How To Stay Ahead of Uncertainty

With Ingenuity and the Right Data and Tools—You Can Be Ready To Act on What’s Coming.

By Lynn Ettinger

Planning in an uncertain business environment is like taking a trip to an unknown destination with no idea of how long you’ll be there, what you’ll find, or how much your stay will cost. Unpredictability generally isn’t a welcome condition, but in commercial real estate, it’s a familiar one, whether created by legislative or regulatory changes, economic and industry downturns, changing investor and buyer preferences, or—in the case of 2020—all of the above brought on by a global public health crisis. The usual solutions, including hiring and investment freezes and avoidance of new markets, aren’t producing enough results. So, how can commercial professionals adjust—and keep adjusting?

For starters, they can look at what’s coming and not duck. They can define a question or a hypothesis, then search for useful, credible data and work with analytics tools or analytics professionals to get clues about what’s ahead.

Start With a Purpose

Commercial professionals who work extensively with data and tools recommend you ground your research and analysis by first defining your purpose. “Ask yourself, what’s the problem I’m trying to solve or answer I need?” says Carol Campbell, vice president of CCIM Technologies at the CCIM Institute.

Before doing even preliminary data searches, jot down your idea or a hypothesis, advises Blaze Cambruzzi, cofounder of True Commercial Real Estate in Lancaster, Pa. You don’t even need to know exactly what you’re looking for, he says. “Start with a question.”

Firsthand observation can help inform your search, says K.C. Conway, chief economist at CCIM Institute. “I’m a third-generation appraiser, so I was trained to drive around and ask, Why is that building vacant? Why did that building suddenly become something else? Why are there no grocery stores here? Ask yourself, What are some anecdotal indicators?

“If you go looking without a defined purpose, you’re going to get overwhelmed with information, become discouraged, and revert to what you typically might do,” says Cambruzzi.

Zero in on Data Sources

Once you have a purpose, pinpoint your data sources. The massive volume of data and sources can be intimidating, and the relevance and reliability vary widely. A premier source for demographics and related data is Esri, which supports integration with Microsoft Office and a number of platforms, Cambruzzi says. Cambruzzi accesses Esri through CCIM TECH's Site to Do Business, which provides data and tools as a member benefit for CCIMs and by subscription for REALTORS® who are not CCIMs and other commercial professionals.

Campbell explains how the site works: “We get data from [a variety of ] sources. Let’s say someone wants to put together an index to measure how different areas will emerge from COVID-19. That would take data related to COVID-19 and commercial real estate, and probably Bureau of Labor Statistics data about what’s happening in the job market. We would put all the data together to see areas that are going to lag and areas that are going to rebound more quickly.”

You can also check government sites—local, county, state, municipality, and federal, Cambruzzi says. “All these places are rich sources of data that can be integrated into your work product. Many states will have commerce or community economic development information and all types of economic engine data.”

Conway suggests looking at the public companies that are material to your local economy and to your tenants. Let’s say you manage or sell retail properties and are near a Home Depot or Walmart. Find out how they are doing. “Look at and listen to what these companies are telling you, what stores they’re closing, or what is underperforming. That will tell you more about what’s coming at you.”

Analyst calls of large public real estate companies provide useful information for Tom Bothen, CCIM, director of investment analytics at One Chicago Realty and a senior instructor for the CCIM Institute. “I especially listen to the analysts’ questions to know what the companies are actually doing, not just what they say they’re doing.” He reads economic reports from Warren Buffett and Black-Rock. And because he views real estate demand as a function of the job market and compensation, Bothen analyzes job growth, struggling companies, and the current and long-term impact of COVID-19 on retail, office, and hotel properties. “As a result of COVID-19, adaptive reuse will be a major market opportunity,” he says.

