Category: Real Estate

How Real Estate Developers Overcome Market Challenges

September 1, 2023 Real Estate

Jeff Bartel

Chairman and Managing Director

Real estate developers are part of an industry well known for its risk-tolerant nature and market challenges. This complex industry includes the creation, design, financing, construction, and management of various property types, from residential and commercial buildings to industrial and infrastructure projects. Successful real estate development is proven by innovation, adaptability, and a focus on client success that relieves challenges and drives growth and profitability both locally and globally.

How Real Estate Developers Adapt to Shifting Economic Landscapes

The ability to adapt is a crucial skill that allows real estate development companies to maintain industry success. When economic conditions are fluctuating, like economic downturns or strong growth periods, developers quickly adjust strategies and change accordingly.

Portfolio Diversification

A key strategy in real estate is diversification. This lowers risk, so developers diversify their portfolios by investing in different property types, locations, and market segments. Diversification includes:

  • Affordable housing
  • Modified existing structures
  • Eco-friendly developments
  • Luxury developments

Market Research and Trends

Besides diversification, studying demographic trends, economic indicators, and consumer preferences is useful. Informed by market research, real estate development funds emerging opportunities, anticipates potential risks, and makes strategic location, property type, and pricing decisions. This lowers investment risk in both growing and declining markets and promotes project success and profitability.

Financial Strategies Used by Real Estate Developers for Sustainable Growth

Commercial real estate development uses various financial strategies to ensure sustainable growth. The most common is smart asset management, where developers optimize property performance, streamline operating costs, and build value in their portfolios.

Financing Models

Developers look to collaborative financing options like joint ventures and crowdfunding as tools to secure funds. Both options allow developers to diversify their funding strategies, build relationships, and ultimately bring real estate projects to completion.

  • Joint Ventures: Partnerships formed between developers and investors that lead to the pooling of resources, expertise, and sharing of risks and rewards. 
  • Crowdfunding: Access to a wide network of potential individual investors outside usual financial channels that contribute large and small amounts of project funding.

Risk Management

A successful project depends on many factors, like economic changes, regulations, construction delays, and environmental issues. A big part of the real estate development process is finding possible risks, weighing their expected impact, and setting up mitigation plans. Protocols include:

  • Diversifying portfolios to spread risk.
  • Conducting thorough due diligence before acquisitions.
  • Contingency plans to address unexpected setbacks. 

Developing a consistent risk management approach lets developers safeguard investments and enhance their ability to make informed decisions, protect their reputation, and ensure the successful execution of projects.

How Real Estate Developers Navigate Regulatory Complexities

When a real estate development consultant is in a complex regulatory situation, the focus is on legal expertise, community engagement, strategic planning, and environmental compliance. 

Government Relations and Permitting

Developers collaborate closely with legal professionals knowledgeable in local zoning codes, building regulations, and environmental compliance to ensure projects meet legal requirements. Closely engaging with government entities in public meetings and partnerships helps address local concerns and ease regulatory approvals. By negotiating with government departments, building relationships with local officials, and learning about local policy, the chance of a successful development increases. 

Environmental Sustainability Compliance

Adapting to evolving regulations and sustainability demands, developers are beginning to pay more attention to incorporating eco-friendly features and aligning with environmental standards. 

Pro-environment developments use energy-efficient technologies, green building materials, and sustainable design principles. This reduces carbon footprints, offers long-term energy savings, and lowers operating expenses. These developments also contribute to healthier indoor areas and improved conditions for occupants. 

Harnessing Technological Advancements for Development

The use of technological advancements has revolutionized building, enhancing design, efficiency, accuracy, and usability throughout a project.

Developers now access cutting-edge tools and technology to improve the process and provide quality projects. These include:

  • Building information modeling creates detailed 3D representations of projects that allow stakeholders easier visualization of the development. 
  • Advanced data analytics help with informed decision-making by looking at market trends, detailing project costs, and watching emerging opportunities. 
  • Virtual and augmented reality technologies let potential investors, buyers, or tenants experience locations virtually, providing better marketing potential and increasing engagement. 

