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Case studies in real estate marketing.

Case Studies in Real Estate Marketing Most people are only vaguely aware that companies like Procter & Gamble, General Foods, Chrysler, and Fruit-of-the Loom spend hundreds of millions of dollars each year to market their products to a fickle public.

While a block of office space or a new condominium is not exactly a bar of soap, the basic concepts of consumer goods marketing are being increasingly applied to real estate.

"Regardless of the nature of the project, the most important thing in real estate marketing is to have a clearly defined strategy," says Arthur Lohman, president of The Lohman Organization, one of New York's leading real estate advertising/marketing concerns.

Lohman says such a strategy has three steps: defining the audience, analyzing the competition, and determining the project's positive and negative attributes. Once the research is finished, Lohman says, the project can then be positioned with respect to the marketplace and the competition. Only then should the most visible steps in the marketing process--the brochures, advertising, models, sales offices, parties, and public relations--be placed into motion.

None of this work is inexpensive. Industry experts say that in cities like New York, Chicago, and Los Angeles, office building owners typically budget between $1.25 and $1.50 per square foot of building area for marketing, exclusive of broker commissions. For large residential projects, the range is usually between 3 and 5 percent of sales.

How these resources are allocated differs with every situation. The decision of how much should be spent on what medium for how long is usually the result of a combination of professional judgement, personal tastes, and budgetary discretion.

In examining marketing programs across the country, our interviews found that while their situations differed radically, all of them applied the same basic elements of "strategic marketing" to their leasing programs.

The Corinthian, New York City

In this city of rectangular edifices of glass and steel, the Corinthian's 180-degree bay windows make this 57-story residential tower at 330 East 38th Street one of Manhattan's most memorable.

Designed as a super-luxury, The Corinthian towers over a former airlines terminal building in the posh Murray Hill neighborhood near the United Nations. When it opened in the fall of 1986, the building competed against 30 other luxury condominiums in midtown, which were also targeted to wealthy buyers.

According to Jane Gladstein, vice president of marketing and sales for M.J. Raynes, Inc., the building's marketing agent, the Corinthian's size was its biggest problem and one of its best qualities.

"Many people do not want to live in a building that has 863 units, so we decided to turn its size into an asset. We made sure that everything was done on such a grand scale that no other building in the city could touch us."

One of the most common amenities in New York condominium buildings is a health club, but these usually have little more than an exercise room or a standard-size pool.

The 12,000-square-foot Corinthian Club features a 50-foot, glass-enclosed pool, separate whirlpool, gymnasium, aerobic warm-up rooms, saunas, steam rooms, changing facilities for men and women, and indoor and outdoor play areas for children, not to mention the juice bar and the landscaped, outdoor jogging tracking (with seven laps to the mile). Gladstein notes that the Corinthian's huge, private health club became a key selling point to buyers.

"The building was positioned as something that was going to have everything on a grand scale," Gladstein says," and that, coupled with the curveaway, or serpentine, architecture of the building, really set the tone for the marketing program."

Gladstein says buyers fell into three categories:

* People between 30 and 50 years old, most of whom already lived and worked on the East Side of Manhattan.

* People looking for a second residence or a pied-a-terre in the city.

* Investors who purchase individual apartments for long-term appreciation, and corporations, such as Pfizer, Inc., a multinational chemical and pharmaceutical company, whose headquarters are a few blocks away on 42nd Street,

"We were very appealing to Pfizer," says Gladstein. "They purchased a floor and a half for use by their employees when they are in town. They realized that financially, this is a much more economical alternative than leasing out exorbitantly priced hotel rooms all around town."

Economics, like everything else, is relative. One-bedroom units at The Corinthian start at $271,500, and three-bedrooms are available from $693,000. According to Gladstein, the building opened at about $360 per square foot, and units are currently selling at about $430 per square foot. Within the first two years, more than 600 units were sold, and only 80 units remain.

