Taking on Goliath
Jul 1, 2007 12:00 PM, By Elaine Misonzhnik
When executives at Paul Hemmer Companies, a Fort Mitchell, Ky.-based construction and real estate firm servicing Kentucky, Indiana, Ohio and Tennessee, decided to expand their retail division five years ago, they knew they were in for a challenge. The move, part of an overall growth strategy, was helped by the signing of several contracts with national retailers, including Ace Hardware and Dollar General, but it required the establishment of new contacts in the retail real estate community and the development of expertise in shopping center building and management. Previously, Paul Hemmer concentrated on industrial and office space.
Though the transition was difficult — the new areas of specialization required Paul Hemmer to create separate departments for construction, development, marketing and administrative functions, as opposed to having everyone work on the same projects and it paid off. A few months ago, the Cincinnati Business Courier put the firm on its list of 55 fastest growing privately held companies in the region. In May, the Cincinnati USA Regional Chamber of Commerce named it the top Small Business of the Year. And the 2007 ICSC Spring Convention marked the first time Paul Hemmer had a booth on the trade show floor. In the past, the firm's executives were attendees, but not exhibitors.
Hemmer's success shows that even in a world where the top 10 owners of retail real estate command a combined portfolio of more than 1 billion square feet, there is still plenty of room for small operators.
The challenge, though, is that increasingly REITs are expected to encroach upon niche areas where smaller developers have thrived, says Stanley Eichelbaum, president of Marketing Developments, Inc., a Cincinnati, Ohio-based consulting firm.
For now opportunities remain, he says. “We are still in a period of market elasticity and there is a reasonable amount of work out there that smaller firms can participate in,” he notes. “But [in the future], the world of opportunity for smaller developers will be more constrained than it has been.”
That means smaller firms that would like to succeed in shopping center development will have to pay closer attention to their business strategy. And the bit of wisdom that most old-timers, including Paul Hemmer Companies, offer is this: don't try to be David to the REITs' Goliath. The best thing that a smaller firm can do is take advantage of its size by becoming an expert in one product type, developing strong relationships within the real estate community in its home market and positioning itself as one that can offer retailers a level of local knowledge the nationals won't be able to match.
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