The use of smart building technology is also becoming a popular choice and uses advanced internet-connected technologies to optimize efficiency, comfort, and sustainability. Interconnected systems and sensors view and analyze data to control the way users interact with a built space. This offers many economic, environmental, and lifestyle advantages, including:

  • Reduced energy consumption and operating costs. 
  • Enhanced safety and security features. 
  • Personalized comfort settings and improved indoor air quality. 
  • Predictive maintenance that reduces downtime and expenses.

How Real Estate Developers Build Strong Partnerships

It’s possible to build strategic partnerships with other real estate stakeholders by improving the development process, offering valuable insight, and providing access to cost-cutting and innovative resources.

Stakeholder Collaboration

Building strong partnerships is crucial to driving successful development projects. Partnerships include professionals like architects, contractors, engineers, financial institutions, and community members. With clear lines of communication and shared objectives, partnerships provide access to special expertise that makes projects better, is more cost-effective, and meets regulatory requirements.

Community Engagement

Community engagement plays an important role in project success by creating trust, understanding, and support among stakeholders. Through open communication with local communities, developers are positioned to address concerns, gather feedback, and include community input into designs. Engaging with residents and local organizations creates ownership within the community, provides warnings of challenges, presents solutions to problems, and makes regulatory approvals easier.

Creative Real Estate Developers Overcoming Market Challenges

In real estate development, success is determined by a wide number of conditions and requires detailed strategies, risk management, regulatory understanding, and strong community connections. As the industry continues to evolve, adaptability is key, and it’ll require quick thinking and innovation to stay ahead of potential market challenges.

Building Cross-Functional Agility for Operational Resilience

February 3, 2023 Private Equity

Jeff Bartel

Chairman and Managing Director

The array of challenges organizations faced during and after the pandemic made it clear that operational resilience is crucial to business success. For example, studies now show that 60% of companies temporarily shut their doors during the pandemic are permanently closed. The inability of these organizations to adjust to challenges, such as remote work, quarantines, supply chain disruptions, and labor shortages, left them unable to recover.

Successful businesses understand that remaining operationally resilient requires building cross-functional agility throughout the organization. This blog closely examines cross-functional agility and how to assemble a team that maintains business resilience.

Building Operational Resilience

Businesses across the globe are looking for new and innovative ways to overcome many new and ongoing challenges, such as supply chain disruptions and labor shortages. Organizations must prepare for current and future challenges by building an operational resilience framework. For example:

Optimizing Global Supply Chains and Assets

Overcoming today’s global supply chain disruptions will take more than building new networks. It requires new work models that utilize real-time data insights and automated workflow processes—knowing what and where inventory and supplies are needed allows your organization to put your goods or services into consumers’ hands as quickly as possible.

The supply chain is a complex process that encompasses multiple departments, including sales, warehousing, and transportation. Therefore, to optimize the supply chain process for operational resilience, you need cross-functional cooperation that covers every stage of the process, including:

  • Inbound: Today’s supply chain disruptions often start at the border, with bottlenecks occurring at ports worldwide. Some companies are utilizing regional suppliers to avoid these issues, but for many other organizations, international suppliers are a critical source of raw materials.
  • Middle Mile: Between the labor shortage causing late deliveries and capacity restraints and increased fuel costs driving up delivery fees, moving materials from the supplier to the warehouse or factory has become more costly and cumbersome. Businesses must know what supplies they need and where these supplies go.
  • Warehousing: To deal with supply shortages, some companies increase their storage of goods and raw materials. Since finding available storage space can be difficult, time-consuming, and costly, organizations must know what’s in stock and accurately predict future demand to minimize storage needs with accuracy.
  • Last Mile: Traditionally, the final mile involved transporting finished goods to various retailers. Due to increased e-commerce demand, companies are looking to bypass retailers and deliver directly to consumers. Organizations must be able to manage a complex logistics process to accomplish this.

