Document View

Pass by any condominium or office building construction site, and the odds are many of the units were sold to future tenants before the first brick was laid. Pre-selling or pre-leasing buildings under construction is not just a desirable way for owners to pocket some tenant cash up front; it is now often required by lenders before they will consider funding a new development. But advances in computer technology are helping building owners lease up space without decreasing rent prices. Because today's digital tools have proven so effective, more real estate investors are spending money on technology. Computer renderings are not the only way to get prospective tenants or residents to appreciate the lay of the land: Virtual tours offer a bird's-eye view of a property for a range of prices. While using technology to market properties has a price tag, the price of not selling out units can be more costly.

Enlarge 200% Enlarge 400%

Pass by any condominium or office building construction site, and the odds are many of the units were sold to future tenants before the first brick was laid. Pre-selling or pre-leasing buildings under construction is not just a desirable way for owners to pocket some tenant cash up front; it is now often required by lenders before they will consider funding a new development.

"The developers really have to be knocking on doors and getting lease commitments from prospective tenants before they can even start breaking ground on a project," said Lynda Clarke, CPM, and vice president of property management for Oregonbased real estate firm Norris, Beggs & Simpson.

Despite the growing number of investors nationwide willing to prebuy-hoping to get in early on a potentially lucrative investmentselling residential or office space in a nonexistent building hasn't gotten any easier.

Convincing potential building occupants of the virtues of living in a space they can't see, touch or walk through can be a tough pitch. And often, offering units at a discounted price is the trade-off for signing tenants up early.

But advances in computer technology-like high-quality computer renderings showing realistically detailed floor layouts and virtual tours allowing prospective tenants to cyber walk through a computer-generated building-are helping building owners lease up space without decreasing rent prices.

"[Technology] has enhanced the traditional sales model," Clarke said. "I can imagine-based on the tools we have today-that it must have been really difficult [back in the day] to be able to sell an empty building or a building that doesn't even have steel going up in the air yet."

DIGITAL TOOLS GIVE VISION

Because today's digital tools have proven so effective, more real estate investors are spending money on technology. Clarke said owners and managers formerly relied mostly on blueprints to walk potential investors through a property to help them visualize their spaces. Now, more companies use advanced computer renderings to show floor plans to prospective tenants.

"The black and white of those blueprints can now be modeled on the computer as a 3-D image," Clarke said. "It's as if prospects are standing in the finished product. [Digital models] take it one step further than what the blueprint can convey."

Digital models, available on the Web or burned on CD, reveal the views from various windows and give aerial images of the building's exterior. With the click of a mouse button, users can change the visual perspective from which they view the building.

The Equity Company, a residential properties developer in the Boston area, is using computer renderings for its latest project-The Residences at Franklin School, a former school being rehabbed into 20 two- and three-bedroom condos. The building is scheduled for completion in June. It is the first project for which Equity has created all of the building's marketing illustrations on a computer.

"[Most buyers] are not that visualIy oriented when it comes to what they will be seeing when the space is finished," said Equity's president, Rick Williams. "It is important to find tools that help them imagine the value in the space or their homes, when finished."

Williams said the renderings have created a certain level of excitement among the sellers and brokers involved in the project-a level of excitement printed brochures failed to create on other projects. He said he believes the computer renderings will positively affect his bottom line.

"Historically, you would see some price reductions if you bought before construction was completed," Williams said. "But certainly, the more you can get people to appreciate what the property will actually look like and what the perceived value will be, I'm sure that reduces the amount of discount you have to provide to get people to make a commitment before the property is completed."

VIRTUAL TOURS, REAL PRICES

Computer renderings aren't the only way to get prospective tenants or residents to appreciate the lay of the land: Virtual tours offer a birds-eye view of a property for a range of prices.

Rich Hegarty, founder of Tube Media Productions, a Boston-based video and multimedia production house, has created computer renderings and virtual Web tours for several real estate clients. He said the cost for enhanced computer models varies widely, depending on the features included.

Computer renderings can cost between $10,000 and $40,000, while a package containing renderings, a virtual tour and a promotional video can cost upward of $60,000, Hegarty said. He said that range isn't a precise estimate, though, because clients can use varying degrees of technology to determine the price. Ten years ago, the range was pricier, he said-between $50,000 and $70,000.

"Because we're all digital now, the overhead is a lot less," Hegarty said. "The technology has become a lot more affordable."

Landers Symes, president of Symes Associates, a Massachusetts-based residential developer, said the company recently sold more than 60 percent of its units at Wakefield Crossing, a multibuilding condominium development in Wakefield, Mass., before the project was near completion-thanks in part to a Web site touting computer renderings and a sales video including a virtual tour.

Symes said he plans to use computergenerated material for all his major projects, now that such technology is more affordable for his company. He said the cost of offering virtual tours on his various developments' Web sites runs, on average, between $3,000 and $5,000. Overall, his projects' Web sites cost between $10,000 and $15,000, on average. However, Symes said the technology pays off.

"You'd be hard-pressed to say these virtual tours don't help you on presales," he said. "You've got to be able to do something to sell these units that aren't built, and I think Web marketing and virtual tours are a good way to do it."

HARD COPIES, HARD SELL

While using technology to market properties has a price tag, the price of not selling out units can be more costly.

David Gilkie, vice president of the commercial real estate firm Nordblom Company, has been marketing commercial and industrial space for more than a decade. He said using renderings and virtual tours as marketing tools is effective because tenants are so concerned with the look of a building-including how common areas will be set up, and how lighting and wall treatments will look.

Enlarge 200% Enlarge 400%

"The best way to tour a property is to visit it. But the next best thing to do is a virtual tour," Gilkie said. "Pictures are worth a thousand words, and virtual tours are able to create that picture. You're selling something that doesn't exist, and to give someone an understanding about what the property is going to ultimately look like is very important."

Advances in computer design technology can go beyond helping building owners market their projects. Those advances can potentially change how owners decide to design future buildings, said Pradeep Chintagunta, a marketing professor at the University of Chicago Graduate School of Business.

"You can use this [technology] as a way of testing to see whether the market prefers one design to the other," Chintagunta said. "What you could do is put three possible designs out there and then see the design that consumers seem to like much better; it gives an opportunity for companies to experiment without going through expensive marketing research."

No matter how real estate professionals decide to use them, today's digital tools hold far more potential than the ink-and-paper methods of the past.

"I know some of the materials people were using 20 years ago [were] hand sketches of the building," Clarke, of Norris, Beggs & Simpson, said. "But considering where computer technology was back then, that was the best people could do. There's a big difference now. We're just seeing the tip of the iceberg in terms of tools that will be available to developers and brokers."

Symes, developer of Wakefield Crossing, said investors have come to expect such technology when considering buying into a property.

"The days of handing out blackand-white flat pieces of paper with floor plans...are over," he said. "People are expecting this, so if you don't do it, you're going to look like you're behind the times."

Enlarge 200% Enlarge 400%