The commercial real estate market offers some of the best potential ROI of any asset class and continues to outshine the threat of recession. Still, no investment is free of risk. The possibility of taking a loss can be nerve-wracking for investors, especially those who are new to the CRE market. With the word “downturn” buzzing through the air, some previously loyal and committed investors are getting spooked. As a result, you may find that fewer of your traditional investor base are responding to your deals and opportunities.
Amidst the fear of fewer sources of committed capital, there is plenty of reason to maintain a positive outlook. In fact, 97% of investors intend to increase their investment in real estate over the next 18 months despite a flattening yield curve. The difference will be where this money goes. Competitive, crowded markets give investors plenty of options when it comes to allocating funds.
Further, the investor landscape is changing, and many first-time investors may not clearly understand the value associated with an investment. When it comes to investor retention, the greatest risk occurs with new investors who may feel their experiences are not what they initially anticipated. Many first-time investors jump in and then get cold feet, expecting a huge payout and then facing the reality of market volatility.
Build and Maintain Meaningful Investor Relationships
Most of your investors are informed and financially savvy and will respond favorably to you when you acknowledge that they have this awareness. Communicating directly about both victories and challenges will help your investors to feel like they are active collaborators in the process, rather than passive observers. Instead of vague communication and platitudes, provide meaningful information and keep an open line of communication.
Once you have a vote of confidence from investors, it is important that you continue to meet and exceed their expectations. For example, the modern investor is not going to be content with quarterly reports. Investors want to be in the know at all times, with unfettered access to the details and performance of their portfolio. These insights provide your investors with increased control over their investments, creating comfort and confidence amid the unpredictability and risk of investing.
A technology such as IMS provides investors with 24/7, everywhere access to dashboards. This open exchange of information facilitates a more collaborative type of relationship. When investors have concerns, they will feel they have an open line of communication to address these concerns, and they will feel you respect them enough to keep them informed.
Transparency with investors is the crux of the investor and sponsor relationship. Striving for transparency enhances the client experience by providing the context and security that comes with information and insights.
Technology makes it easier than ever to be transparent with investors by providing 24/7 on-demand access to investment data and enabling more regular and efficient communication. These factors drive better engagement and help to establish and maintain a trusting relationship. Two-thirds of investors cite transparency as being an important consideration when making an investment. Today’s investors want to feel confident that they are making an informed decision about choosing a sponsor, and transparency helps them to feel good about that choice.
According to Fast Company, “Transparency is one of those subtle things that can make a dramatic impact on a business … It helps everyone do business better – you, your clients, and your team members.” Commit to your investors by building trust through transparency, and your investors will commit to you.
With so many options, technology can be overwhelming, and based on adoption and usage, it can either work for or against your firm. For example, 59% of CRE investors begin their commercial real estate search online, and 86% use online services or tools at some point in their search. Your investors are likely perusing your competition’s offerings and could jump ship if they find an opportunity they prefer. CRE firms that haven’t adopted a digital strategy are now behind the curve.
The good news is that it’s not too late to adopt and leverage technology to secure relationships with your existing investors. Customer Relationship Management (CRM) software creates the opportunity to enhance client relationships by simplifying and centralizing investor management and engagement. It goes beyond merely maintaining a database of prospects and customers but also tracks, analyzes, and records the information you have about these people, their preferences, their activities, and the interactions and communications you have with them. With these insights, you can stay connected with clients and better align with their expectations and preferences.
In a competitive and crowded market, you can set yourself apart from other firms and demonstrate value by leveraging progressive investor management strategies that reassure investors in their decision to commit capital. Ultimately, utilizing technology to facilitate transparent communication is likely to create a winning investor experience and earn back the trust of those who may have doubts.
For more information on improving investor relationships through transparency, click here to download the free checklist!