Digitizing for Operational Resilience

Companies hoping to remain competitive in the years to come must invest in innovative technology and digital tools for operational resilience. Adequate tools allow companies to use real-time data to build, analyze and adjust business processes and improve efficiency. You should take several steps to transform digital operations for operational resilience.

Set goals and objectives: As with all business processes, the first step is to set clear goals and objectives. Determine what real-time data you want to collect, what insights you want to obtain, and what the project’s end goal is.

Determine scope: While you do not need to digitize all company files and documents at once, you need to determine the scope of this transformation. Identify precisely what types of information your company wants to digitize first.

Complete frequent audits: The needs of your company shift from year to year, month to month, and even week to week. Therefore, it is crucial to frequently audit your digital processes to ensure they meet the company’s needs.

File storage: You also need to think about how you want to store files. For instance, do you want everything to be in digital form, or do you want to maintain physical documents as well?

Cloud storage: Cyber resilience is vital in improving cross-collaboration. Consider using cloud storage to maintain your records.

Building Cross-Functional Agility in Operations

Two business advisors building cross-functional processes for operations.

Building cross-functional processes allow for seamless communication and collaboration between departments that help build operational resilience. When these teams are no longer limited to the scope of their respective tasks, that improves agility in operations and the company’s ability to remain resilient despite ongoing challenges. This agility comes from the company’s ability to maintain resilience management and allows the organization to:

  • Anticipate the company’s future needs.
  • Develop business plans to meet both current and future challenges.
  • Quickly respond and communicate with all key players within the company.
  • Adapt to shifts in the markets and workplace.
  • Learn from mistakes made to ensure improved future outcomes.

Cross-Functional, Agile Teams Effectiveness

Even with the effects of COVID-19 starting to subside, businesses are still facing multiple issues, including rising costs, supply chain challenges, shifts in customer expectations, and frequent changes in consumer demands. As a result, every business must work as a team and not as independent departments to overcome current and future challenges.

In many cases, organizational silos, where each department takes care of its tasks, can hinder rather than build resilience. Rather than teams working individually, which can interfere with communication and coordination, organizations need the agility only cross-functional collaboration can provide.

The good news is that cross-functional, agile teams can deliver various benefits, including

  • Enhanced organizational communication.
  • Improved efficiency of business processes and workplace practices.
  • Faster implementation of new technologies, processes, and policies.
  • Ability to scale business production up and down, as necessary.

Strategic Advisors to Build Operational Resilience

Organizations must maintain operational resilience because of today’s fast-paced market, shifting consumer demands, supply chain disruptions, and numerous other challenges. The good news is that developing cross-functional collaboration throughout the workplace can help your company build this resilience and remain competitive for years to come.

Does your organization lack operational resilience? If so, this lack of agility could hinder your ability to stay competitive in the years to come.

To learn more about how to build operational resilience, schedule a time to talk to one of Hamptons Group’s strategic advisors today. 

Private Equity Property Investors and High-Level Strategies

January 6, 2023 Private Equity

Jeff Bartel

Chairman and Managing Director

Private equity real estate investments allow private property investors to pool resources together to purchase, develop, upgrade, manage and sell properties. Typically, a private equity real estate (PERE) firm manages the property and may also handle negotiations to sell and acquire real estate. These firms allow property investors to add real estate to their investment portfolio without the hassle of managing the property.

This blog explains more about private equity property investing to help you determine the most suitable options for you.

Private Equity Real Estate Investment Strategies

Suppose you are considering investing in private equity real estate development. In that case, exploring your options and developing an investment strategy that aligns with your long-term financial goals is essential. Here is a look at the most common private equity investment strategies.

Real Estate Investments by Sector

Some real estate development investors select properties based on sector. For example, a REPE firm might only invest in office buildings, cell towers, commercial properties, multi-family residential buildings, or hotels. Larger firms may take a broader approach by only focusing on commercial or residential properties.

