Each year, Washington, D.C.–based RCLCO invites more than 400 master-planned communities (MPCs) to participate in a survey to determine the top-selling MPCs in the United States and to isolate key trends and strategies that influence their performance. Many top-performing MPCs in RCLCO’s 2011 survey had gained critical mass before the economic downturn and most were fairly well capitalized, enabling their developers to continue investing in them even as the economy stalled. This helped the communities maintain credibility with the market. A majority of the best-performing MPCs are located in preferred submarkets, accessible to key job centers, and served by high-quality schools. These factors were important to their success, but do not tell the whole story. Interviews with developers of many of the 20 most successful MPCs across the country show that creative marketing, builder relationships, market segmentation strategies, amenities, product programming, and other factors have also played a role—and offer insights into the future of the master-planned community.
Successful developers have been able to increase sales by finding innovative ways to produce new housing products and amenities responsive to consumers’ needs and price points. They have managed inventories better, learned how to compete with the resale market, and implemented cost-effective marketing strategies. For many, moving from defense to offense resulted in increased market share despite the condition of the local market. Total sales in 2010 for the top ten communities exceeded 7,000 units—above 2009’s tally, but still far below the peak of 22,000-plus home sales that took place in 2005. Most respondents (85 percent) believe that 2011 will end up delivering moderate increases (up to 5 percent) in home sales and home prices.
This year’s top performer, the Villages, is an active-adult community in central Florida that achieved 2,107 net sales in 2010—more than twice as many as the runner-up, the Villages of Irvine in Orange County, California. Gary Lester, vice president of community relations at the Villages, says the MPC’s secret ingredient is offering a social and active lifestyle on an attainable budget. On the opposite coast, and focusing on a much broader market, the Villages of Irvine gained momentum in 2010 after revisiting its segmentation model to better align housing products with market opportunities, leading to 965 sales.
| A waterfall at Teravista Golf Club in Austin, Texas. |
Top MPCs have been getting serious again about market segmentation. As the housing boom pushed prices higher, many MPCs strayed from their segmentation models, chasing larger homes and higher prices. When the market crashed, this contributed to falling market shares. After the downturn, they found themselves lacking product at lower, in-demand price points. They had been recast by real estate agents as “upscale communities,” which made them seem unattainable to some segments of the market. Revisiting segmentation while reeducating staff, brokers, and consumers about “who they are” in terms of price, lifestyle, and amenities has been key.
Developers of top MPCs have worked diligently with builders to adapt their product types to better meet the new market. Builders largely rose to the challenge, often introducing smaller, high-quality, appropriately priced homes on smaller lots. Developers’ expectations for increased lot sales to builders increased twofold from last year, though they say few builders are back to buying in bulk.
Brambleton in Loudoun County, Virginia, has been working to eliminate large lots over the past five years. The community focuses on the quality and character—rather than the size—of product offerings to appeal to a broad audience. Lakewood Ranch in Sarasota, Florida, reworked its product offerings to create smaller residences with high-quality finishes, convincing builders to sell off large models and produce smaller, nicer model homes. FishHawk Ranch near Tampa, Florida, has emphasized high-quality, efficient smaller homes. Daybreak has worked solely with local Salt Lake City builders, who traditionally are more comfortable with innovation, mixing modern and traditional architecture.
In general, developers have maintained a fluid builder strategy, being more flexible, renegotiating take-down schedules, easing builder requirements, and/or creatively structuring profit participation deals. In Houston, for example, the Woodlands’ builder strategy revolved around eliminating standing lot inventory in 2009, catching up to inventory in 2010, and maintaining a four- to six-week inventory in 2011. Today, the builder take-down pace is one of “sell a home, buy a lot.”
It may come as no surprise that the communities that gained the highest sales in 2010 were the best at delivering on their vision and promises. These MPCs continued to make programmed investments to reinforce the message to residents and prospective buyers that the community is a sound investment, that it continues to prosper, and that the developer remains committed to quality. Staying the “quality” course created pent-up demand that emerged as the market recovered. Half of the top MPCs surveyed (20 percent more than last year) plan to increase these types of investments in 2011.
Smart developers have figured out which low-cost/high-value amenities residents want most. In Austin, Texas, for instance, Teravista converted a television theater room into a library and social room, sold the golf course, and separated amenity centers that appeal to different demographics (including young families, mature families, and empty nesters), which pleased residents. Sienna Plantation in Houston captures 0.5 percent of the sales price of each new home to fund the Sienna Plantation Community Services Foundation, a nonprofit corporation that maintains a reserve fund used to modernize older amenities.
| Brushy Lake Park at Sienna Plantation in Houston. |
A survey of FishHawk Ranch residents recently revealed to the developer that they wanted a bigger, better tennis facility. Despite challenging market conditions, the developer moved forward with a major new tennis facility in 2010, which helped create the buzz that FishHawk remains successful and prosperous. The tennis facility also houses the community information center, a move that allows the developer to sell the community in a setting that residents actually use. Last April, Verizon announced that Brambleton—which in 2000 became the nation’s first “wired community”—also will be the first to offer a home monitoring and control service that will enable homeowners to lock doors remotely, view their homes via networked cameras, and set, adjust, and control lights, smart thermostats, and appliances via a smartphone, a computer, or FiOS television.
In marketing MPCs, developers have learned to do more with less. Technology and existing residents are playing important roles in attracting buyers, both in community amenity facilities and social media, where MPCs are creating opportunities for residents and guests to interact. Developers are facilitating interactions between residents and prospective buyers and adding dedicated staff to manage the growing flow of communications that occur through their websites, Facebook, YouTube, Twitter, and so forth.
YouTube was the big factor in 2010, with numerous communities launching YouTube videos to tell their stories. Daybreak ran a home video contest that engaged 4,000 of its residents in creating the content, then produced a commercial that it briefly ran on television—after which the commercial went viral on YouTube, as residents sent links to friends and family. Fewer communities nowadays are using newspaper, radio, or television advertising. Event-driven marketing, on the other hand, has taken off. Charitable events generate positive media messages and are meaningful and fun for residents and potential buyers alike.
Communities are creating sales centers that provide the experience of living in the community, not the experience of being sold a home. Sometimes—as at FishHawk—these centers are set in community recreational or social facilities, which creates opportunities for prospective homebuyers to interact more with residents, the community’s best salespeople.
The experiences of these master-planned communities point to the most critical factor for success in 2011 and beyond: adaptability. Successful communities are adapting to changing demographics, preferences, and purchasing power, and are reinventing themselves to remain relevant. Although absolute sales declined during the downturn, MPCs increased their market share in many areas as builders and consumers made “a flight to quality.” The future belongs to the communities that best understand their consumers and ensure that their features, amenities, designs, and housing products positively reinforce their aspirations. The most successful communities will do this at a finer scale, appealing to a broader range of market niches and working closely with builders to deliver products matched to their customers’ lifestyles.
Most interviewees expect that as job growth gradually reduces unemployment and foreclosures, and short sales continue to work their way through the marketplace, pricing will gradually stabilize and overall market demand will grow. This likely will take several more years, however, so—in the near-term—MPC success will continue to require the kinds of creative strategies employed by the communities profiled here.
