Among the many facets of the property industry so frequently highlighted there is one important factor that is often overlooked: the development of properties. No, not the actual building, designing, styling, financing, marketing or even planning of projects and individual homes, but the all-important question: what should be built, where and in which quantities?

Normally known as Product Development, it is a vital part of any company’s success, as it actually determines what they produce. Of course, Volkswagen produce cars, L’Oreal produce pharmaceutical products and Iberia produce flights, so product development relates to the more specific choice of car models, hair care product lines and flight routes. Why do some manufacturers produce prestigious limousines and exotic racing cars while others concentrate on the small and mid-sized cars that represent the largest share of the market? Are they even sure we really want or like those cars? Well, the truth is they have a pretty good idea of ours likes and dislikes.

Knowing your market
A businessperson, even one as omnipotent as Bill Gates, is faced with tough choices when deciding which products to develop, produce and sell. The entrepreneur, be he a carmaker or a property developer, will have to decide which products to produce with his limited resources. The crux of the matter is knowing what the public wants.

To ensure success, you have to know your market and how it is broken down into different sub-markets before you can decide which segment to cater for. The most common qualification of a market segment is price, but there are other factors that influence consumer behaviour, such as age, gender, socio-economic background and culture. Each of these groups has different wants and needs, and will buy different types of property in different locations.

Having established an understanding of the tastes and preferences of the market, what do you do? Developers of this kind are often faced with the question: do you play it safe or try to be a market innovator? The choice between these is like the choice between a safe, low-yield investment and a juicy high-risk one. All too often, decision makers of all kinds opt for the safest of choices, the lowest common denominator, but problems can arise when everyone tries to play it safe

The problem is that if 70 per cent of property buyers on the Costa del Sol are in the market for two-bedroom apartments but 90 per cent of property developers opt for this lowest common denominator, then collectively they are in danger of flooding the market with the wrong kind of product or too much of the right kind of product, which is the same.

Building the right properties
Much attention is focused on the construction, design, marketing, promotion and selling of projects on the Costa del Sol, but all of these processes are preceded by product developmentand good product development should be preceded by exhaustive market research. Entrepreneurs must beware to remain creative and in touch with the market; to be market-driven, not married to a possibly outdated affiliation to a particular product type.

A problem all decision makers have to face is the delay in market feedback reaching them, which reduces their ability to respond swiftly to changes in demand. Its a problem that applies particularly to property development, says Diana Morales, founding director of DM Properties. The time between the inception of a project, the purchase of land, the obtaining of permits and licences, and through the process of construction to the execution of the project may involve several years. It makes it even more important to carefully consider the product options before embarking on the project.

Modern computer models help a great deal, but as Diana says: it is also important that developers should talk to agents during this process, as they are in constant contact with the market, not just locally but also overseas. A related problem is that some projects are developed in isolation, with only the individual projects parameters and short-term profit maximisation in mind. The result is often a patchwork of little projects that lack infrastructural and architectural cohesion, and can enhance a sense of over-development that might have been avoided with the benefit of a master plan. In this scenario, those projects which have been well-planned and thought out will always be more appealing to buyers, supporting the claim that quality always sells.

Master Plans
Working to a master plan that facilitates the coordinated development of a far larger area avoids many of the problems highlighted above, allowing not only for greater economies of scale and avoiding wasted resources, but also ensuring a greater visual harmony and the ability to plan in green zones and features that give added value, such as properly located and facilitated shopping and recreational areas.

For a property development to be desirable it has to be attractive both in itself and as an investment. Quality of design and finish, as well as a long list of modern facilities and comforts relate to the attractiveness of the project itself, but none of us live in a bubble, so developers have to take into account the living environment that surrounds their project. If it is enveloped by dense construction, messiness or low-rent areas it will lose desirability, no matter how beautifully finished it is.

The central point here is knowing when NOT to do something. Good developers, by definition, take outside factors into account, for they have the potential of damaging the market in the long run. We know that exorbitant land costs drive up volumes in many parts of the world, but what is lost in volume can be made up for in yield per square metre, and while this option may not be as readily available in more densely built up areas, it is certainly important in a luxury destination like Marbella and many other resorts along the Mediterranean Coast.

By Michel Cruz, copyright of Diana Morales Properties

diana@dmproperties.com