Real Estate Investments by Strategy

You may also choose to invest in real estate based on investment strategy. For instance, you might take a long-term approach by investing solely in income-producing real estate. On the other hand, you can make short-term investments, such as fix-and-flip investments.

Real Estate Investment by Geography

You can also base your real estate investment strategies on location. For example, you might choose investments in only the Southeast or Midwest regions of the country or only consider international investment options.

Real Estate Investment by Capital Structure

It is important to note that there are fewer regulations associated with REPE investments than RIETs. This factor allows REPE firms to take on numerous types of assets, such as debt. Therefore, be sure you know the firm’s holdings before investing.

Real Estate Investment by Deal Flow

You also want to know what role the REPE firm plays in making real estate investment deals. For example, do they actively make investment decisions or hold a more limited position?

Benefits Gained by Private Equity Property Investors

Business team leaders discuss financial investment portfolio.

Private equity real estate funds are an excellent way for property investors to expand their investment portfolios without the added stress of managing the property. However, this is just one benefit of private equity property development investing. Here is a look at several other benefits of developing private equity strategies.

  • Hedged risk: Private equity investment options provide long-term results that can lead to higher returns. Since these investments can take a decade or more to develop, investment managers can take their time to build a strategy that delivers higher results.
  • Well-structured deals: In most cases, these real estate investments result in well-structured deals. This is because the private equity investment firm also has a vested interest in the success of these deals.
  • Property ownership: Real estate investing is always a popular option for investors. It provides a tangible asset that holds at least a portion of its value, no matter the state of the market.
  • Depreciation write-offs: Fortunately, the IRS allows you to maximize the return on your investment by writing off any depreciation amount for the building and any capital improvements made to the property.
  • Dividends through profit: Depending on the structure of your investment, you may receive dividends on a monthly, quarterly, or annual basis. These dividends are based on profits made from business operations at the property.
  • Less regulation: As mentioned above, there are fewer regulations regarding REPE investment, which allows these firms to develop more diverse real estate investment portfolios.

Private Equity Commercial Real Estate Strategies

Private equity commercial real estate investments allow property investors to pull their money together to invest in commercial real estate properties. This type of investment can offer excellent returns, but it has risks. Therefore, finding investment opportunities that match your financial goals and risk level is vital.

Here is a look at some of the most common commercial real estate investment options.

Investing in Shopping Centers

Despite shutdowns and supply chain disruptions during the global pandemic, shopping centers, including strip malls and shopping malls, are still performing well in many locations. In fact, investing in shopping centers can provide both capital appreciation and rental income. It is essential to do your research to make sure you select the right investment option. For example, look for commercial properties with solid performance histories located in a high-traffic area.

Investing in Industrial Real Estate

Industrial real estate, such as warehouses, storage facilities, and manufacturing plants, can be an ideal investment opportunity. Industrial properties often serve multiple purposes. First, a large industrial building can serve as a storage facility or manufacturing plant, making renting easier. Secondly, industrial real estate tends to provide higher rental yields, which can transition into higher returns.

Investing in Raw Land

Raw, undeveloped land is another commercial real estate investment option that property investors often overlook. One of the top benefits of investing in raw land is that it can be highly affordable due to a lack of competition. However, purchasing this land is not without risks. For example, you could have trouble finding a suitable buyer if this land cannot be developed. Therefore, it is vital to research the land’s history and location before investing.

Investing in Self-Storage

Self-storage investments have become one of the most popular commercial real estate development investment opportunities due to the industry’s strong performance during and after the pandemic. This type of investment often requires lower upfront investment and offers high returns in rental incomes alone. While this can be a good investment opportunity, it is still essential to do your due diligence and research any property before investing.

Real Estate Finance and Funding Innovations

November 14, 2022 Fintech

Jeff Bartel

Chairman and Managing Director

Real Estate Finance and the Rise of Fintech for Funding

As inflation concerns continue to trouble some investors and interest rates keep rising, it is not surprising that real estate investors are looking for alternative funding and real estate finance options. While fintech has played a role in the real estate industry for decades, today’s economic conditions have catapulted it to the forefront.

