form the primary environment where opportunities await firms that can
discover and exploit them. Marketers tend to be highly aware of
dependence on buyers' or renters’ behavior for success. Many
executives show too much concern for the competitive environment. They
should have learned from examples of real estate firms that were
so intent on competitors' moves that they ignored market needs and
fell prey to new entrants who were attuned to markets.
is a real
estate market ?
market comprises individuals and organizations with the purchasing
and renting power, desire, and authority to buy or rent any specified
definition has two components:
- The individuals
or organizations that compose the market
- The extent of
their purchasing power.
are going to deal with markets in the first sense regarding their
identification and interpretation; and in the second sense regarding
stage begins in seeking to find or identify the relevant markets,
those that will or should be renters for what the real estate firm
will offer. When market categories have been chosen, the
interpretive tasks begin: finding the characteristics, the wants, and
the dissatisfactions of renters; determining the firm's position
among them; and interpreting the opportunities as bases for strategic
the firm (or a PMU (product market unit) in it) is satisfied to
continue in markets now served, their identification may be obvious
but such complacency may be an error. Markets may be changing for
present accommodation or expansion may be vital even to maintain
rental turnover. Ambitious firms seek to tap other potentials. The
greater the ambition or pressures, the tougher the search for the
classifying markets are essential. The broadest are the four general
- Consumer markets
(individuals renting for themselves or their households)
markets (including all private firms that produce goods or services)
Institutional markets (including all government and nonprofit
enterprises and groups who buy for many consumers).
markets (wholesalers and retailers)
firms (or PMUs) market to all these categories (at least indirectly)
and possibly all would merit individual strategies. Even when they
are markets already served, the strategists should check their
definitions, for doing so may reveal markets that are not homogeneous
(as supposed) and that contain significant special groups.
to numbers of people or other populations (for instance, number of
ACT government departments). They can show the sizes and locations
of markets. They may indicate individual or group characteristics or
states of existence, such as age, sex, race, occupation, income,
family size, marital status, and type of residence.
to these are geographic
of which there are three broad types:
- political (such
as nation or city)
- urban or rural.
of the foregoing have been given standard classifications and are
used in modem government censuses that provide basic parameters for
marketing. These variables describe population size, composition,
distribution, and buying power (but there may be serious drawbacks in
long intervals between collection and issuance of government data).
are also standard criteria for classifying industrial markets. It is
a uniform numerical system that is the universal key in this nation
for data on establishments engaged in any economic activity.
classifying markets are equally essential in strategic planning.
Statistical data are a comfort to the planner, with their seeming
precision and their readiness for analysis, but unfortunately they
reveal little qualitatively. In spite of the statistics on, let us
for example, ACT government departments or on “high tech”
companies in the ACT, they reveal little about the needs, renting
practices, or other qualities of those groups. For example, some
departments have a much more rigorous renting criteria (largely based
on OH&S) than other departments. Some departments quite readily
decentralize whereas others insist on siting in the CBD.
major decisions remain, following determination of which
classification types are suitable. One is obtaining data that will
identify which categories (within the types) offer sufficient rental
potential to merit consideration. The other is identifying the
logical markets (on the basis of that evidence) to study and
market categories exist, but a relatively small number offer enough
potential to spend time on interpreting them.
market categories is required in order to have an objective basis for
choosing markets. Qualitative category systems suffer here, because
no statistics are available on their sizes and locations, and so the
user has three options:
categories in those systems on sheer judgment
time-consuming special studies made to identify and quantify them
- Choose some
existing statistics that may serve as proxies in order to identify
obstacles discourage the use of qualitative classifications for
choosing markets. The subject of obtaining quantitative data belongs
in the field of marketing research, not strategy, so I just comment
on it. The easiest to obtain are demographic statistics from the
ABS. The best source is “Supermap”.
