Real Estate Investment Trust - Essay Example

Marketing Research 1. Introduction Marketing Research is broader than the market research and includes the later. The aspects like new products, modes of distribution are also a part of this research. In this paper instead of product, new format of company; Real Estate Investment Trust is taken to decide the demand in the sector as the chosen sector is Real Estate. Marketing Research is a function that enables to link consumer, customer and public with marketer through information. This is used to recognize and define marketing opportunities and problems that are generated and solved during the process of business. The evaluation of marketing action and monitoring of marketing performance arise from identifying marketing problems and the solutions. This is termed as a company’s marketing process according to Palmer in 2000. The marketing mix, competitors, markets and all the policies to deal with the customers are the constituents of marketing research. The information from marketing research is gathered in a synthetic process. Some times it focuses on a question or a problem also like the falling or rising sales of a company or in an area. The methods used in collecting the data are very important. The telephone surveys, arranging focus groups are some of them. In this paper the results from reliable surveys done by famous firms are taken into consideration. Usage of random sample, stratified sample, cluster sample will give more clarity to the data collected. Next comes the part of analysis. The analysis of the data collected is very important. The techniques used, decide the degree of accuracy and this sometimes depend on the budget and timeframe also along with the samples used. Collecting the data, analyzing it and checking for mistakes at the end of it are important tasks before making a final report. Secondary data need to be considered as well as the primary data. The primary data is collected from surveys and the secondary is collected by desk research. 1 2. Survey Surveys are important to know the size and segment trends in a sector. Considering real estate market as the sector of the research, the surveys include representative telephone surveys, web/email surveys, intercept interviews, internet based research, in depth interviews and collection of important information regarding the sector and analysing it. The surveys conducted by Property Week, Financial Times, DTZ, Mc Carthy & Stone and UN are taken into consideration in this paper. The tracking of real time key questions is important in the market survey. One of the important real time questions is size of the market and the space for new entrants. The initial design of marketing research depends on the size of the sector considered and producing enough data about it. 2 Size: The size of the UK real estate market is up to the extent of GBP 50 Billion in 2006 and it is increasing. The real estate financing from different organizations like IREF helps it to grow further by increasing and meeting the growing demand. This may result in further segmentation. This results in forecast of experiencing a major boost in 2007 being standardised in 2008, as by that time the investments will be materialized and the operations of different organizations may start. One out of number of aspects that help the real estate market to flourish in UK is the proposals of Arab British Chamber of Commerce’s endorsement to promote real estate sector in UK. Out of the total 50 billion GBP of real estate market in UK, the Middle East business men are investing about 1.42 billion and the investments from remaining countries may flow too. This is capable of resulting in more demand for land and houses in UK thus giving a major boost for real estate and infrastructure sector. The investors from Asia are a majority of equity buyers and this indicates that the corporate companies regarding real estate sector in UK are about to increase or grow in size, resulting in more corporatisation of UK real estate thus triggering the construction of houses and commercial places in large numbers to meet the growing need. 3 The macro environmental factors decide the course of external environment. This is a fundamental analytical tool to understand the market growth and decline thus evaluating the regulatory and economic effects including social and technological advances. As the social, technological and economic factors are showing healthy trends in UK, the demand for land and constructions increases and this helps in consolidation of corporate companies in real estate sector of UK. The policy stability in the country irrespective of any political party in power helps in attracting investment and helps in growth of economy. The faster economic growth helps in increasing demand for infrastructure, land and constructions. The leisure interests in a wealthy country like UK increase demand for leisure activities and construction of hotels and other entertainment centres can take place. This is capable of creating a boom in real estate and construction market. The technology in UK is world class and it ever helps the real estate sector to grow by helping in producing materials that help in cheaper and quicker construction. 4 Segmentation: The classification of real estate market for portfolio diversification should reflect on fundamentals. The heterogeneity in property investment strategies in US continue to increase portfolio diversification and thus resulting in more segmentation of the market into rentals and property sellers. Local markets are grouped on the basis of cluster analysis and changes in rentals. The rentals and changes in them are key dimensions of underlying influence. This is due to the regional classification and super regional classification. The grouping is appropriate in corporate sector and this may result in emerging more corporate firms in real estate sector of UK and high investments could work out profits in the coming years. The return and risk in real estate sector is less and minimum as the products cannot be spoiled and this less risk is suitable for large investors or corporate groups who can wait for a substantial period for reasonable returns. The appreciation and capital return can be calculated at substantial standards for long term investments. Taking this analysis into consideration, the long term investments can be considered as the investments that give enough scope for marketing of real estate services and products. Another point that discusses liquidity in real estate in long term investment view can also be discussed. In this point of view, the current state, income and anticipated income and state that are expected to change in near future will be reflected within the appraisal. Thus change or to be clear, rise in income levels form a basis for compulsory consideration of real estate returns and the returns on the investment. As there is no decline observed in the incomes of the people in UK, the returns can be termed as safe, though they may not be termed as profitable. 