The Blue Ocean Strategy in Commercial Real Estate: Creating Your Unique Market Space

The Blue Ocean Strategy in Commercial Real Estate: Creating Your Unique Market Space

The Blue Ocean Strategy in Commercial Real Estate: Creating Your Unique Market Space

In the world of commercial real estate (CRE), competition is fierce, and many markets are crowded with players vying for the same deals and clients.

Yet, some professionals seem to operate in a league of their own, with deals flowing to them and competition seemingly nowhere in sight. How do they achieve this? Often, it’s because they’ve adopted a Blue Ocean Strategy, a concept that’s not only transformed global business strategy but has powerful applications in CRE.

“The only way to beat the competition is to stop trying to beat the competition.”

Understanding Red Oceans and Blue Oceans

To grasp the power of the Blue Ocean Strategy, it’s essential to understand the difference between “red oceans” and “blue oceans”:

Red Oceans In red oceans, industries are well-defined, and competition is intense. These markets are saturated, with businesses battling over limited opportunities, leading to a “bloodbath” of cutthroat competition—hence the term "red" ocean. In CRE, red oceans can include highly saturated sectors like multifamily apartment syndications or traditional office space leasing in competitive cities. Here, firms operate within established rules and compete on similar offerings, often reducing profitability in the fight to stand out.

Blue Oceans Blue oceans, on the other hand, represent untapped market spaces with little or no competition. Instead of competing for a share in an overcrowded market, businesses in blue oceans create their own demand by offering unique solutions, often pioneering new markets or niches. In CRE, a blue ocean strategy might involve targeting an under-served asset class, leveraging a unique investment strategy, or focusing on an emerging geographic area.

Creating Your Blue Ocean in CRE: Breaking Free from the Red Ocean

Moving into a blue ocean requires creativity and a willingness to diverge from conventional practices. Let’s look at specific examples of how CRE professionals can apply the blue ocean strategy.

Example 1: Moving Beyond Apartment Syndication with Land Entitlement and Development

The multifamily market is a classic red ocean in CRE. Apartment syndications are a popular investment, and many investors are competing in this space, often targeting similar apartment complexes with similar strategies. But what if you could step outside this crowded market?

One way to create a blue ocean within CRE is by shifting your focus from traditional multifamily syndication to land entitlements and developments. Here’s how this can work:

• Land Entitlements: This involves acquiring raw land and securing necessary approvals for development, such as zoning changes, permits, and utility hookups. The entitlement process adds significant value to land, creating a prime development opportunity that’s often in high demand. Few CRE players specialize in this, so competition is far lower than in multifamily syndication.
• Development of Mixed-Use or Niche Properties: Instead of competing in traditional apartment deals, focus on developments that meet unique market needs, like build-to-rent communities or mixed-use properties that combine retail, office, and residential space. These kinds of developments can attract investors and tenants interested in innovative, community-oriented spaces, setting you apart from the crowded multifamily syndication field.

By stepping away from the over-saturated multifamily sector, you enter a market with fewer competitors and create demand for specialized offerings that add substantial value and differentiation.

Example 2: Specializing in a Unique CRE Brokerage Niche

If you’re a CRE broker, you might feel the intense competition for clients, particularly in general CRE markets where many agents handle any type of deal. However, applying a blue ocean strategy could involve focusing exclusively on a hyper-targeted niche, where your expertise and specialization create demand.

Let’s say you decide to focus on 50- to 100-unit apartment complexes built after 1980 in Kansas City. This niche is specific enough to set you apart yet broad enough to maintain consistent deal flow. But you can drill down even further:

• Geographic Specialization: Narrow your focus to specific zip codes within Kansas City. By becoming the go-to expert in, say, the 64111 and 64112 zip codes, you can develop unmatched expertise in the area. You’ll know every property, every owner, and every deal that has taken place. Clients in these zip codes will turn to you for your hyper-local expertise, effectively making you the top choice for brokers within these boundaries.
• Building Age and Size Specialization: By only targeting properties built after 1980, you limit competition and create a more specialized portfolio. Your clients will know that you understand the nuances, market values, and operational concerns of these specific properties.

With this focused blue ocean strategy, you’re no longer competing with every broker in Kansas City for every property. Instead, you’ve carved out a market segment that values your unique expertise and brings clients directly to you.

“Blue oceans are vast, deep, and powerful in terms of opportunity and profitable growth.”

How to Find Your Own Blue Ocean in CRE

Creating a blue ocean in CRE doesn’t require a complete reinvention—it’s often about identifying under-served areas within an existing market. Here’s a step-by-step process to help you find your blue ocean:

1. Analyze Your Current Market: Identify where competition is fiercest and where opportunities are limited. What sectors or asset classes feel overcrowded, and what are competitors all doing the same way?
2. Identify Unmet Needs: Look for gaps in the market or under-served client needs. Is there a demand for specialized services, unique property types, or overlooked geographic areas? Research market trends and potential demands that others aren’t focused on yet.
3. Develop Specialized Knowledge: Once you identify a potential blue ocean, start building deep knowledge and skills in that area. Become the go-to expert by understanding the intricacies that others might overlook.
4. Focus on Differentiated Value: Blue ocean strategy emphasizes creating value that resonates deeply with clients. Instead of simply lowering costs or making incremental improvements, innovate on factors like unique offerings, service quality, and specialization to create demand.
5. Refine and Market Your Niche: Don’t be afraid to double down on your blue ocean. Tailor your marketing, networking, and business development efforts to reinforce your unique position. Emphasize your specific expertise, your understanding of the market’s needs, and how your approach differs from the mainstream.

The Impact of Nailing Down Your Blue Ocean in CRE

When you nail down your blue ocean, the benefits go beyond just closing deals. A well-defined blue ocean brings three core advantages:

• Reduced Competition: By operating in a unique market space, you face less competition. Instead of competing for every deal, you’re working within a space where you are one of the few—if not the only—specialist.
• Inbound Leads and Referrals: As your reputation grows within your niche, clients will seek you out. By being known as the expert in a highly specific field, you’ll experience an increase in referrals and inbound leads. Investors, buyers, and sellers will come to you for your expertise.
• Higher Deal Velocity and Profitability: Specialization leads to efficiency. With deep knowledge of your niche, you streamline deal processes, maximize your expertise, and enhance profitability. Deals close faster because clients trust your authority, and they may even pay a premium for your guidance.

“Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.”

Final Thoughts

The Blue Ocean Strategy offers a powerful framework for CRE professionals looking to rise above the crowded, competitive red ocean markets. By specializing in an under-served niche or creating new value in existing markets, you create a space where competition is limited and demand flows directly to you.

In the end, finding your blue ocean means more than just fewer competitors—it’s about becoming the expert others seek out, the one who brings unique solutions to the table, and the one clients remember. So, whether it's land entitlements, specific property types, or hyper-focused geographic areas, consider where your blue ocean might lie. The impact can be transformative, not only for your business but for your entire career.

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