Because I’m a real estate geek, I’m continuously looking at sales metrics, updating my databases, and endeavoring to uncover useful information. In this post, I’m attempting two things: 1) offer some perspective on sales in downtown Austin’s high profile buildings, and 2) predict when those buildings will approach being completely sold. If you just want the data then skip to the end.
One of my mentors shared with me an insight: the first buyers are innovators – early adopters that fill up the bandwagon and help throttle the acceptance of something new. It applies to new real estate development, as much as it does to new technologies.
Now that the cranes are long gone, where are the new construction projects in their sales cycles?
The first stages of a building’s sales and marketing efforts begin long before the building receives its certificate of occupancy. Reservations and earnest money can begin to transact before earth is moved. Once the building is ready for move in, you will observe a surge in closings from the build up of pre-sale contracts. Conversely, when a building is approaching completion of its sales and marketing, the remaining units can take the longest to sell.
I’m a believer in the Crossing The Chasm theory of marketing. Though it was developed to highlight “disruptive” technologies, it makes sense when applied to the recent business of downtown Austin luxury condos. When conceived, the downtown luxury condos were audacious, unproven, and “disruptive” to the Austin real estate market.
The most difficult step in marketing a new project, consistent with the Crossing The Chasm theory, is making the transition between visionaries (early adopters) and pragmatists (early majority).
Further, the theory posits that marketing dollars and efforts should focus on one group of customers at a time, using each group as a base for marketing to the next group. Focus on the bandwagon first, and attract skeptics later.
The Research, Counting The Deeds
Scouring recorded deeds for each building, I gave best efforts at “auditing” the actual closings of new construction sales of downtown Austin condos. The set of buildings we are focused on are: the Austonian, Four Seasons Residences, W Hotel Residences, Spring Condos, and 904 West Ave (no other downtown condominiums are planned).
The spreadsheet I created can be downloaded by anyone interested (.xlsb).
Why is this important?
Transparency. We all have bias, naturally. Sensationalist headlines in mass-media compound the problem.
Here in the trenches, my job is to drill down to the truth and help educate.
Using The Data To Gain Perspective
As it relates to Crossing The Chasm, our set of new/luxury construction condos in downtown Austin have leaped the chasm and are in the early majority stage, late majority stage, or beyond. The Four Seasons is heading into the late majority phase. The Spring Condos can be considered well into the laggard stage of its adoption cycle with 11 units (4%) remaining out of an original 247.
Additional Steps, Making Estimates
Knowing the date of the first closing for each building, and knowing how many condos have sold through September 1st, we can calculate the average time it took for each sale.
Using that metric we’ll project into the future, and estimate when the building could close out. To be consistent with our application of Crossing The Chasm, we’re going to estimate when each building could enter the laggard stage of the cycle.
This prediction is an extrapolation of the historical data. Better estimates could be made by qualifying the data. We won’t go into that here, though please use the comments. So, take it with a grain of salt.
In the table below, the far right column shows an estimated date when each building enters the final stages of its sales efforts.
New Construction Data - Deeds Counted From County Clerk
|# of |
# of Days
|Trending Completion Date (estimated)|
|Four Seasons Residences||May 7, 2010||81||148||55%||67||6||October 2012|
|Spring Condos||August 17, 2009||236||247||96%||11||3||October 2011|
|W Hotel Residences||January 10, 2011||65||159||41%||94||4||August 2012|
|The Austonian||June 10, 2010||69||163||42%||94||6||May 2013|
|904 West Ave||November 24, 2010||15||24||63%||9||19||March 2012|