Planning in an uncertain business environment is like traveling to an unknown destination without knowing how long you will be there, what you will find, or how much your stay will cost. Unpredictability is generally not a welcome condition, but in commercial real estate it is a familiar one, regardless of whether it is caused by changes in law or regulation, economic and industry downturns, changing investor and buyer preferences, or – in the case of 2020 – all conditions above caused by a global public health crisis. The usual solutions, including hiring and investment freezes and avoiding new markets, do not produce sufficient results. How can commercial professionals adapt – and continue to adapt?
For starters, they can watch what's coming and not duck. You can define a question or hypothesis, then look for useful, believable data and work with analytical tools or professionals to find clues about the future.
Start with a purpose
Commercial professionals who work extensively with data and tools recommend that you justify your research and analysis by first defining your purpose. "Are you wondering what is the problem I am trying to solve or answer?" says Carol Campbell, Vice President of CCIM Technologies at the CCIM Institute.
Before doing a preliminary data search, write down your idea or hypothesis, advises Blaze Cambruzzi, co-founder of True Commercial Real Estate in Lancaster, Pennsylvania. You don't even have to know exactly what you're looking for, he says. "Start with a question."
Firsthand observation can help you in your quest, says K.C. Conway, chief economist at the CCIM Institute. "I'm a third generation appraiser so I was trained to drive around and ask, Why is the building empty? Why did this building suddenly become something else? Why aren't there any grocery stores here? Ask yourself: what are some anecdotal indicators?
"If you search for no specific purpose, you will become overwhelmed with information, become discouraged and return to what you normally do," says Cambruzzi.
Zero on data sources
Once you have a purpose, locate your data sources. The enormous volume of data and sources can be intimidating, and relevance and reliability vary widely. According to Cambruzzi, Esri is one of the primary sources of demographic and related data. It supports integration with Microsoft Office and a number of platforms. Cambruzzi accesses Esri through CCIM TECH's Site to Do Business, which provides data and tools as a membership benefit to CCIMs and as a subscription to REALTORS® who are not CCIMs and other commercial professionals.
Campbell explains how the website works: “We get data from [different] sources. Let's say someone wants to compile an index to measure how different areas are emerging from COVID-19. This would require data related to COVID-19 and commercial real estate, as well as likely data from the Bureau of Labor Statistics on developments in the labor market. We would pool all of the data to see areas that will be left behind and areas that will recover faster. "
You can also check government pages – local, county, state, parish, and state, Cambruzzi says. “All of these places are rich sources of data that can be incorporated into your work product. Many states will have trade or community economic development information, as well as all kinds of economic engine data. "
Conway suggests looking at the public companies that matter to your local economy and your tenants. For example, let's say you manage or sell retail properties and are near a Home Depot or Walmart. Find out how they're doing. "See what these companies tell you, what deals they are closing or what is underperforming. That will tell you more about what to expect."
Analyst calls from major public real estate companies provide useful information for Tom Bothen, CCIM, Director of Investment Analytics at One Chicago Realty and Senior Instructor at the CCIM Institute. "I especially listen to analysts' questions to know what companies are actually doing, not just what they say they are doing." He reads economic reports from Warren Buffett and Black-Rock. And because he views real estate demand as a function of labor market and compensation, Bothen analyzes job growth, troubled businesses, and the current and long-term effects of COVID-19 on retail, office and hotel properties. "Because of COVID-19, adaptive reuse will be a great market opportunity," he says.
Collect and analyze the data
The ability to find opportunities in all of these investigations may require information beyond what your own observation, data collection, and analysis can produce. This is where the area of predictive analytics comes into play. Campbell offers a simple definition of predictive analytics: combine past data with current information to predict what will happen. Software giant SAS defines it as "using data, statistical algorithms and machine learning techniques to determine the likelihood of future outcomes based on historical data".
"Some of the tools in Site to Do Business introduce users to predictive analysis," says Campbell. “We have tools that predict what a market is likely to do over the next five years. We are working with a new tool called Alteryx that allows us to bring in datasets from different locations and use that data to create workflows to create reports and maps.
The website will soon offer concierge services, Campbell said in early summer. "We have a partner who provides turnkey analysis solutions such as predictive analytics, sophisticated mapping and video marketing with a cost-based structure."
Cambruzzi uses tools such as ArcGIS Business Analyst and ArcGIS Mapping Platform from Esri and Microsoft Excel. “If you can't sit down with a piece of paper and go through 10 advanced Excel formulas and know the inputs, then you should get some training. There are tons of resources online. For example, if you're evaluating five [building] locations to find out which ones Best for an office user, you need to be able to get not only the demographics – like the number of companies in that space – but also the data. Esri doesn't spit out the analysis. "
Get help filling in the gaps
Cambruzzi, who helped companies research and analyze data before entering the commercial real estate industry, says commercial professionals don't need to become analytics experts. "The world's largest house builder probably hasn't wielded a hammer in years," he says. “You need enough understanding of the mechanics to ask about the right output. You need to sharpen your saw and incorporate tools and resources to strengthen yourself. "
From there, "find people who can do different kinds of things," who expand your own knowledge and skills, he adds. “Get an intern. Hire someone who doesn't have your commercial real estate knowledge but knows a lot about software packages and tools. "
The time and resources you invest in accessing and analyzing credible data, and using analytics tools or support, can go a long way in helping you in today's unpredictable environment. You can move your business forward to face the uncertainties ahead.