The Disconnect Between Real Estate Research and Market Outcomes

by Joe Stampone on January 19, 2012

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Dr. Sam Chandan of Chandan Economics is amongts the commercial real estate industry’s leading voices in relation to capital and credit markets and the dynamic relationship between the economy, regulation, and market performance.

I was reading an interview with Sam and he said something that I found interesting.

One issue I am very conscious of is the disconnect between the research function and market outcomes. We now have access to a wealth of data. A decade ago, the industry was far less transparent. At the same time, the reality is that information is not yet driving markedly better decision-making when it comes to managing risk. We have some work to do here.

I’m not entirely sure why this is the case, so please weigh in if you have any ideas. My hunch is that people simply aren’t taking advantage of the plethora of data at their disposal.

I wanted to lay out a few of the major sources of real estate data. The following companies will provide you with all the market data you need to make informed decisions and ensure the deal upside is sufficient for the inherent risk:

Real Estate Information Services (REIS)
REIS provides real estate practitioners with transaction data including rent comps, sales, and construction activity for apartment, office, retail, and industrial property. Users can refine the information by various data points and center around a specific address.

REIS also provides market data including vacancy, inventory trend, and their own economic forecasts.

Real Capital Analytics
RCA is similar to REIS, but covers transaction data all across the world. RCA provides sales transaction data, capital trends reports, troubled asset and distressed debt tracking, and a variety of special reports. However, RCA does not provide sub-market data.

Chandan Economics
There are two big services that Chandan Economics brings to the market that are not directly addressed by other services. First is their Real Estate Economics service which tracks real estate trends in the context of the broader economy and  capital markets. It informs investors and lenders understanding of how macro trends, policy developments, and capital and credit flows into and out of real estate are driving outcomes in the industry.

The second service analyzes the quality of loans on both a macro level as well as specific loan pools. This research is intended to empower debt investors, lenders, and regulators with a better understanding of trends in loan quality and credit risk.

Property and Portfolio (PPR) Research
PPR (owned by Costar) provides objective thinking in analyzing and forecasting real estate markets. PPR uses a unique set of analytic tools to provide actionable insights to investors.

These are just a few of the many sources  real estate practitioners have at their disposal. So why, with this wealth of data at our finger tips, is there a disconnect between what real estate research is telling us and market outcomes?

P.S. Here are a few other research tools which are out there:

  • aptindex.com
  • city-data.com
  • blacksguide.com
  • icsc.org
  • tortowheaton.com
  • economy.com
  • ccienet.com
  • propsourcebook.com
  • sior.com
  • columnfinancial.com
  • epodunk.com
  • Axiometrics

 

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  • http://twitter.com/PBA_RE PetersonBlissAdvisor

    Torto Wheaton is owned by CBRE, just as a note on this.

  • http://www.astudentoftherealestategame.com/ Joe Stampone

    Thanks Peter, are there any good sources that I missed? I know all the major brokerage houses produce their own reports.

  • http://www.ericamzalag.com/ Eric Amzalag

    I don’t think owners/investors take the time to actually read the data… Maybe if their advisers could summarize the data for them we would see that disconnect disappear a bit. 

    I do not think that most brokers, who should also be acting as advisers, have any incentive other than to prompt owners to sell and investors to buy, regardless of what the data/economic reports claim.

    This is something that I believe needs to change in the brokerage industry. I’ll spare the rant here, but I do believe that brokers acting in their own best interest to earn commissions is what keeps brokerage from having a true “recurring revenue model”.

  • Anonymous

    The inherit problem with data and trends is that it’s hardly an indicator of future outcome. Data tells you what has occurred but doesn’t tell you why. Yes, there’s lot of data, but little context around it. Better decision making results from thorough understanding of underlying factors that drove the data trends and whether those factors are still relevant in the future, along with new catalysts. 

  • http://www.astudentoftherealestategame.com/ Joe Stampone

    Hey Eric, thanks for the comment. I think you’re definitely correct in saying that most real estate practitioners don’t actually use the data. It’s definitely most apparent in the brokerage community.

    There’s a lot of value in being the most informed person in the room. 

  • http://www.astudentoftherealestategame.com/ Joe Stampone

    Hey Joey, thanks for the comment. I think you’re correct, the data often doesn’t tell a story of what’s going to happen but it certainly shows trends.

    It’s all about taking the right data and making informed decisions.