New Construction Sales Strategies

There has been a noticeable trend in the market whereby larger, premium units at higher price points (those above $550k) are purchased by more discriminating buyers.

This makes choices regarding layout, finishes, options, etc. especially important for the higher price points. Equally important is recognition that buyers of higher priced units are also less willing to buy off of plans or even during the early stages of construction.

These buyers truly aren’t any less imaginative than buyers of lower priced product, the market simply gives them more purchase options as there are more new construction units available that are near completion, or even sitting fully completed and staged.

This logic also applies to challenged units at lower price points. I define challenged units as those having some type of less desirable feature that the average buyer of new construction (those who would buy an average unit off plans or during construction) can’t bring themselves to commit to purchasing without seeing a finished product.

How then, can developers ensure that they do not bring a large amount of unsold units to the market all at once?

Delivering multiple similar units without pre-sales instantly means that Developers are having to compete with their own product, and can substantially lengthen the time it can take a Developer to pay off financing and avoid further interest fees as well as to return contributed capital and realize profits that can be moved into other projects.

The following is a seemingly common sense strategy that requires decisions be made early to ensure feasibility and success.

To start: the solution to the problems outlined above is to have units finished. Common sense, but we’re talking about how to get the benefits of a finished unit without all units being complete- i.e. a model unit like you would see in large suburban developments or large high rise condominiums. The benefits of having a finished/model unit is that it allows the more discriminating buyers at higher price points to buy in early, even if the particular unit they are purchasing is still under construction. Secondly, it allows the developer to downplay the shortcomings of challenged units via insightful staging and by highlighting all the positive features of the unit. Odd layouts, small spaces, or even location or other issues can usually be overcome by showcasing all the benefits of a unit and capturing buyers’ emotions, allowing them to become excited about a purchase. The above seems obvious, but the objections and reasons why a model unit for townhome development is not feasible are numerous. Certainly a dedicated model unit ready well in advance of construction on any other unit is impossible but there ARE strategies that can ensure a unit can be completed as far in advance of others as possible.

  1. Developers often ignore the issue of construction sequencing. Often, direction from a developer is all General Contractors require in order to shuffle both building sequencing, as well as individual unit sequencing. Planning with your general contractor on the best overall strategy to get a challenged unit complete can make the difference of a month or more.

  2. It’s likely impossible to get the buy in from individual subcontractors necessary to expedite a unit during rough-ins as too many trades are interdependent (siding/sheathing/roofing/windows/electrical), but once drywall is installed, there’s no reason subtrades cannot focus their efforts on a single unit.

  3. Negotiations can be had with suppliers and subcontractors to guarantee a single unit’s completion prior to any work beginning on others. Typically tile installers will have teams working on multiple units, and multiple baths/foyers/laundry rooms/etc. at once. If the demand is made prior to giving a supplier your business that crews need to work in a single unit and can then resume normal sequencing, a large amount of time can be gained. Repeating this with MEP trim out, shower door installation, cabinet installation, etc. can gain considerable time. It takes buy-in from your General Contractor, and negotiations up front with suppliers and subcontractors, but expediting a single unit is an easy concession to ask for when you’re about to give subs and suppliers the volume of business of a whole project.

  4. All told, as much as two months could be gained on the first unit you choose to be in sequence. Two month of preselling with a model unit is incredibly valuable. Over and over, we find that difficult unit sales are made much easier once units are complete and staged. Unfortunately, the typical townhome sequencing means that time is spent waiting on each unit to be completed, before buyers will even begin considering a challenged or expensive unit.

  5. Angling for construction to deliver a model unit takes a little extra time and some extra planning, but can yield results that can pay vital dividends to your project pro-forma.

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