Monthly Archives: April 2009

The Real Estate Story Awaits the Next Chapter

Brian Boero of 1000watt recounts a dinner conversation and throws down some challenging questions and assertions:

This particular debate centered on the following question:

“Have we reached the end of the real estate story now that FSBOs and discounting have lost their menace?”

As Brian puts it, there were two camps, comprised of him in one camp and everyone else in the other camp:

Methods have changed. Markets have changed. The balance of power between brokers and agents has shifted. Consumers have access to enough data to choke a horse.

But the basic structure of this business remains remarkably intact.

There are two possible conclusions to be taken from this:

A. Real estate is exceptional. The complexities and emotions that characterize the real estate transaction will forever shield it from structural change. Bill Gates, Barry Diller and about a billion dollars in VC have been thrown against the barricade with no transformative impact. The story is over.

B. We’re due for a cataclysm. The forces of change, of technological innovation, of inchoate consumer frustration, are stacked high against the dam of Real Estate As We Know It. It will not – it cannot – hold. The story is far from over.

My dinner pals were in the “A” camp. I argued for “B.”

Given that the whole thrust here is theoretical and futuristic, I can’t help but charge in foolishly where wiser men fear to trod.

Continue reading

The Green Premium in NYC Rental Market Heads Towards Zero

A really fun discussion on Twitter with Robin Greenbaum (@cobrokenation) led me to just do a very quick, very back-of-napkin, and likely very inaccurate comparison between two rental units.  As Robin pointed out, since comparisons are very difficult, depends on many factors, and the like, no matter what I come up with, this is likely to be wrong.

Nonetheless, I’m curious to see if we might see any interesting bits of data.

One unit is a 1BR at 22 River Terrace, a luxury rental building constructed in 2001:

22 River Terrace

22 River Terrace

Detailed info can be found here, but the vitals of the unit are:

Floorplan, 22 River Terrace

Floorplan, 22 River Terrace

725 sq. ft., monthly rent of $2,880, 23rd floor but facing east (aka, no river views).  I know the floorplan is hard as heck to see, but it’s pretty standard fare for NYC apartments.

The second unit is located at The Verdesian, a LEED Platinum certified building located right by 22 River Place.  See the map here.

LEED Platinum certified, The Verdisian

LEED Platinum certified, The Verdesian

The Verdesian is a newer building, built in 2006, and LEED Platinum is not given to just about anybody with a solar panel or two.  There was quite a lot of thought and technology devoted to the building.

The unit here is a 1BR as well:

Floorplan of 1BR at Verdisian

Floorplan of 1BR at Verdesian

The vitals here are:

750 sq. ft, $3,065 per month, and east-facing on the 13th floor.  Clearly, the little alcovey “Den” area means a smaller living room, but the floorplan might be better for some, worse for others.  Who can say?

On a straight $$/sq.ft. basis, however, the difference is only $0.12 between the newer, eco-friendly unit and the older, non-green unit: $3.97/sq. ft. for 22 River Terrace vs. $4.09/sq. ft. for The Verdesian.  If we hold the square footage equal at 725, that means a monthly rental difference of $87.00.

To my untrained, unpracticed, and non-realtor eyes, this seems rather insignificant and would tilt the decision towards the Verdesian.  According to GreenbuildingsNYC.com, the Verdesian’s advanced systems, EnergyStar appliances, and various other design & architectural choices, means a 40% savings on electric bills for residents.

According to ConEdison, the average NYC resident can expect to pay $104.97 per month in electric bills.  A 40% savings on electricity alone is $41.99 per month.  Nearly half of the “green premium” (if that’s what it is) is taken care of simply from savings in electric bills.

Now add in the fact that The Verdesian is five years newer, and offers “Fresh filtered air, continuously humidified or dehumidified, depending on climate conditions” to every unit, and it isn’t clear to me that the green premium starts to head towards zero.

Again, comparing different units, different buildings, with slightly different amenities and the like is hazarding error.  But it does seem significant to me that the actual cost difference may be as low as $45 or so per month — less than the cost of a cup of Starbucks latte per day.

If this is true, then the green premium at least in the NYC rental market is heading towards zero, and renters really have to ask why they would go to a non-green building vs. a green building.

I for one would love to see some real comparisons by real professionals — realtors, appraisers, I summon thee!

-rsh

PS: Note that I am a heretic when it comes to anthropogenic global warming hype, so this has nothing to do with religious views on carbon footprints and such nonsense.