estate forms can classify their rental data in the standard census
categories to be compatible with government demographic data and to
use such data as market indicators with which to compare performance
by geographic areas. However, these comparisons are valid only if
there is correlation between the firm's rental turnover and the
chosen demographics (such as status of the government department),
which would need to be demonstrated.
analysis on other renter characteristics is possible only if the real
estate firm can record these characteristics about each renter. Since
most producers of office space for example, rent out indirectly
(that is, through an agent), they can obtain data on consumer renting
only by purchasing them from research services (eg BOMA). Industrial
marketers have advantages in pinpointing their renters’
the real estate firm considers rental accommodation lines that it
does not presently offer, there are greater tasks in acquiring valid
market data. When considering new forms of existing rental space,
the more innovative renters must be identified. It is most difficult
to identify markets for absolutely new accommodation or uses, and
special marketing research may be needed. Lead time for marketing
studies would require an early start on strategic planning.
the data on market categories, market
proceed. The strategist probably would consider numerous segments
before choosing those whose data indicate that they are most relevant
to the product line being planned. Rather fine breakdowns may be
needed to reveal market segments where the firm has opportunities. It
may prove to be necessary to conduct qualitative studies of
renters to determine which categories would be logical market
the logical markets defined, the strategist must study them to detect
the opportunities and threats they offer (SWOT analysis). Since
strategic planning is going to be focused on them, this
interpretation is vital to the situation analysis:
First consider interpretation for accommodation and markets in which
the firm is already marketing. As an example, let us say that
industry rents are available, by region and departmental type, and
that currently the firm holds a 20 to 25% market share in all regions
except the ACT, where it is only 13%. Does that mean that the real
estate firm has an opportunity in the ACT, with a strategy that would
raise its market share to the national norm?
answering that question, the firm needs to see trends, not just a
current snapshot (dynamic data). Our data over the past four years
show that the firm held a 21% share in Sydney that fell slowly for
two years and then dropped 5 percentage points this past year. Whatever
caused that drop may be a threat, some menace that could
start eroding other markets as well. For example, a trend towards
strata purchases instead of renting. This becomes a complicated
firm should also look at the importance and profitability of the
Sydney market, for it may be a lesser concern than other markets. If
it decides to look further at its situation, more data are needed for
diagnosis. What is going on, in that region for that business, that
has caused the erosion? Perhaps answers may be learned from sources
that are informed about the Sydney region, including the firms’
rent representatives. Beyond that, the problem may merit the time
and cost of qualitative research in that region.
strategist is going to need to have such conditions and their causes
revealed for a fruitful situation analysis. There cannot be
intelligent determination of objectives or stratagems unless we know
what market opportunities or threats are to be attacked. You will
notice that our example was an elementary one, and that market
interpretation often faces more elusive conditions and forces. If a
strategist has ample data with adequate breakdowns, the causes and
opportunities in a situation may be inferred from those facts.
great strategic strokes usually require the real estate firm to
become innovative in the accommodation it offers and in its
marketing. The risks are high, and careful situation analyses are
needed particularly of markets. Probing of those markets entails
custom studies of users or renters, followed by painstaking
situation analyses should include data on market potential, current
and forecasted. I will discuss that aspect of interpretation next.
Market analysis and forecasting
are three different determinations involved in the analysis and
projections of markets:
- market potential
- rental potential
- rental forecast.
distinguish them, I will give a definition and an example of each.
defined as the capacity of a market to assimilate rental
accommodation via an agent. This usually refers to the amount of
space that the market can rent in either the current period or the
next period that is under planning.
may be estimated, based mainly on economic variables and consumer
attitudes, that real estate firms do not have a market potential of
renting 1 million square metres of office space in the ACT in the
defined as the maximum share of market potential that a real estate
firm within the ACT can expect to obtain for specific commercial
rental space. This also is typically for the current period or that
on its current share of the market, marketing efforts, production
capacity, and other considerations, Matlock Real Estate may expect to
obtain a 25 % market share in 1997. In other words, its rental
potential would be 1.95 million square metres.