Real estate sector’s road to recovery
We are on the brink of a major global recession.With the COVID-19 virus still in our midst after more than six months, and without a tested cure in sight, many of us are fearing for the future. Many businesses have been affected by the quarantines, especially in the real estate sector. With our health still at risk and our businesses in peril, will we ever recover and bounce back from our losses?
Fortunately, history would tell us that the answer is a clear yes. Though we have encountered a lot of challenges this year, this isn’t the first time the world has been in an economic slump. In the past, countries have been affected by stock market crashes, an influenza pandemic and even a mortgage crisis. Despite these challenges, people have managed to pick themselves up and recover. The real estate sector, in particular, has remained a durable industry, surviving through financial challenges every time.
Let’s take a look at the past and see how people managed to recover from a global recession. If they were able to do it then, chances are, we will also bounce back from the COVID-19 pandemic with the same adaptive measures and attitude changes.
When the 2008 recession hit the United States, many lost their homes. The primary reason for the economic downturn was caused by poorly regulated bank mortgages which led to a lot of foreclosures. Amid this challenge, one Portland-based real estate company saw a way out of the mess.
The Guardian Real Estate Services is a 40-year-old property management firm that had 13,000 residential units across seven US states. When its business was hit hard by the recession, the company turned its focus on affordable housing projects.
Using its experience in property management, the Guardian invested in existing affordable housing complexes and redesigned them. The buildings were provided with new community spaces and green features that would make them enticing and allow them to stand out from the competition. While the company first encountered challenges in selling homes to the cash-strapped market, it managed to thrive with the government’s help. Due to the mortgage crisis, the US government started reallocating resources to push the affordable housing sector, and this greatly propelled the Guardian’s new business venture amid the recession.
By the end of the recession, the Guardian had developed and leased out 6,000 apartment units. Today, the company operates over 130 communities in four states. It has since grown into a multi-service real estate firm, offering management, development and investment services. It has shown that while a recession can hurt businesses, it can also be an opportunity to discover a new viable market.
Another Oregon-based real estate firm survived the 2008 US recession by doing the opposite of the Guardian’s strategy. Gerding Edlen Development, a company that used to outsource property management in its real estate projects, started to provide the service in-house.
While the move helped diversify its business opportunities, the company’s main reason for venturing into project management was so that it can get first-hand information on what its clients want. Damin Tarlow, the company’s current director of asset management said: “We wanted to differentiate ourselves…[by] getting feedback from our customers and putting it into action.”
The input that the company received from its current tenants allowed it to develop better design approaches when it came to new projects. One of the innovations it introduced during the recession was an online concierge service, wherein tenants can forward mail, set-up utilities and apply for cable television. Through this avenue, it can also solicit personalized services such as home massages and function room reservations. The website also became the company’s way of offering exclusive deals to its tenants when it came to purchasing from nearby shops or groceries.
The company implemented these new strategies in three apartment buildings, which allowed it to succeed even through a recession. Gerding Edlen continues to offer project management services up to now. The venture allows it to ensure each project’s success, as it became involved from the pre-construction to the post-construction phase of each building.
Updating strategies, diversifying portfolios
Many real estate companies have turned their focus on developing multi-family units especially during a recession. Even if the economy is down, housing remains a fundamental need everywhere. Greybrook Realty Partners of Toronto, Canada, in particular, states that imposing one-year lease terms in multi-family apartments allows rents to be based more closely on current inflation rates. The team invests in a range of building types, from commercial to residential. The diversity of its business ventures ensures that its investors would not lose assets, even during a horrible recession.
Improving the game
The examples above show that the best real estate companies have managed to pull through the worst of times by improving their game. They studied the market, made design improvements and diversified their portfolio to ensure their survival.
Here in the Philippines, one such company that demonstrates these approaches is Ortigas Land. As a company with more than 80 years of real estate experience, the group has weathered through many storms and have emerged wiser each time. With the current COVID-19 pandemic, the company offers various multi-family units that feature contactless technology and green design, making it responsive to the needs of the new normal.
Its mixed-use development in the making, The Galleon, also allows investors to diversify their assets with the project’s retail, residential and office spaces for sale. Strategies like these would allow Ortigas Land’s clients to withstand and recover from the worst economic times, time and time again.
So even with the ongoing crisis, don’t lose hope. Partner with a group who can adapt to necessary changes, allow you to ride it out until the good times get here. Each loss offers an opportunity to do better and this works out not only in real estate but also in life.
Sources: https://emmechicago.com; www.gres.com; https://djcoregon.com; www.ortigas.com.ph
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