Borrowed Approach Could Boost Building Products Industry

21 Nov

How Customizable Rental Properties are Working in Some Markets.

In spite of what economist are saying, increasing home sales might not be the only way to boost the post-recession building product industry.

As a Federal Reserve economist told Builder News Magazine, “The United States needs to make it more attractive for capital to flow back into the housing market to get the residential real estate industry — and the economy — back on track.” 

But, increasing real estate sales is not the only option. This may be the time to look to other markets for inspiration, to see how they have handled selling building products when there are fewer homeowners to sell to. An example of such a market is Hong Kong.

The Shell Approach

A.P. Hurd, an Affiliate Fellow of the Runstad Center for Real Estate Studies in the College of Built Environments at the University of Washington, recently made a research trip to Hong Kong.

According to his article in Metropolis Magazine he discovered that 33% of the Hong Kong population lives in government subsidized housing rented out as bare shells called ”Housing Estates”. The renter then finishes the space with their own flooring, cabinetry, appliances, light fixtures and air-conditioning units.

Why Shells are Successful

Because of the investment involved, “Many stay in the unit they were first assigned for the rest of their lives,” mentioned Hurd.

Would this approach work here in the states? Renters could benefit from creating a home that’s a custom fit for them, and the building industry could make profits outside of the home owner channel.

5 Benefits of Renting “Shell” Spaces

  1. Renters take pride in owning their own finishes
  2. Decreased turnover for property owners
  3. Renters can customize to their needs & taste
  4. Increased sense of community from long term leases
  5. Less upkeep cost for property owners

As Hurd puts it, “In the end, this approach may be a tremendous lever—an important alternative to home ownership—to align renters in a fundamental way with the success of their communities.”

In the least this model is an example of how innovation can do more than work around a problem, it can remove it from the equation.  But at most, it could change the market and the way we think about real estate sales.

Sources and Additional Articles

2 Responses to “Borrowed Approach Could Boost Building Products Industry”

Trackbacks/Pingbacks

  1. Building Products: 4 Tips for Asking Informative Questions that Drive Sales « Depth Finder - December 13, 2011

    […] Borrowed Approach Could Boost Building Products Industry […]

  2. 7 Ways Building Product CMOs Increase Financial Fluency « Depth Finder - January 5, 2012

    […] Borrowed Approach Could Boost Building Products Industry […]

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