High Technology Letters ISSN NO : 1006-6748 MARKETING STRATEGIES FOR REAL ESTATE IN NEGLECTED NEIGHBORHOODS - Case Study Saxony-Anhalt - Jörg Petermann#1 #PhD Student at Faculty of Management, Comenius University [email protected] Supervisor: Assoc. Prof. Ing. Marie Hesková PhD Abstract Peripheral regions of Germany are characterized by vacancy and neglect of real estate. In the face of low market demand, owners find it difficult to find a suitable exploitation option for their property. This article is the author's second article in the thematic series 'Marketing Strategies for Real Estate in Neglected Neighbourhoods'. The first article, which has already been published, deals with the derivation of the marketing concept (Petermann et al., 2020). This article deals with a case study in which the developed marketing concept was applied. Using a holistic marketing approach, the present study, a typical problem property in Saxony-Anhalt (Jeßnitz), shows how systematic market analysis and critical vision of the owner's goal results in a new competitive marketing concept that benefits users, owners and the community. Keywords: 'Marketing Strategy, Real Estate, Neglected Neighbourhood, Case Study Saxony-Anhalt Volume 26, Issue 5, 2020 314 http://www.gjstx-e.cn/ High Technology Letters ISSN NO : 1006-6748 Introduction – a Marketing approach for neglected locations While there is a housing shortage in large cities such as Berlin, Hamburg, and Munich, it is often ignored that large peripheral regions of Germany are affected by housing vacancy due to a sustained decline in population. For example, housing demand in parts of Thuringia and Saxony-Anhalt is expected to fall by up to 23% by 2030. The current frontrunners in terms of vacancy are village communities such as Raguhn-Jeßnitz at the gates of Dessau-Roßlau in Saxony-Anhalt (BBSR, 2014, S: 48). The result of the vacancy is often the neglect of buildings and entire neighborhoods, since for the property owners a renovation and the maintained maintenance of the building at the achievable market prices is no longer worthwhile or because tenants who rent the scrap properties cheaply leave them further neglected (Böcking, 2013, online). The decline of building stock and private infrastructure due to neglect is also an unresolved problem for tenants and owners in the periphery of Dessau-Roßlau (Thiemann, 2017, online). In a guide to the handling of scrap properties, the Federal Office of Building and Spatial Planning draws up a catalogue of measures to oblige owners for the maintenance of neglected properties and, if necessary, to expropriate them (BBSR, 2009, p. 9ff). However, this practice does not solve the problem of location neglect, since after insolvency or expropriation of the private owner, the burden of property and site maintenance must be borne by the state and thus by taxpayers' money. A private-sector solution is therefore needed to make the best possible use of real estate in problem locations in the interests of tenants, owners, and affected communities. A publication previously published developed a marketing approach for problem locations that takes into account an analysis of the demand market and a marketing strategy that takes into account the requirements of the bidder, which has been combined into a marketing concept with regard to the specific requirements of neglected real estate. The market analysis includes location, target group and competition analysis, which enables even neglected properties to be accurately valued in the overall market. The marketing strategy develops a fundamental decision on the use of the property, a suitable target market and a realistic offer price, considering the time horizon for the marketing measure. The interaction of these strategies is illustrated Figure 1. Volume 26, Issue 5, 2020 315 http://www.gjstx-e.cn/ High Technology Letters ISSN NO : 1006-6748 Figure 1Interlinking Market Analysis and Marketing Strategy to Obtain a Comprehensive Marketing Concept for Problem Locations (Petermann et al., 2020) The following sections examine, using this approach, the extent to which it is possible for the owner or a municipal or private purchaser to use property in a neglected neighborhood to a suitable and economically valuable use by means of appropriate marketing strategies. Objective and Methods The original work has been written in full in German, so the tables, as well as graphs and tables, have been left in the original language of the study. This article is the author's second article in the thematic series 'Marketing Strategies for Real Estate in Neglected Neighbourhoods'. The first article, which has already been published, deals with the derivation of the marketing concept (Petermann et al., 2020). This article deals with a case study in which the developed marketing concept was applied. An example is referred to a concrete case study in