5 Real Estate Investment Trusts: The legislation enabling the creation of real estate investment trusts in 2006 has accelerated the process of corporatisation of real estate in UK. As REIT regime commenced from 1st January 2007, the effect of those investments and the returns from them can be found in 2008 and this may increase investments in these trusts. This again is capable to have an environment that is favourable to a growing real estate sector in size and investment. This ensures an extra safety for corporate investments in UK real estate sector as it bestows exemption from tax on relevant property profits. These entities withhold tax from dividends paid to shareholders from profits. In this manner the legislation is investor friendly and helps in organising the present highly fragmented real estate sector. Moreover this increases demand for real estate as a real estate investment trust floated, invests up to some extent and collects capital from share holders. This enables small investors also to take part in corporate investments and investing in real estate. The collective investment of the people who cannot invest individually in real estate helps in increasing demand to land and houses or other commercial complexes as substantial number of the share holders may not invest in the absence of real estate investment trusts. The flexibility and liquidity in the property in REITs may result in attracting more investment. The conversion of present firms to REIT and setting up of new REITs are termed to be better alternatives in the present UK real estate market. The conversion of present companies into REITs or set up of new REITs include modelling, impact on the group, share holders, listing advice and advice on pre conversion is needed and this results in employment in ancillary sectors that offer consultation services. As there are number of firms offering advice on technology solutions and compliance obligations and legislations are favourable, there is every opportunity for an REIT to be successful in real estate market and it is advisable to invest in forming a REIT for new investors in UK real estate. The REITs not only perform property creating and selling, they can do the business of property hiring also. This results in not only one time return but ensures the sustenance of returns for a substantial period thus enhancing the security for the investment. 6 Surveys regarding a factor that can influence the real estate market: According to a survey of Property Week, Financial Times, DTZ, UN, McCarthy & Stone, the activity in UK senior living sector has been picked up in 2007 and entrance of American operator Sunrise Senior Living into a joint venture with Pramerica Real Estate results in growing further demand in this sector. The collaborations and acquisitions include acquisition of Peverel by Consensus Group for GBP 500 million resulted in largest owner of UK retirement home freeholds. In terms of market and demand that is conducive to investing in this sector, UK senior living sector presents attractive medium to long term dynamics of investors. This is due to increasing demand that is driven by demographic realities. As there is a rapid growth in aging population who can invest and need homes or commercial complexes, a short fall regarding retirement homes is anticipated and this is capable of finding place for new investments. Though there are high barriers due to planning restrictions regarding acquisition of land, the investors can access the market through sale and leaseback transactions and joint ventures with special operators. This is possible as this sector is operationally intensive. The investment in Senior Living sector and the emergence of REITs in UK real estate are capable of consolidating the fractured UK real estate market and thus making it investor friendly. The corporate acquisitions like that of the ones mentioned above also are offering a boost for growth in real estate market. One more fact that is evident from surveys of Property Week, Lehman Brothers, DTZ, Steel Storage Europe Survey 2007 is that there are successful completions of IPOs like that of safestore holdings. The company has raised GBP 209 million and Big Yellow Group has got approval to convert to REIT status. Adding to this HSBC specialist investments purchased Edinburgh based Armadillo self storage and Macquarie Real Estate has a joint venture of GBP 140 million with Storage King. All the above transactions are indicators for the growing demand in real estate market. These activities are due to buoyant growth that is expected to take place in this sector. The data collected in the above mentioned surveys is supported by increasing population densities in various places of UK. The increase in consumer spending and rise in work force mobility can help in increasing demand in real estate sector thus inviting more investments. It is an observation in the above mentioned surveys that the increase of supply is difficult, though the companies are creating growth through development. This deficiency in increasing supply can be a factor to attract more investments to ease the supply of real estate properties to customers or tenants. The environment in UK real estate market is investor friendly as it allows the real estate investment as a cash generating operation of business. The anticipation of strong activity at corporate level is a healthy indication for UK real estate market. The opportunities in UK real estate market for further consolidation is due to the factor that the 50 percent of facilities in UK are in the hands of top ten self storage operators.7 References: 1. Marketing Teacher, 2008, Introduction to Marketing Research, Marketing Teacher, Edition 9, Retrieved on 7th January 2008 from http://www.marketingteacher.com/Lessons/lesson_marketing_research.htm 2. Axiom, 2007, Our Process, Axiom, edition information not available, Retrieved on 7th January from http://www.axiombpm.com/market_research.html 3. IREF, 2005, Islamic Real Estate Finance, A Two Phased Approach, IREF, edition information not available, Retrieved on 7th January 2008 from http://www.islamicrealestate.com/IREF2007-registration_form.pdf 4. Koncept, 2007, UK Real Estate Market, Report Buyer, Edition Information not available, Retrieved on 7th January 2008 from http://www.reportbuyer.com/business_services/real_estate_agents/uk_real_estate_market_pest_analysis.html 5. White, Michael, 2005, Challenging Traditional Real Estate Market Classifications for Investment Diversification, Journal of Real Estate Portfolio Management, Edition information not available, Retrieved on 8th January from http://www.allbusiness.com/legal/contracts-agreements-real-estate/1035166-1.html 6. KPMG, 2008, Real Estate Investment Trusts (REITs), kpmg.co.uk, edition information not available, Retrieved on 8th January from http://www.kpmg.co.uk/industries/re/reit/ 7. Market Overview, 2007, G-REITs Arrive; Sustainable Development Gains Interest, M/3 Capital Partners, Edition information not available, Retrieved on 8th January from http://www.m3cp.com/files/M3%20Europe%201Q07.pdf Read More