A few years ago I inspected a vacant tract of ground in a remote location in the western suburbs of Birmingham, Alabama. Although situated within the city limits of Hoover, an upscale suburb which is considered to contain one of the better school districts in the metropolitan area, this property is and would naturally be perceived as for all intents and purposes physically within Bessemer, a lower income and socio-economic city in the process of decline.
The growth in Birmingham had historically followed four major traffic arteries to the south. This property, unfortunately, was not proximate to any of those routes and instead was accessed only from surface roads after what seemed to be a long and arduous journey, remote from other development and services. In fact, when I first went to visit the site I wondered how we would attract prospective purchasers, especially as the most visible landmark along the way and very near to the property was a hand painted sign nailed to a tree that read “Goat Meat for Sale”.
Now I have come across a number of signs in my life that were puzzling. Last week in a restaurant restroom I noticed a sign next to the soap dispenser that read “for washing hands only”. I am still uncertain what the management was hoping to avoid by posting that sign, perhaps someone deciding to shampoo their hair? But I had no doubt what the “goat meat” sign meant and what it suggested about the perception of the neighborhood in which the property was located.
The developers behind the community were two experienced and successful real estate development companies in the area who had commissioned a market study by a national research firm before entering into their joint venture. And prior to finalizing the community plan and just to be certain that they were on the right track, they commissioned a second study to be certain that market conditions had not changed and to consider necessary adjustments to the development strategy prior to starting. I had the pleasure of performing that second study and commented to my client that their action reminded me of the first rule I learned in this business, taught to me by a carpenter during my month-long field indoctrination into the homebuilding process – “measure twice, cut once.”
My report recommendations contained relatively minor changes from the original concept – adjusting density and pricing within the parcels, changing the sequence of the development, revising some of the housing product positioning to reduce internal competition, and reducing the size of the Village Center property which required a TND housing component. This last recommendation was due to the local market’s less than overly enthusiastic response to the TND concept in several existing developments. These recommendations were all implemented as were my specific suggestions for the community positioning and sales and marketing implementation. While there certainly are a number of successful new home communities across the country that opened in 2005, I believe that Ross Bridge is arguably unique in that its success has continued even through the current economic and housing downturn.
The original absorption estimates for the community had forecast homes sales averaging 150 annually. The results achieved have met or exceeded that goal even though the local housing market has seen substantial deterioration. In 2006, the first full year of sales, 194 homes were sold; in 2007, 204 homes were sold; in 2008, 177 homes were sold (and in that year the lower priced home segments within the community were already sold out) and it appears that for 2009 they will sell 130 homes.
On an absolute basis those numbers may seem respectable but from a market share standpoint, they are exceptional. The 2006 absorption equaled a 2.5% share of the total new home production for the metro area, an outstanding accomplishment for a single community. And as the overall market declined by 30% in 2007, an additional 37% in 2008 and a projected additional 60% for 2009, Ross Bridge’s share of market increased to 3.6% in 2007, 5.7% in 2008 and to an amazing 14.2% in 2009.
What has made Ross Bridge so successful and what lessons can be learned for future residential development?
- They selected a location where their markets wished to live. That may sound simple, almost an absolute, but it was a concept that was often forgotten in the recent boom years.
- They created a true community, not just a subdivision, wherein the individual villages are sized for a reasonable sellout and are separated from each other to preserve values and allow for changes if market conditions require.
- They provided amenities that were appropriate to and desired by the target markets yet did not burden the development or the purchasers with undue cost.
- They selected professional builders and carefully segmented the product and pricing of the homes so that three full pricing quintiles were covered, maximizing the market appeal, while minimizing direct competition within the community.
- They regularly update their market evaluation including analysis of each builder’s performance and positioning to determine opportunities for their builders to increase sales.
- They required centralized sales and marketing by the developer to insure a cohesive and professional presentation to the market and they provided what I believe is the best sales operation in the market under the direction of my personal choice for one of the best new home sales directors in the business.
- They promote and market the community professionally, recognizing early the paradigm shift to web-based advertising and they spent their advertising dollars intelligently and effectively.
I would recommend taking a look at the community, with a physical visit if possible but, if not, at least a visit on-line – www.rossbridge.com.
For information on our company and services please visit our web site at www.levitanassociates.net