Raguhn-Jeßnitz. The case study approach is established in real estate marketing (e.g. Denzer & Grundmann, 1999; Ziercke, 2005; Topcu, 2010; Herling, 2018), as real estate is unique assets and can be addressed in a differentiated Volume 26, Issue 5, 2020 316 http://www.gjstx-e.cn/ High Technology Letters ISSN NO : 1006-6748 way using case study methodology. Basic conclusions for the practical conception of real estate marketing in neglected locations can be derived. A neglected apartment building in Raguhn-Jeßnitz with a living area of 300 m2, 14 rooms spread over three floors and a plot area of 223 m2 is considered, which was built in 1900 and was renovated in 2017 at least partially with regard to the plastic windows and the central heating according to the energy certificate. Otherwise, the house is partly basement, has an analog telephone connection and an electrical installation of the 1960s, older fitted kitchens and bathrooms expanded in the 1960s. The house is in an exposed street location but centrally opposite the town hall and church. Due to the relatively small plot, only a small garden or terrace can be used. The private owner has set the house at an offer price of 98.000, - € in real estate online portals. The property is divided into several residential units, one of which is currently available for rent with 73.3 m2 of living space. The rental price of the vacant unit is indicated by the owner with 293, - € cold rent plus 190, - € additional costs prepayment. The property has been on offer since December 2019 (Immowelt, 2020). Market analysis for the location The market analysis provides information on the market-side supply and demand situation and includes the location, target group and competition analysis for the property. Location analysis: Jeßnitz is a district of the town of Raguhn-Jeßnitz, located north of Bitterfeld-Wolfen and about 20 km south of Dessau. Halle an der Saale is about 30 km southeast and Leipzig about 35 km south. Jeßnitz has about 3,650 inhabitants, which is about as many, as in 2000. Since 1947, the population has decreased by 66% (Schönfelder, 2004, p. 145). The population of the administrative community Raguhn-Jeßnitz has about 9,500 inhabitants, has decreased by 1.2% between 2011 and 2015 and a further decline of 15.8% is expected by 2030 (Wegweiser-kommune.de, 2020). After the flooding of the city by the Elbe flood of 2002, the buildings in the Centre of the village and the offered object are damaged by moisture. A demolition permit for the church next to the building was granted due to flood damage (Bistum Magdeburg, 2003). This information suggests that the location of the property has little growth or development potential. The numerous district towns in the immediate vicinity are better connected in terms Volume 26, Issue 5, 2020 317 http://www.gjstx-e.cn/ High Technology Letters ISSN NO : 1006-6748 of transport, economically stronger and more infrastructurally attractive. In the wake of global warming, the Centre of Jeßnitz will continue to be threatened by flooding in the future. Target group analysis: The statistical data of the municipality Raguhn-Jeßnitz provide insight into the population structure. The natural balance of the population is slightly negative at -4.1 per 1,000 inhabitants, i.e. more people die each year than are born. The number of emigrations minus emigration was slightly negative in the region until 2014 but is in positive range in 2020 at 0.6/1,000. In 2013 to 2015, families (2015: +2.8/1,000) and people aged 18 to 24 moved to the region (+ 8/1,000), while elderly people over 65 tend to migrate from the region (- 3.7/1,000). The proportion of people under 20 is 24.5% and the proportion of the elderly over 65 is 25.5% of the total population (wegweiser-kommune.de, 2020). The target group for the sale or rental of the property in Jeßnitz is therefore basically people who already live on site and who want to change their residence, e.g. to acquire property or to save on rental costs. For example, the property could appeal to a family or a community of young people who, due to limited financial resources, are looking for cheap accommodation or want to purchase an object to renovate it themselves. Competitive analysis: To gain an overview of competing market offers, an online search engine via real estate portals such as Immowelt.de is suitable. It was searched for houses for sale in Raguhn-Jeßnitz. Häuser zum Kauf in Raguhn-Jeßnitz Typ Baujahr Sanierungszustand Status Wfl. Grund Angebotspreis €/m² Wfl €/m² Grd. ZFH 1911 sanierungsbed. frei 149 1192 58.000 € 389 € 49 € EFH 2000 neuwertig frei 135 170 135.000 € 1.000 € 794 € MFH 1870 sanierungsbed. frei 211,5 355 40.000 € 189 € 113 € DHH 1880 sanierungsbed. frei 70 91 30.000 € 429 € 330 € RMH 2000 gebraucht frei 112 205 85.000 € 759 € 415 € RMH+ Laden 1910 gebraucht frei 200 507 50.000 € 250 € 99 € REH 1940 sanierungsbed.