCs report an increase in use of social media as well as finding other innovative, cost-effective ways to stay top-of-mind with consumers. All of the most successful communities have taken a careful look at where they're spending marketing dollars and where they are having the greatest success and have made adjustments, in many cases accomplishing more with less.  

On the flip side, large-scale residential developers continued to pour more capital into "strategic investments" such as amenities, marketing, programming, and maintenance throughout the downturn, which gave buyers confidence and allowed them to capture the buyers that were looking in 2011 and 2012.

In the 18 years since Robert Charles & Lesser & Co. started their MPC survey work, one thing that hasn't changed as a key ingredient to successful MPCs is "lifestyle." As with good quality schools, this major differentiator between the best-selling communities and their competition, RCLCO reports, hasn't changed. Buyers choose MPCs because they deliver the right amenities, services, schools, and retail that provide the desired great lifestyle.

Diversifying their "business lines" is another way many MPCs have stayed financially strong. For instance, many MPCs have creatively sought other ways to generate income, including expansions into multifamily, business parks, assisted living facilities, and other types of vertical development in order to help them weather the downturn.

Another thing MPCs have learned is value propositions are still driving a lot of sales. So many of the MPCs are offering buyer incentives such as free power for a year and $1,000 gift cards at Bridgeland in Houston, and a year membership at the new Sports and Health Club at Brambleton in Northern Virginia.

Lastly, creative financing is a must. Successful MPCs like The Villages in Central Florida have been helping both builders and homebuyers get credit throughout the downturn. With builders this includes subordinating the cost of the lot until the house is sold, and with consumers it includes items such as credit coaching.

Among those MPCs that still cater to first-time or entry-level buyers, credit coaching, coordinated by the builders, has been key to lowering the "bust-out" rate (rejection rate) of first-time buyers seeking credit. The bust-out rate has decreased when credit coaches have been engaged by builders to work with prospective buyers to raise credit scores to acceptable levels. Lending standards are still difficult for would-be homebuyers, and the builders in top-selling communities are helping them get the counsel needed to raise scores.

While it's clear that many of the keys to success in MPCs are similar to what worked in the past (good schools, desirable lifestyle, multiple product lines), according to RCLCO, these are some of the proactive strategies that developers and builders are successfully employing in today's market conditions.


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