Succeeding with any type of business that involves real estate always requires plenty of skill, energy, and market-specific knowledge. Vertically integrated real estate companies that feature several distinct types of expertise, though, manage to become masters of a number of distinct domains. As those who contact NRIA or another leading business of this kind will see, that requires a deep commitment to excelling in a variety of ways.
Working Toward Vertically Integrated Excellence
It used to be much more common for companies that focused on real estate to stick resolutely to particular, sharply delineated types of activities. More recently, leaders in the industry have been leveraging vertical integration to become more efficient and capable than most businesses that have stuck to more traditional approaches.
When carried out strategically, vertical integration can allow a real estate business to minimize friction and take advantage of economies that would not otherwise be accessible. Moving several types of activity under one roof can make it easier to produce results even in particularly challenging and competitive real estate markets.
Tackling the Challenge of Vertically Integrating a Real Estate Business
While there are plenty of benefits to be enjoyed as a result of successful vertical integration, it always takes a great deal of effort and commitment to prevail. Some of the kinds of activities that most often end up becoming central to vertically integrated real estate businesses are:
- Fund management. Many real estate development companies today still rely on partners who handle the raising, distribution, and management of capital. That necessarily means imposing a barrier between investors and developers, which is rarely all that desirable. Real estate companies that combine fund management expertise with other types of activities tend to run leaner, more efficient operations. That can boost the returns of investors and make subsequent funding campaigns easier to carry out.
- Development. Being able to develop projects suitable to targeted markets inevitably takes a great deal of finesse and skill. Development is so crucial to the real estate industry that it can only be regarded as an absolutely fundamental activity. While some companies strive for decades to become truly formidable developers, others have managed to do so while also developing other skills to the same level in pursuit of vertical integration.
- Property management. Managing properties is a specialized undertaking that can end up being one of the most critical of all to the cause of profitability. Handing property management duties off to a partner might seem reasonable in many cases, but it will always contribute to increased costs. Vertically integrated real estate companies that can manage properties effectively often thereby produce improved returns for investors.
A More Modern Model for Real Estate Companies
While there are other types of vertical integration that can be worth pursuing, most of the exemplars of this approach in the real estate industry incorporate at least these three types of expertise. Vertical integration is not a panacea and can, in fact, make for especially imposing challenges. Companies that do succeed at leveraging the power of vertical integration, though, often find themselves become leaders in the real estate industry as a result.