Because of The Corinthian's enormous size, however, common charges and real estate taxes are typically less here than at other New York high-rise condominiums. The three-bedroom unit's common charges, for example, are about $645 per month. This, too, became a selling point.

Gladstein says the success of the marketing program was a combination of factors. "It is a product that immediately differentiates itself, and I think the New York marketplace is sophisticated enough to realize that that will translate into a better resale potential."

In New York, large ads in the New York Times Sunday real estate section are de rigueru for high-profile residential projects, and The Corinthian was no exception. To give the building presence in the marketplace, a full-page ad showing pictures of the building ran every week for the first two years.

Following the building's grand opening, the ad campaign was changed to emphasize the size of the units by showing a typical floor plan, a tremendously successful strategy which continues to draw large numbers of potential buyers, Gladstein says.

Despite the high costs of advertising (one full-page ad in the New York Times cost about $30,000), an elaborate system of brochures and collateral materials, a video showing the various views from different floors, a public relations campaign, and special eventS, the project is actually under budget in terms of its marketing program.

While the targeted budget for The Corinthian was between 5 and 6 percent of the total sellout for marketing and sales costs, exclusive of sales commissions, Gladstein says that they have spent less than 3 percent.

"It was just a wonderful combination of expertise, luck, and a market that responded to a good product that enabled us to save in places where we felt we would have to spent it.

"It is not enough to say, "'Hello, here we are, we are terrific, and we want your money," she says. "You have to show people that you are real, that you are building something they want to be a part of, and give them enough information so that they can make an intelligent buying decision."

Security Pacific Plaza,

Los Angeles

The 1980s was a decade of corporate mergers and acquisitions, during which space users became aware that some of their property holdings were, in fact, liabilities to the bottom line.

Such were the concerns when Security Pacific Bank sold its 1.4-million-square-foot headquarters building at 333 South Hope Street in downtown Los Angeles to Metropolitan Life Insurance Company in 1984. Rather than leasing the building back, the bank decided to vacate 320,000 square feet of Class A office space, or about 25 percent of the building.

Built in 1974, the 55-story tower is situated at the top of Bunker Hill and features 25,000-square-foot floors, an 800-seat cafeteria, a restaurant, retail shops, a 200-seat auditorium, meeting rooms, an art gallery, a park, and parking for 2,500 cars.

"Security Pacific was already down as a Class A building, but because it had been off the leasing market for the past 10 years, we had to bring it back to the minds of tenants and leasing brokers," says Kim Macy, president of Macy & Associates, a Venice, Calif.-based real estate marketing concern.

Macy supervised the marketing of Security Pacific Plaza as director of public relations for Tishman West Management Corp. in Los Angeles, which was hired by Met Life to both manage and market the property.

At the time Security Pacific went on the market, Macy says, four other Class A office buildings were also leasing, and all were competing for the high-end corporate, financial, law, and accounting-type tenants.

Rather than engaging in a price war or offering large concessions to woo tenants, Security Pacific was positioned to be above the fray. "Whereas the competition would definitely come down in their lease rates to get a tenant," Macy says, "Metropolitan Life and Tishman West basically said, 'This is the rate. Take it or leave it.'"

Contrary to most office leasing campaigns, Security Pacific's advertising and promotion were primarily aimed at large end users. "Given the high lease rates of Security Pacific Plaza, we were recruiting tenants who would demand a higher level of service from the building management company, which was also Tishman West," Macy says.

While only used in one ad, "We Give You a Sense of Security in Downtown Los Angeles" became the underlying message in the entire campaign. Met Life's long history as a successful owner and investor in real estate gave the building a certain panache and empowered potential tenants with the feeling that they and Security Pacific Plaza would be well taken care of for a long, long time.

Tishman's low-key, high-impact marketing style was a critical element in the success of the leasing program. Security Pacific Plaza was 98-percent leased within two years at rates of $29 to $30 per square foot--$2 to $3 per square foot higher than the competition.