The reality is that fintech is changing how we handle real estate finance, track property ownership, and even purchase real property. These changes are generating new real estate opportunities, with fintech assisting investors with growing investment portfolios.

Crowdfunding Real Estate Investments

One major shift in real estate investments is the popularity of crowdfunding. This type of real estate finance strategy is often a win-win for developers and investors. It allows developers to bypass the traditional lending options that are usually time-consuming and limited in real estate funding opportunities and will enable investors to diversify their investment portfolios to include real estate without the hefty upfront down payment.

In many cases, crowdfunding real estate investments can provide a higher dividend than traditional real estate transactions. Most importantly, crowdfunding in the real estate market can help minimize your risk level because you do not have to use any personal assets for collateral.

While crowdfunding can provide an alternative way to invest in real estate, there are some downsides to using this strategy. First and most importantly, since there are multiple owners, you will not have direct control over the decisions regarding the property, and you typically cannot use the property as collateral for other loans. Additionally, some crowdfunding platforms that offer real estate investments only work with accredited investors. Finally, since this is a relatively new investment opportunity, it is sometimes difficult to determine which platform is best.

It is crucial to weigh the pros and cons of this investment option before deciding whether crowdfunding real estate investments are suitable for you.

Fintech innovation, including blockchain, changes the speed of transactions while decentralizing the investing process

Blockchain Transactions in Real Estate Finance

At first glance, it may seem like something other than blockchain and real estate should be partnered. However, the reality is that blockchain may help to revolutionize the real estate industry. There are several ways this is happening.

First, blockchain provides a safe and secure way of storing and managing real estate records and transactions. Second, it helps to eliminate the middleman by decentralizing the process, which is prone to fraud and errors. Finally, blockchain can speed up the transfer of ownership process and cut costs for buyers.

Those interested in investing in blockchain real estate transactions can do so in several ways, including:

Purchase Property With Cryptocurrency

The most direct way to invest in real estate through blockchain is by purchasing real estate using cryptocurrency. Since this is a new investment opportunity, investment options using this payment method are possibly limited. However, there are several platforms that investors can use to purchase property both nationally and internationally using cryptocurrency.

Buy Real Estate Tokens

You can also purchase specialized real estate tokens representing ownership of a specific property. In many cases, tokenized real estate opportunities are broken into fractions, which means that one token represents a portion of the property. You can also sell or trade these tokens through numerous platforms.

Invest in Real Estate Finance Related Cryptocurrencies

If you are not ready to purchase real estate with blockchain technologies, you can invest in buying cryptocurrencies that involve real estate finance. For example, you can invest in a cryptocurrency that is working towards creating a decentralized storage system for property transfers and ownership.

Cloud-Based Commercial Lending

Cloud-based technology is already helping simplify the real estate industry. For example, cloud-based loan origination software helps streamline the loan process for both the lender and the investor. It allows most of the lending process, if not the entire process, to complete online while creating safe, more secure document management capabilities.

This technology is such a big part of the lending process, especially for commercial real estate transactions, that it has gained the government’s attention. The Biden administration recently announced its plans to expand its SMB 7(a) program, making it more assessable to a diverse set of small business owners.

While no agreement regarding accomplishing this goal is set in stone, many in the cloud-based lending sector are hoping for good news for the industry. Because fintech lending opportunities tend to attract many minorities, as well as low-income, business owners could play a role in helping the government reach its goals. In addition, with or without the government’s approval for cloud-based commercial lending to participate in the SMB 7(a) program, this type of lending will likely continue to increase as technology advances.

When investing in fintech real estate, it is essential to do your research and understand what opportunities are available. Since this is a relatively new investment market, many fraudulent platforms often offer great rewards for your investment. This factor makes it critical to only work with fintech companies and platforms featuring a solid reputation for success.