Real Estate Marketing in a Post-Middle Era: Property

This is NOT for a Thrift play...

This is NOT for a Thrift play...

In part 1, I started to talk about marketing in a consumer environment when the middle is disappearing.  My basic hyopthesis is that the American consumer today operates in one of two modes: Thrift and Aspiration.  Thrift mode means a focus on price above all; Aspiration means a focus on luxury, lifestyle, or something more than “mere product”.

To apply these thoughts to the marketing of real estate, I asked a few questions, of which the first one is the topic for this post:

If the Middle is disappearing, and the two dominant modes of consumers are Thrift and Aspirational… have you considered how you are positioning properties not only to demographics, but also to psychographic profiles?

Let me attempt to tackle this question and explore what real estate marketing of a property in a post-middle era might look like.

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Marketing In a Post-Middle Era

Image: David Armano

Image: David Armano, Logic + Emotion

Thanks to Brandie Young‘s wonderful post, I found David Amano’s thought-provoking post on “Marketing in a Post-Consumer Era”.  It’s worth reading in full.  Actually, they’re both worth reading in full.

I couldn’t help immediately reacting, however, with skepticism.

Perhaps it’s because the last time we were in a recession, we heard the same thing: conspicuous consumption is out, and frugality is in!  Since then, we have seen an absolute explosion of conspicuous consumerism, celebrity worship taking over as the official culture of the United States, and a continual denigration of the average middle American lifestyle in our cultural institutions.  (I for one do not recall “Walmart” being a dirty word back in the recession of the early 90’s.) Continue reading

The Price of Artifice

Last night’s Lucky Strike Social Media Club (LSSMC) dinner featured a presentation by Phil Thomas DiGiulio (@holaphil) of Wellcomemat on “Video and Social Media”.  I thought it was an interesting topic in and of itself, and am grateful to Phil for coming by to have the conversation with us.

During the dinner — as is normal for LSSMC — a topic came up that I thought needed more elaboration and discussion.  One of the sub-themes of social media and its impact on marketing is how professional it ought to be.  Should companies, for example, have an “official” corporate Twitter handle, like @onboard?  What topics are appropriate for a corporate blog?  And so on.

Video, as it turns out, is directly implicated in this sub-theme.

Professional vs. Confessional

One of the biggest barriers to implementing video as a marketing strategy is cost.  I have priced out what it would cost to have a professional video made for my employer, and the ease with which one can spend $15K on a 3 minute video is staggering.

Video is inherently a more difficult medium for an amateur.  Video editing — even as it is made easier with technology — remains a more technical, a more difficult, and a more expensive proposition than editing text.  Simply consider the fact that you may need to buy a piece of software to edit video.  And that’s assuming that you have the visual aesthetic sense, a talent for crafting narrative using motion pictures, and skill with blending sound and image and motion — all of which are somewhat specialized skills.

Phil usually recommends that you hire a professional to do a well-crafted video, and for good reasons.

On the flipside, however, there has been a growing trend in the world of video towards a more intimate, more amateur, and more “raw” approach.  Perhaps the explosive popularity of reality TV is reprogramming our cultural expectations.  Perhaps the wide availability of cheap equipment and editing software is bringing “moviemaking” to the masses.  The popularization of sites like YouTube certainly helps to spread video works that wouldn’t have seen the light of day in earlier times.

For example, Nigahiga is one of the top subscribed channels on YouTube.  This is a typical video:

While Nigahiga videos are hilarious, with decent editing, a story, and some really funny actors, part of the appeal is its extremely amateurish production values.  The exact same script, exact same actors, exact same everything, but done professionally by a TV production crew would be horrible.  Audiences would be making fun of the terrible script, the bad acting, and the not-so-funny jokes.

Why is that?

Audience Expectations: Artifice

I think the reason is that the modern audience grew up in the era of mass media.  Few of us remember a time before movies, a time before television.  The Millenials don’t remember a time before the Internet.  Few Gen-Xers remember a time before VCR’s.

Movies and TV are a part and parcel of our culture, our memories, and even our identities to some extent.  As we grew up surrounded by filmed entertainment, our knowledge of and expectations of motion pictures have also grown.  We are no longer fascinated, as the first viewers of movies were, by grainy black and white footage of a train pulling into the station, over and over and over again.