By going directly to tenants and bypassing much of the usual ballyhooing, Tishman West's advertising and promotional costs came to $176,500 or $0.54 per square foot, Macy noted. This included:

* $30,000 for public relations at $2,500 a month;

* $37,000 for advertising, including the creative and production costs for one leasing ad and two "tombstone" announcements;

* $30,000 for one brokers' party and one private reception to celebrate a large lease transaction;

* $42,000 for 3,000 copies of a leasing brochure;

* $4,500 for monthly broker mailing pieces with updated availabilities; and

* $3,000 for photography.

"We marketed Security Pacific Plaza as an exclusive building but also an established one," Macy says. "It's just human nature; you always want what you think you can't have, and in this case it really worked."

35 East Wacker Drive, Chicago

In Chicago, brokers Frain Camins & Swartchild are leasing 35 East Wacker Drive, a 40-storey, 550,000-square-foot building overlooking the Chicago River one block from the business district of North Michigan Avenue.

Originally known as the Jewelers Building when it was completed in 1928, the tower, which features ornate terra cotta and brick detailing, was designed to house the wholesale jewelry industry, but soon became the headquarters for the Pure Oil Company.

Over the decades, the building became a local " landmark," and continues to attract such tenants as North American Insurance Company, the Architectural firm of Murphy/Jahn, and local public relations and ad agencies.

In 1981, Canadian-based Marex Properties bought 35 East Waker Drive. A multimillion-dollar renovation program was begun in early 1989. In a most unusual step, the 23rd and 24th floors, which were formerly used for storage, mechanical, and workshop space, are being rebuilt into 41,000 square feet of office space. According to David Tropp, vice president at Frain Camins & Swartchild, these two floors represent half of the 80,000 square feet of vacant space in the building.

"When Marex bought the building, they saw it as a gorgeous example of classic Chicago architecture with a great deal of potential. It was a solid and well-maintained Class B building. They saw the opportunity to bring it as close to a Class A standard as a 1928 building could be."

As a result, "classic form, modern function" became the theme of the still on-going marketing campaign. "Our biggest challenge since the program began was trying to educated the whole community that this is not the old 35 East Wacker building," Tropp says.

With rents ranging from $22 to $26 per square foot, 35 East Wacker Drive has been positioned between existing Class A and Class B buildings, with asking rents are about $31.50 and $23.60, respectively.

"Our competition is a little bit of everybody," says Tropp. "We are dealing with similar types of buildings as well as buildings that are radically different, including newer steel and glass buildings and renovations.

"To say that we draw a specific type of tenant is erroneous. I wish it were true because it would make my life easier. I could focus on a specific geographic area or a specific type of industry." He notes that there has been a tremendous amount of interest from existing tenants looking for expansion space.

Tropp says that part of the building's appeal is distinctive architecture and visual appeal and its 60-year history. "When people look for office space, they are looking for a building that complements the image of their businesses. 35 East Wacker represents tradition, stability, and attention to detail."

The marketing program for 35 East Wacker started in September 1988, says Peggy McTigue, marketing director for Frain Camins & Swartchild. She noted that while her firm is not a strong believer in advertising as a leasing tool, an ad was developed to raise awareness about the building and change the perception it had within the community.

The ad runs every three or four weeks in the Chicago edition of the Wall Street Journal and in local publications, and is supplemented by a monthly direct mail program to brokers and prospective tenants, an on-going public relations campaign, and direct solicitations.

"You try to do a whole combination of things within a certain time frame," McTigue says. "You want to keep the elements close together so that people will get something in the mail, will see an ad or see a story the next time they pick up the newspaper, and will start to say, 'Gee, this is something I should be looking at.'"

Janet White is a professional freelance writer and is president of White Marketing Services, a public relations and marketing company for real estate firms in the New York City metropolitan area. She was formerly director of public relations for Landauer Associates.
COPYRIGHT 1989 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article on eight marketing strategies
Author:White, Janet
Publication:Journal of Property Management
Date:Nov 1, 1989
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