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Real Estate Data: What Will the Future Behold?. Mark R. Linne, MAI, SRAJack Huntress Rene Circ CEO/Chief Analytics OfficerManaging Director-Residential Director of Research-Industrial ValueScape Analytics, Inc . Environmental Data Resources Property Portfolio Research. - PowerPoint PPT Presentation
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Real Estate Data:What Will the Future Behold?Mark R. Linne, MAI, SRAJack Huntress Rene CircCEO/Chief Analytics OfficerManaging Director-Residential Director of Research-IndustrialValueScape Analytics, Inc.Environmental Data Resources Property Portfolio Research
Some of Todays Themes
The Appraiser of TomorrowJared Schlaes-1995Two kinds of participants in the real estate analysis professionCollectors of DataAnalysts of DataWho prospers most?Who is the professional and who is the para-professional?What is the vision for the profession?
The Appraiser of Today
The Trends to Watch ForCloud ComputingBig DataMobile TechnologySocial NetworksNew AnalyticsAugmented Reality
The Rise of Databases
UADFannieFreddie100 Million Property DB in 10 yearsKnowing more about the market than appraisers-what do you do?
Cloud ComputingSeeing through the hype to discover the potential
Its not just for storageIts all about analytics
Leveraging the analytics in the cloud provides significant improvement in the fieldAnalyze everything in real-timeAnalytics that were never before possible at the device level
Big DataMore data on virtually everythingHow is the data analyzed?What is the benefit?Data availability will only accelerateWhere are the tools to analyze?What you need to look forWhat you need to do
OfficeConventional Wisdom: Lease Are Getting Smaller As a Result of Shrinking SF/Employee
TYPICAL LEASE SIZE FALLING 70 SQUARE FEET PER YEAROFFICE LEASE SIZE IN SF--ROLLING 4 QTR AVERAGE
SMALL TENANTS DISPROPTIONATELY DRIVING DEMANDPPR54 OFFICE MARKET: NEW LEASING
Multi FamilyConventional Wisdom: The Market is Getting Overbuilt
CLASS A SUPPLY VS INCOME-QUALIFIED DEMAND (2010-2015)DEVELOPERS ASSUMING HUGE POOLS OF LUXURY RENTERS
OfficeConventional Wisdom: Renewal Probability Is ~70%
IF YOU LAND AN ELEPHANT, IT STAYSPROBABILITY OF RENEWAL BY TENANT SIZE
IndustrialConventional Wisdom: Warehouse Buildings are Commodities
MARKETS HAVE LIMITED IMPACT ON RE-LEASE POTENTIALBIG & NEW ASSETS IN DISTRIBUTION MARKETS
ITS ALL ABOUT THE MARKETBIG & OLD ASSETS IN DISTRIBUTION MARKETS
RetailConventional Wisdom: The Best Days for Retail Are Behind Us Blame it on E-Commerce
ONLINE VS. IN-STORE SALES VOLUME AND GROWTHNET GAINING GROUND
BUT SO IS PRODUCTIVITY PHYSICAL RETAIL SALES PER SF OF RETAIL SPACE
THERE IS SIGNIFICANT NOI UPSIDE BREWINGPHYSICAL SALES PER SF AND RENT LEVEL
IndustrialConventional Wisdom: Portfolio Premium Exists for Warehouse Assets
PORTFOLIOS ARE BIGGER THAN EVERWAREHOUSE INIDIVIDUAL ASSET VS. PORTFOLIO PRICING*
IF YOU BUILD ITWAREHOUSE INDIVIDUAL ASSET VS. PORTFOLIO PRICING
RetailConventional Wisdom: Grocery Anchored Center Are a Safe Bet Immune to E-Commerce
BIG BOX EATING GROCERS LUNCHGROCERY SPACE AND EQUIVALENT BY RETAILER
BUT SOME SAFETY CAN BE FOUNDSHARE OF GROCERY STORES IN GREAT AND TERRIBLE CENTERS
Data to Information
Mobile TechnologyGood-bye desktop, good-bye lap-topHello tablet and iPadThis changes everythingThree monitors is not the solutionsGoing smaller and going mobileCompleting the appraisal in the field while you are at the houseThe inspection corollaryEfficiency, efficiency, efficiency
Social NetworksAppraisers dont play well togetherWe dont share wellWe dont take advantage of the opportunities that collaboration allowsSharingTalking advantage of each persons expertise and opinions and experienceYou cannot leverage data unless you shareReal time sharing in the field with your peers
New AnalyticsRegression AnalysisGeographically-Weighted RegressionMonte Carlo AnalysisNon-Linear ModelingMore Data-Better Models
Bloomberg Terminal
Augmented RealityNot just what you an seeBut what you cannot seeLinked together based on geographyThink layers of a cakeThe Landscape of ValuationEVERYTHING about a propertydemographicsEconomicsTrendsLegal Zoning
What Should You Do?Some of these technologies are hereCostarSome are being developedLooking for industry adoptionOver the next 24 months the world changesBe aware and be ready
There are 6500 FDIC Banks.thousands that do less than 500 residential mortgage originations a year.Too Big to FailToo Small to Comply
Appraisers THE eyes and ears of the lender
Data Now Readily Available
The pendulum swings backNew rulings make using AMCs (potentially) a business riskThere are benefits to both sidesAppraisers get paid more (potentially better service)Better appraisers and appraisalsButBanks need good technology (processes) and audit capabilities to prove arms length and remain in complianceAMCs to Self ManagementWhat data and technology is going to be used?