As filmmakers advance their art, as TV producers get savvier, as actors and directors and lightning and sound engineers and editors and the rest of the production industry continue to improve their art and technology, our expectations of professionals continue to rise as well.

Just last decade, CGI was a big deal special effects wise.  We audience members oooh’ed and aahh’ed at movies like Terminator 2 and Jurassic Park.  Today, we take CGI for granted, and harshly criticize crappy CGI work.

The result of all this improvement and sophistication on the part of the audience — as a direct response to the continual improvement by industry-leaders in film and television — is that we hold professionals to a far higher standard.  We are so jaded by movies, by TV, by big explosions, by car chases, and special effects that to break through our awareness and make an impact requires something extraordinary.

For example, this Sprint ad:

From a marketer’s perspective, having worked at an ad agency, the level of execution on that video/ad is incredibly high.  The amount of thought that went into it, the CGI-work, the models, the video shoots, the ad copy, the script, the voiceover work… all of it likely required thousands upon thousands of manhours of work by some of the best and brightest in the advertising industry — namely, Goodby, Silverstein & Partners, the winner of the 2008 Ad Agency of the Year by AdWeek.

That is the level of skill, of art, needed to break through with professional video.

In contrast, when the audience is confronted by video that is clearly not professional, and is intended not to be professional, then the expectation changes.

Audience Expectations: Humanity

The Nigahiga video on YouTube embedded above is a perfect example of changed expectations.  The martial arts fighting sequence in the Nigahiga video is hilarious precisely because it is so amateurish, and intentionally so.  What the viewer is responding to isn’t the technical perfection of the fight scene, but the humor and the personality of the actors (and the filmmaker) as evidenced by their staged “fight scene”.

What the audience expects in an amateur production is humanity, not artifice.  They want authenticity and personality, rather than perfect execution.

In that situation, I believe that the bad lighting, the bad acting, and low production values are a bonus rather than a detriment.  They help to create authenticity.

The Nigahiga videos would not be improved by professional lighting, or a soundstage.  They would be hurt by it.  Getting professional actors to act out the skits would not make the videos more interesting or more entertaining; I rather think professional acting would make the videos less entertaining.

This is, frankly, the connection to “social media”.  Video, I think, has a unique ability to help viewers assess the honesty and authenticity of the person on camera.  Visual cues, speech patterns, the facial expression, gestures — all of these things help a viewer decide whether the person they are viewing is “keepin’ it real” or faking it.

If you understand social media properly — that is, as an expression of the Cluetrain concept of authentic human connection, rather than as a collection of technology tools — then you will implicitly grasp that video is just another tool for that expression.  Based on that, you can make decisions on whether and how to use video to maximum effect.

Danger, Will Robinson, Danger!

There is, however, real danger with video, and one that I don’t think is well enough understood.

The danger is not the unprofessional video with shaky cameras and bad lighting.  No, the real danger is the mediocre professional video.

Because the audience expectation is so high when it comes to professional work, in order to avoid looking like an idiot, your execution must be extraordinary.  This is both prohibitively expensive and incredibly difficult.  The difficulty is easily illustrated with this video from Cyberhomes (which is a good company of good, smart people):

The cheesy stock photography, the horrible music, the “professional” voiceover, all combine to make what is a deadly boring corporate video.  This is not to say that the team at Cyberhomes didn’t do a good job — it did.  But the video is not extraordinary, and it couldn’t possibly be — it isn’t a Goodby Silverstein campaign costing millions of dollars.

Once the decision was made to go the “professional” route, Cyberhomes could not help but fall into the “crappy corporate video” hellhole, not because of anything its team or videographer or editor did, but because what they could not possibly do given the likely budget for something like this.

There is a price for artifice.  A rather significant one in the current media environment.

If you are unwilling or unable to pay that price, then your video project is doomed from the start.  It may be a better strategy to go the other way and go for an amateurish, human connection driven video play instead.

I think Jim Duncan‘s “hey, I’m talking on camera while I’m driving somewhere in my car” videos are absolutely fascinating.  Unfortunately, I can’t embed them on a WP.com blog, so go view a sample here.  An embeddable sample is from Robin Greenbaum, of Prudential Douglas Elliman, in New York:

The parts where Robin’s real voice comes through, when she’s giving her opinions and views rather than when she’s reading off some description of the Windermere, are fantastic.  She sounds like a human being, like an interesting person with strong views, with whom one might be able to have a conversation.

And that, my friends, is social media.

-rsh