As empirical data in the property markets takes on heightened importance, research increasingly becomes a point of differentiation among commercial real estate firms competing to win the confidence of clients.
While third-party data firms provide a measure of a market's performance, they often fail to capture the true inventory of office or industrial space. These third-party providers can overlook buildings, or include those that may be functionally obsolete.
More importantly, third-party data carries an inherent limitation: the data neither interprets the underlying trends occurring in the local market very well nor does it predict future performance.
What's more, national research firms provide a reliable picture of space availability but fall short of providing specific lease comparables including effective rates, termination options, tenant improvements and lease expirations.
In-house research overcomes these limitations and further demonstrates a commercial real estate firm's commitment to the local market. As one of the largest commercial real estate firms in the Midwest, Colliers Turley Martin Tucker spends hundreds of thousands of dollars and countless hours to develop proprietary research that offers breadth and depth of information in the local markets served by the company.
That may seem like idle talk, but internal research driven by a customized database can provide the edge in winning and successfully completing an assignment. A recent challenging assignment to market a 96,000 sq. ft. call center illustrates the point.
Internal research and its underlying database were instrumental in filling not only a large space but also specialized space that far outstrips demand in today's market. The space was vacated after a telecom firm reorganized and outsourced the services performed at the call center.
Prospects were culled in many ways. Space users in the submarket in need of significant space in the next year were targeted. An expanded search identified tenants known to need large blocks of space two years out. Space users occupying more than 100,000 sq. ft. also were identified.
This database generated 75 prospects. Four potential tenants negotiated with Colliers Turley Martin Tucker, which represented the building's owner. The deal was completed in just six months. It's doubtful that third-party research would have uncovered the winning candidate — a firm that had just moved its corporate headquarters from St. Louis to another large Midwestern city.
A proprietary database can supply clients with market information such as potential tenants, their location(s), the amount of square footage they occupy and the history of previous deals. Then, a targeted marketing plan can be developed for each individual property or client.
While third-party providers employ an army of researchers to gather data, a real estate service provider's brokers should drive internal research. This approach also helps sharpen a brokerage team's in-depth understanding of the market.
That was a key reason in marketing the call center to the firm that relocated its headquarters elsewhere. An astute broker constantly surveying the market understood that the firm still could benefit from its employee base in the area.
Also, if brokers participate in the process, firms gain more control over the quality and veracity of the information. Brokers are in a better position to know the buildings and their tenants. They can classify the buildings by type — Class A, B, or as functionally obsolete space.
And it's important to accurately differentiate between tenant-based buildings and those corporately owned and occupied. Brokers constantly monitor the buildings and market conditions to gain a a clearer understanding of key variables.
Commercial real estate firms, especially on the brokerage side, may win a deal by occasionally pedaling inaccurate information, but they simply won't build a relationship. Suffice it to say, integrity is critical and in many cases the single ingredient that may win the assignment.
In fact, many institutional clients request and receive regular, customized research prepared by Colliers Turley Martin Tucker so they can compare it to reports generated by outside sources. Rarely have these clients challenged the accuracy of the data, and in many cases they revise some of their projections based upon the information provided.
The decision to buy third-party research or to generate data in-house may be as much a philosophical issue as it is an economics issue. But one point is indisputable: there is no substitute for local market knowledge in meeting clients' needs.
Jim Mosby is an office property specialist in the St. Louis regional office of Colliers Turley Martin Tucker.
Numbers are just that — numbers. Clients should expect an analysis of what those numbers mean.
Local knowledge should be more than a slogan. Ask what — and how — information is used to support this knowledge.
Methodology matters: get the specifics on how data providers monitor the marketplace.
Source: Colliers Turley Martin Tucker