Cluster
I have been legally licensed to sit in the driver’s seat of a vehicle for 40 years. The reason why I say legally is because growing up on a farm in southern Alberta, my dad often had me behind the wheel of a tractor, pickup, or even a large grain truck around the countryside well before I turned 16.
It was from a young age that I learned the skill of double clutching—using a two-speed axel and gearing up and down without the clutch, all while keeping a keen eye on the various gauges on the dashboard. The dashboard was the knowledge centre or hub for all things. For instance, when running the harvester or combine, the cluster of gauges on the dashboard would tell me everything I needed to know. The dashboard would display the speed at which I was travelling, RPMs of the engine, oil pressure, engine temperature, PTO speed, header height, yield per acre, and other various things that would be crucial information necessary for harvesting the crops. The dashboard truly was the eyes and ears of all things, and the way the clusters of gauges were laid out on the dashboard was critical in being able to take in every piece of information at a quick glance.
I am guessing that in your years of driving experience, you have probably driven in a vehicle with a great dashboard, as well as in a vehicle with a terrible dashboard. The great dashboards allow you to see all the pertinent information at a quick glance, whereas the not so great dashboards (hard to read gauges, poor layout, missing gauges, etc.) leave you feeling confused and not as confident while operating the vehicle. It is much more advantageous driving in a vehicle with a well-designed dashboard and cluster of gauges than a poorly-designed one.
Much like the dashboard of a vehicle, clustering can describe a key driver for regional economic growth. The industrial revolution was the launch of shaping cities and creating cluster models and patterns of business relationships that were woven into urban networks. These business clusters brought a concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters models increased the productivity with knowing which companies could compete nationally and globally.
There are four types of clusters according to Nicholas LePan:
- Hub-and-Spoke: an industrial sector with suppliers clustering around one, or several, dominate firms (e.g. airplane manufacturer Boeing and the region of Seattle)
- Satellite Platform: a set of unconnected branches with links beyond regional boundaries, each part of its own globally-oriented supply chain (often found in suburban neighborhoods)
- State Anchored: industrial activities are anchored to a region by public or non-profit entities. (e.g. military base, universities, government offices, Ottawa)
- Mashallian: the most modern cluster. It is defined by Alfred Marshall, an economist from Cambridge school, as a cluster of firms in a similar industry, operating within a certain geographic location. (e.g. social media marketing companies in San Francisco, video game developers in Vancouver)
Recognizing these four business clusters is incredibly important to understand how real estate clusters develop. As a real estate investor, we must understand these business clusters and understand the pros and cons of each type for long-term success for a real estate portfolio. What business cluster is driving your real estate portfolio? Are you sitting behind a poorly designed dashboard that is leaving you feeling confused and unsure about your real estate portfolio? Or, are you sitting with confidence behind your well-designed dashboard, knowing that your real estate portfolio is ready to hit the road?
The Lower Mainland has experienced one of the most amazing falls I can remember in many years! Sunshine is a positive-inducing drug and it certainly has been good for the October market. All areas, property types, and price ranges from Whistler to Hope experienced an upswing in market activity. Listings are down and sales are up. This is a very good thing! One would ask, are we in a recovery mode after experiencing a few months of positive numbers? It certainly appears that we are; however, I will cautiously share my opinion until we push through the dark months of November, December, and January. The big money from around the world is looking for safe havens to park it, and it appears that Vancouver could once again be on the shortlist for these high net-worth individuals.
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STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales
Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com
