May 19, 2020
By Paul Bubny
This Wednesday, May 20, Connect Commercial Real Estate will host a webinar presented by Austin-based RealMassive, gathering a multi-disciplinary panel of experts to discuss the increasingly essential role of reliable and actionable data in commercial real estate. Moderated by Daniel Ceniceros, CEO of Connect CRE, the discussion will feature CEO Jay Olshonsky of NAI Global; Richard Green, Lusk Chair in Real Estate at the USC Lusk Center for Real Estate; and Mike Clark, RealMassive’s CEO. To give our audience a preview of the upcoming conversation, we asked Clark to provide some insights. Here’s what he told us:
Q: In February, RealMassive published an article on the different types of CRE data available. In the current operating and transacting environment, what types of data are especially valuable? Has this changed since prior to the pandemic?
A: Every aspect of the commercial real estate industry has felt the impacts of the pandemic. While data is extremely valuable in any state of the economy, it is crucial in navigating a global crisis. Construction has either halted or slowed dramatically, landlords are finding it difficult to show or lease space, and tenants are struggling to pay their rents. The office sector has taken a huge hit as many businesses shift to the work from home model for the foreseeable future, and an already crippled retail sector is being crushed. These astronomical impacts in every class and property types make data invaluable in conducting CRE business. Reliable, comprehensive and real-time data around vacancy rates, lease prices and changes in tenancy have always been imperative, but now so more than ever. It’s not so much that the types of valuable data have changed, but where the data is coming from, what you do with it, and the ability to monitor how markets are fluctuating as these major changes occur.
A: We continue to hear from current and potential customers that they’re seeking ways to cut costs. Many CRE professionals are looking for alternative data providers who can still provide them with reliable, high-quality data they need while adhering to changes in their budgets. At the end of the day, giving market participants affordable access to current and relevant data will allow for faster innovation and enhanced value for all parts of the CRE industry.
Q: How is the current situation affecting the ways in which clients use data?
A: Historically, the industry has relied heavily on market reports from previous quarters to monitor trends and changes in their markets. If we look at Q1 and how drastically these data points shifted from January to March, or even from the beginning to end of March, we know that summarizing an entire quarter to make future business decisions doesn’t always paint an accurate picture of what’s happening in the industry. Customers are realizing the importance of real-time data and insights now more than ever.
Q: As the U.S. economy and commercial real estate emerge from the shutdown and move toward the recovery, what metrics will data users find to be especially valuable?
A: This could be the beginning of a long-term shift in the demand for office space. Time will tell, but many CEOs are reporting high productivity from their remote work forces. The longer “work-from-home” continues, the more likely we are going to see a long-term lasting impact. Google and Facebook have announced they are staying remote for most jobs for the rest of 2020. While some job functions will need to reside in physical space, many roles can remain remote. Companies are already scrapping plans for office expansions. Open floor plans and shared desks are also coming under scrutiny. Perhaps we will see much smaller footprints for businesses, with much of their staff working remotely and only congregating in a physical space on a limited and rotating basis.
Q: What does commercial real estate look like over the next 18 months?
A: Our data has shown lease and sale prices decline across the country, and I think this will continue over the next 18 months. We will see brick and mortar retail continue to decline. As ecommerce continues to grow, we will likely see an increase in the demand for industrial properties to make space for storage, packaging, shipping, etc. The need for physical office space is going to be closely evaluated by all businesses. Perhaps we will see new construction slow as more uncertainty arises regarding demand. We will continue to see many small businesses go under, defaulting on rent obligations and impacting property owners.
Q: What about after 18 months?
A: Building safety will come more into play with technology apps helping with screening and social distancing. There is a concern about data privacy, and we will see if there is a long-term impact caused by the need to keep people safe. Open floor plans were already coming into question as being the most efficient for workforce productivity. The pandemic may cause this pendulum to swing much faster and the return of cubicles could be the norm. Again, it is possible we will see companies permanently taking less of a footprint for office space.
For comments, questions or concerns, please contact Paul Bubny