Research Takes on More Prominent Role in CRE

By Dennis Kaiser

Quinn

Alexander Quinn recently joined JLL as Director of Research for Northern California. With a deep background in economic consulting over a 20-year career, Connect Media asked him about the changing role of economic analysis in real estate research and decision making. Check out his responses in our latest 3 CRE Q&A.

Q: How has research changed over the last 20 years in the commercial real estate sector?
A: The increasing speed and volume of economic data available to researchers means both not over-reacting to every data point, and keeping an eye on core statistics that ultimately inform the direction of the market. So, while the availability of information has dramatically improved, the core principal of understanding supply and demand has remained constant. What we’ve all gotten better at is using statistical analysis to inform what is important, what will inform rent growth, and what is an outlier that is not reflective of the overall market. Markets work best when there’s greater transparency, and commercial real estate is finally catching up with other industries. It means prices are not based on gut, but clear understanding of the market.

Increasingly, we are finding our investor and corporate clients asking for much more detailed insight into not just properties but entire markets, even countries. Research is taking on a much more prominent role, as a result.

Q: Can you offer an example of how the research focus has changed?
A: Sure. Take a single data point such as walkability. We know that the walkability of a retail corridor can inform its overall health. Now we have Walk Score in nearly every urban area and on every block. I can tell you the Chestnut Street corridor in San Francisco has a very high Walk Score of 98, and Solano Avenue in Berkeley has a slightly lower Walk Score of 85. Information is abundant and available in minutes if you know where to look. However, I think it has been increasingly important on where you are gathering information and not simply what you are gathering. There’s a hierarchy of data in our group, and we strive for accuracy in our models.

Take a single data point such as traffic. Has it always been a data point for commercial real estate? Yes, but often in a very micro way. Retail landlords, developers and tenants focused on it because they needed more of it; office and other commercial developers focused on it because municipalities required them to, but that was often the extent of it. Today, it is office users particularly who are looking outside their workspaces at broader traffic patterns, not just in front of their buildings but throughout the region. They want to make sure they can recruit and retain, and part of that is being able to keep employees happy by letting them get into and out of the workplace efficiently and with as little stress as possible. So, there is a tremendous appetite for data that shows not just traffic, but traffic flows, reverse commute patterns, the number – and efficiency – of public transit options within a short walking distance, access to personal mobility options such as bike lanes and scooters, and so on.

Q: What role is technology playing in real estate research?
A: It’s playing a huge role. Technology has always been important in real estate research, but with the rapid advance of technology and ongoing innovation within the real estate sector, it is vital today. Technology allows us to better collect and analyze data, especially much more quickly and accurately, and this can provide clients with a greater depth of information and insight with which to make decisions. Technology is also allowing our clients to slice and dice the data much more effectively and is visually improving the way we present that data. One example of this is JLL’s patented, proprietary technology’s Blackbird. Blackbird literally provides clients with a bird’s-eye view within or across property markets, depending on the data points that matter most to them. We can also visualize changes to the skyline, as we view office buildings before they are constructed. Clients can see future views and adjacencies that will be in place three or four years in the future. I think as technology continues to develop, it will play an even larger role in our business.

For comments, questions or concerns, please contact Dennis Kaiser