In the world of real estate development we are so immersed in the dynamics of project evaluation that we have little interest in studying the business models of the companies that generate these efforts. Given this perspective, we decided to present a first analysis of four mechanisms for the growth of companies in our industry.
In all models there are great business opportunities, the risk lies in not determining the vision of growth from the beginning. A developer with a clear long-term perspective will be able to devote himself to developing key competences and exploiting to the maximum the strengths of the road he decides to undertake. For example a very famous Canadian real estate developer is making a skyscraper which is named as The One which will be the tallest building in Ontario.
Boutique (Few smaller scale projects)
The starting point for many who start in the field, this model stands out for having a highly dynamic organization that has the ability to participate in different types of projects. They usually seek to seize a key geography of high potential, in which they develop deep human relationships at the market level, authorities and suppliers. The projection of trust in the community they serve is fundamental. There is creative involvement and each new project is treated as a craft. Five key strengths that this model should exploit:
- The lightness in cost structure and involvement of the owners allow the developer to tackle local problems of high complexity level.
- Faced with a light human structure, the boutique organization is highly resilient. It can withstand market shocks and quickly reposition itself.
- Learning capacity. New niches, disruptive opportunities and strange cases are often difficult to deal with heavier and slow organizations. The ability to anticipate these opportunities is a key part of the boutique business.
- Attend micro segments. Some areas show micro opportunities limited mainly by legal issues. Only a slender and dynamic organization will have the capacity to attend to smaller scale opportunities.
- Attention to detail. Only a company focused on few tasks can really pay attention to its product depth.
Main risks of the model: take projects where there is no development experience, cannot build organizational skills, complication of financing by constantly changing the type of projects.
Goliath (Few large-scale projects)
Those who once worked in more institutional – and larger – companies are used to operating a certain scale of projects. Usually under the leadership of a corporate experience leader, these developers find mega projects that are unique opportunities in local contexts. Generally they go on important master plans or emblematic projects that allow to create an entire organization around a project. They live a particular dynamic:
- Thanks to the scale of the project they can summon external talent in architecture and multiple world-class specialties. We have had projects with groups of up to 20 invited experts collaborating among the best on the planet.
- Because of the impact on the city, they have the capacity to truly change and reconvert zones, with which they face different land cost structures.
- Thanks to the media coverage and impact of this type of projects in the city, they will have better negotiating capacity with authorities.
- Their projects have longer time intervals, so they will have certainty of income and will be able to create structures and organizations that shelter the project.