Discussion and Q&A
Questions for ConsiderationWith the consumer having access to more information than ever before, what effect do you think that will have on the appraisal process? (Zillow, transaction histories)Why should I care about the secondary market creating a data warehouse?What is the role of AVMs as we go forward?Im not an environmental expert (as an appraiser) Ive never offered that information and I dont plan on it. Why would I?How do I understand big data in the context of how it will affect my job?
*Chart Pasted 2-5-2007P:\Big Book\Current Charts\Office\Master Office\Big Book\Part 1 - Fundamentals and Demand.xlsxEdited By: Rob JenningsUpdate Date: 5/10/2013
The average lease size peaked in 2005 at just over 5K SF, steadily falling to a low of 4.2K SF today (a 17% decline).On Average, lease sizes have fallen 70 square feet every year since 2002The current average lease size is 17% off peak levels.
*C:\Users\gmarker\Desktop\Book1.xlsxNotes 1Notes 2Notes 3Notes 4Notes 5Notes 6Notes 7Notes 8
**Chart Pasted 2-5-2007P:\Work in Progress\Francis\Strategist Work\Rene\Demand Shortage.xlsm
The hollow bar shows the total supply outlook over the forecast. The solid bars represent the amount of income qualified Class A apartment demand (calculated using esri income projections, metro specific homeowner to renter ratios, and PPR demand projections we assume that all new product will be Class A and will have rent at the existing 4&5 Star average rent). The gap between the hollow and the filled bar is the amount of Class A overbuilding the market will have if it builds ONLY Class A properties.
From left to right, the graph shows the markets that have the most opportunity for Class A development (on the left side; where Demand Supply is the greatest). These are mostly housing bust metros. Chicago is another interesting choice, but its Downtown Area is largely overbuilt, while there is little to nothing in construction in the suburbs.
On the right side, are early recovery metros that have largely been overbuilt already.
**Chart Pasted 2-5-2007P:\Big Book\Current Charts\Office\Master Office\Big Book\Part 1 - Fundamentals and Demand.xlsxEdited By: Ted BroderickUpdate Date: 7/31/2012Notes 3Notes 4Notes 5Notes 6Notes 7Notes 8
**Chart Pasted 2-5-2007P:\Work in Progress\Chris Kulig\Rene\RE-LEASE POTENTIAL Slide Split.xlsx
*P:\Work in Progress\Chris Kulig\Rene\RE-LEASE POTENTIAL Slide Split.xlsx
**Chart Pasted 2-5-2007\\ppr3\Common\Big Book\Current Charts\Retail\Ecommerce.xlsmAlthough Still only a smalll piece of retail sales, online shopping had been growing at double digit pace for years.Clicks versus Bricks: First, it is likely that higher volumes will be realized by growth on the "clicks" side, not the "bricks" side, siphoning off demand for physical space. Second, if "clicks and bricks" retailers see more growth from online spending, then they may start to carry smaller in-store inventories, reducing the square footage they require. Finally, slimmer margins may also put downward pressure on rents, as retailers look to offset cuts in gross profit margins with improvements in operating margins. The pressure on margins may be partially offset by volume, and bigger retailers could crowd out their smaller competitors.
LastUpdate5/16/2013
*\\ppr3\Common\Big Book\Current Charts\Retail\Ecommerce.xlsmAlthough Still only a smalll piece of retail sales, online shopping had been growing at double digit pace for years.Clicks versus Bricks: First, it is likely that higher volumes will be realized by growth on the "clicks" side, not the "bricks" side, siphoning off demand for physical space. Second, if "clicks and bricks" retailers see more growth from online spending, then they may start to carry smaller in-store inventories, reducing the square footage they require. Finally, slimmer margins may also put downward pressure on rents, as retailers look to offset cuts in gross profit margins with improvements in operating margins. The pressure on margins may be partially offset by volume, and bigger retailers could crowd out their smaller competitors.
LastUpdate7/18/2013
*\\ppr3\Common\Big Book\Current Charts\Retail\Ecommerce.xlsmAlthough Still only a smalll piece of retail sales, online shopping had been growing at double digit pace for years.Clicks versus Bricks: First, it is likely that higher volumes will be realized by growth on the "clicks" side, not the "bricks" side, siphoning off demand for physical space. Second, if "clicks and bricks" retailers see more growth from online spending, then they may start to carry smaller in-store inventories, reducing the square footage they require. Finally, slimmer margins may also put downward pressure on rents, as retailers look to offset cuts in gross profit margins with improvements in operating margins. The pressure on margins may be partially offset by volume, and bigger retailers could crowd out their smaller competitors.
LastUpdate7/18/2013
**Chart Pasted 2-5-2007P:\Big Book\Current Charts\Admin\Warehouse\Portfolio Chart, aka Jackson Pollack Chart.xlsm
*P:\Big Book\Current Charts\Admin\Warehouse\Portfolio Premium Chart.xlsx
**Chart Pasted 2-5-2007P:\REPS\Grocery Anchored Centers REPS\Charts\Exhibits3.xls
**