The challenge of marketing vacant properties in economic depression

One of the differentiating features of real estate markets in developing and developed nations is that while real estate is the first to feel the effect of economic crisis and the last to feel the impact of economic boom in developing nations like Nigeria, Ghana and India, the reverse is the case in developed countries like United States of America, United Kingdom and Canada, where real estate is the last to feel the effect of economic crisis and the first to feel the impact of economic boom. In a recent project (an online comparative study of tenants’ behaviour in a period of economic crises) conducted by Messrs Fame Oyster & Co. (Nigeria) using Canada, United Kingdom and United States as samples for developed nations and Nigeria, Ghana and India as representatives of developing nations, renters or tenants in developed nations stated they will cut cost of their accommodation or default in their payment of rent of their real estate after cutting other cost-centres like fueling of cars, maintenance of cars, clothing, feeding and socials.

The renters and lessees in developing nations stated they will rather cut or default in the payment of their rents and leases first before any other financial obligation. This is a sociological study which examined the mindset of people concerning where they live as tenants. Sixty-five percent of renters in developing nations stated that accommodation will come last in their schedule of procurement in a period of economic boom, while 58 percent of renters in developed nations stated they will not change their property procurement decisions both in the period of economic boom and doom. In a period of economic depression, that is, a period of occurrence in which an economy is in a state of financial turmoil, often the result of a period of negative activity based on the country’s gross domestic product (GDP) rate, consumers tend to reduce consumption of some essential products including food! It is worse in a country where there is a very high disparity between the mode and the mean or mean and median of the income of the people. In a period of economic depression, poor people do not see accommodation as a basic need.

Their main priority is to get food to eat. While old tenants are likely to default in their payment of rent, prospective tenants will hold back their ‘want’ of renting or buying accommodation and prefer to “squat” temporarily with family members. In a period of economic depression, there will be a lot of vacant properties or voids. Since the aim of every “built-to-let” or “buy-to-let” property investor is to make sure that his or her property is occupied, estate agents must ensure they put tenants in the properties in their portfolio at every time and property developers too, must ensure they sell their finished properties through aggressive marketing in other to have a smooth cash-flow. Marketing vacant spaces is as old as property investment itself. It is a normal practice for landlords or property-owners to let their excess spaces or put them into valuable use. There is no legal practice to put vacant properties into use that is not ethical. Olympia & York was a major international property development firm with head office in Toronto, Canada. Olympia & York specialised in building mega financial centres.

The firm built major financial office complexes like Canary Wharf in London, the World Financial Centre in New York City and First Canadian Place in Toronto. Canary Wharf marketing was a case study because of its poor timing amid the global economic downturn of the era, poor transportation network to the property and over-estimation of the London property market. Paul D. Reichmann initiated the construction of Canary Wharf, on the eastern edge of London, which was started in 1988. The spaces at Canary Wharf, built for corporate tenants that were supposed to have fully let before finishing, could not be let six months after finishing. The available spaces were enormous and intimidating. The management of Olympia & York had to allow big corporate offices to move into the property without paying a dime. They even offered to do the letter-heads and business cards of corporate offices and their personnel that were ready to move into the property. This measure helped but was not successful to let the whole vacant spaces because of the size of the structure.

Property marketing is a branch of marketing that sells or lets real estate, residential, commercial, industrial, tourism and hospitality, etc. The process of property marketing includes branding, positioning, and promotional strategies. It is not out of tune for property owners to launch their properties and intimate prospective buyers and tenants about the services the properties can provide. Conversion of use of voids in finished properties can also help to reduce loss of income. A property developer developed a block of six number three bedroom flats to be let as residences. He converted the property into hotels when good tenants were not forthcoming and it was a successful move. It may also be a marketing strategy to combine two land uses in a building. The combination of hotels and residential spaces in the same building is known as ”hometel”. The combination of office use and hotel is known as “offitel”, while the combination of residential and office use is called “homfice”. The “shoddy boxes”, description of Central London flats of the 1990s, was a development of rising cost of accommodation in Central London.

It is not a bad idea to convert a difficult-to-let “corner-piece residential property” into “shopping mall” and “block of 3 bedroom flats” into “block of 1 bedroom flats and studio apartments”. Anchor or magnet shops may be used to sell vacant spaces in shopping malls. There are occasions when traditional marketing methods of properties will not suffice. Making adverts in the paper, social media marketing and placement of “To Let” and “For Sale” boards on properties to be let or sold will not push the property off market in a depression period. There are novel marketing ideas that a hardworking estate agent and real estate broker should not have difficulty in marketing properties. In a period of economic depression, a developer should think of selling uncompleted buildings called “carcass” or go for smaller properties like “studio apartments”, “one bedroom flats” and “two bedroom flats”. Part-payment, contributory payment and “zero deposit” payment, may be used to market difficult properties.