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MARKETING OF COMMERCIAL REAL ESTATE


FEATURES OF THE INDUSTRY

The commercial real estate market includes properties used for commercial purposes rather than residential ones. It encompasses a wide range of properties, including office spaces in business centers, retail spaces, industrial areas, warehouses, shopping malls, hotels, restaurants, shops, and other types of commercial properties. From a marketing perspective, the market is particularly interesting due to several features. Here are the key characteristics of the commercial real estate market that are crucial for understanding its marketing:

• Economic Situation. One decisive factor influencing the commercial real estate market is its dependence on the macroeconomic situation. The state of the economy, specifically business activity, significantly affects demand, prices, and other market indicators for commercial real estate. During periods of economic growth, the number of new businesses usually increases, leading to the expansion of existing businesses that require larger office, warehouse, and retail spaces. Conversely, economic downturns result in reduced business activity, decreasing demand for commercial properties and lowering prices. Marketing strategies for commercial real estate differ significantly during economic growth and economic downturns, requiring different marketing budgets.

• Market Fragmentation. The commercial real estate market is fragmented, with various segments characterized by unique features and dynamics based on clients' business needs, economic conditions, and regional factors. Different segments, such as office spaces in city centers versus logistics centers, serve to different target audiences with diverse requirements. Each segment has its specific demand, competitive environment, and influencing factors, necessitating flexible and well-considered marketing strategies for each commercial property.

• Limited Repurposing. An essential aspect of the commercial real estate market is the almost impossible repurposing of most properties. Transforming a logistics center into a hotel or a shopping mall into a production facility is challenging. Considering the high investment levels in constructing properties, responsible management and marketing efforts are crucial to maintain the property's condition and marketing promotion level, especially during periods of low demand.

• Long-Term Contracts. Long-term contracts are prevalent in the commercial real estate market. These contracts provide stability for property owners, ensuring a consistent rental income, and offer tenants the advantage of planning their business activities in the long term without concerns about frequent relocations. Long-term contracts also influence market price fluctuations, reducing them compared to other economic sectors.

• Functional Competition. Competition within each market segment is driven by functional characteristics of properties, as demand is largely influenced by an object's ability to meet consumers' economic and production needs. Marketing task is to communicate the property's functional capabilities to potential consumers and highlight additional advantages that differentiate the property from competitors.

• Location and Infrastructure. The importance of the location of commercial real estate properties and the quality of surrounding infrastructure cannot be overstated. Logistic considerations are crucial for many businesses, affecting the convenience of transporting goods and materials, as well as the ease of commuting for employees. For certain segments, such as hotels, shops, or shopping malls, location is a critical factor for successful operations, influencing traffic and the ability to generate a significant level of customer visits due to the surrounding location and infrastructure.
  
  

While these are some key characteristics of the commercial real estate market, further analysis could consider additional features based on the primary purpose of different property segments. Nevertheless, the mentioned characteristics are pivotal for marketing processes in the commercial real estate industry. How to compete effectively in such conditions remains a central question.


SOME GENERAL STRATEGIES AND APPROACHESS

So, owners of commercial real estate employ the following marketing strategies, approaches, and tools to build an effective marketing mix and achieve commercial success:

• Online Property Promotion. Online promotion is a truly effective way of marketing commercial real estate. Moreover, the percentage of potential clients relative to the population is so small that online promotion must be highly targeted in terms of location, property purpose and key search terms. Promotion should include elements such as a modern website, SEO, highly targeted advertising, and listing the property profile on professional real estate buying/selling and leasing platforms.

• Focus on Functionality. It is essential to note that the property's website should focus on demonstrating functional advantages to potential clients, including location, internal and external infrastructure, modern equipment and materials, fire safety systems, security, and additional benefits. For certain properties, if possible, indirect comparisons with competitors (without naming them) may be beneficial. Additionally, if feasible, including reviews from current tenants can enhance the property's reliability.

• Real or Artificial Shortage. In specific cases, particularly during economic growth when the supply of commercial real estate lags behind demand, it is necessary to demonstrate full occupancy and a shortage of available spaces to potential clients. On one hand, such a demonstration can help retain current tenants for a more extended period, as some may not want to lose a space and will hold onto it. On the other hand, real shortage and marketing techniques can help create a waiting list and deferred demand. Skilled marketers can even create an illusion of shortage to achieve similar effects.

• Business Reputation of the Management Company. Paying attention to the business reputation of the management company regarding rental terms, tenant relations, quality of property management, willingness to compromise, and resolving contentious issues is crucial. Given the industry's peculiarities, such a reputation is often formed through individualized marketing and personal relationships with tenants. In case of difficulties, tenants are unlikely to spread negative information through public platforms like social media, but negative feedback in private conversations with business partners can still harm the business. Marketing professionals aim to create an active loyalty system among tenants without relying solely on financial incentives.

• Collaboration with Real Estate Agencies. Collaborating with real estate agencies in the commercial real estate sector is vital for effective marketing. In such partnerships, the key role is not just the ability to attract clients but also the exchange of information on market trends, competitive prices, and demand for properties. Real estate agencies can provide a more or less objective picture of current needs and requirements, assisting in adapting marketing strategies. This partnership also contributes to effective positioning of properties in the market and ensures successful deals in the commercial real estate sector.
  
  

It should be noted that within one article, we cannot show all the pitfalls or demonstrate all the marketing methods and tools specific to the commercial real estate. In other words, these are just a few examples of quite general marketing approaches that can be applied to real estate business. From a practical point of view, everything is much more complicated - the choice of a specific marketing strategy and tools depends on the target audience, competitive environment, and unique advantages of the company, etc. At the same time, it is desirable to understand that commercial real estate marketing may encounter a number of specific problems that are unique to each individual case and require an individual approach to their solution.

Achieving the commercial objectives of a company through effective marketing requires a deep understanding of the market situation, consumer needs, the ability to analyze and explore alternatives, and a creative approach to problem-solving. Our company has extensive experience in defining optimal marketing strategies for our clients' businesses, creating a strong brand and market positioning, as well as developing a marketing mix and implementing the chosen strategy. You can familiarize yourself with the services and solutions our company offers on the "Services" and "Solutions" pages, respectively.