Collect and Analyze the Data

The ability to find opportunity in all this research may require information beyond what your own observation, data gathering, and analysis can produce. That’s where the field of predictive analytics comes in. Campbell offers a simple definition of predictive analytics: combining data from the past with current information to predict what’s going to happen. Software giant SAS defines it as “the use of data, statistical algorithms, and machine learning techniques to identify the likelihood of future outcomes based on historical data.”

“Some of the tools within Site to Do Business will provide users with an introductory level of predictive analytics,” Campbell says. “We have tools that will forecast what a market is projected to do in the next five years. We’re working with a new tool called Alteryx that allows us to bring in data sets from different places and build workflows with that data to create reports and maps.

The site will soon launch a concierge service, Campbell said in early summer. “We have a partner that will provide turnkey analytics solutions such as predictive analytics, sophisticated mapping, and video marketing with a feebased structure.”

Cambruzzi uses tools including Esri’s ArcGIS Business Analyst and ArcGIS mapping platform, as well as Microsoft Excel. “If you can’t sit down with a piece of paper and rattle off 10 advanced Excel formulas and know what the inputs are, you may want to take some training. There are tons of resources online. If you’re evaluating five [building] sites to identify which might be best for an office user, for example, you have to be able to not only pull the demographics—like how many businesses would be in that area—but also analyze the data. Esri doesn’t spit out the analytics.”

Get Help To Fill in Gaps

Cambruzzi, who before entering the commercial real estate industry helped companies with data research and analysis, says commercial professionals don’t need to become analytics experts. “The greatest homebuilder in the world probably hasn’t swung a hammer in years,” he says. “You do need enough understanding of the mechanics to ask for the right output. You need to sharpen your saw and integrate tools and resources to make yourself stronger.”

From there, “find people who can do different types of things” that enhance your own knowledge and skill set, he adds. “Get an intern. Hire somebody who doesn’t have your knowledge about commercial real estate 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 do more than help you in today’s unpredictable environment. They can keep your business moving forward to weather whatever uncertainties lie ahead.

Think Outside the Box — Or Expand the Box

While data can point you in the right direction, you can often gain additional insights for managing uncertainty—as well as ideas for expanding your business—by studying other industries.

Look at industries that align well with commercial real estate, says Jim Berry, U.S. real estate sector leader at Deloitte.

Hospitality is one such industry, Berry notes, especially with regard to the importance of direct interaction with the end user and the need to limit COVID-19
spread in buildings.

“Think about how hospitality companies interact with their hotel operators and owners, the customer experience they’re driving toward based on interaction with the product, and analysis of customers’ lengths of stay, travel patterns, and use of various services,” Berry says. “A year and a half ago, mobile keys weren’t commonplace in hospitality but now they are. Think about that in a COVID-19 environment.”

K.C. Conway, chief economist at CCIM Institute, says the mortgage brokerage industry offers a good example of business expansion. When originations slowed, some brokers “wouldn’t just arrange financing and get a fee for that deal. They would say, ‘We want to service that loan.’ That’s how they made it when transaction activity slowed down.

“We’re going to see less transaction activity, but you have tremendous skills,” Conway continues. “You know how to do cash flows. You know how to analyze markets. You have investment analytical skills. How do you translate your skills so that maybe you can become more of a consultant or an adviser, whether it’s to a bank, a fund, a private entity, or a REIT?

“Cross-pollinate your disciplines,” adds Conway. “When you sell a building, have a property management person approach the investor and say, ‘We can also do your property management. We can help you maintain it and keep track of the leases.’ Or let’s say investors are coming into your area and doing multicity brokerage transactions. You might be a brokerage that isn’t licensed in a neighboring state, but you can participate in an opportunity by having a relationship with another brokerage.”

By adapting or building on available resources—including practices from other industries and skills within your business—you can better control the impact of uncertainty.

Advertisement

About Commercial Connections

Commercial Connections is published four times annually and distributed to members of the National Association of REALTORS® and commercial real estate industry leaders. To subscribe to the newsletter, update your NRDS profile to include commercial interests in the "Field of Business" list.

Update your Field of Business in NRDS