January 30, 2014
RealMassive recently met with Dick Anderson, a partner at HPI Commercial Real Estate Services and Investments for over 21 years, to get a seasoned CRE veteran’s perspective on some of the trends and frustrations of the commercial real estate industry, particularly those relating to issues around real-time data and transparency (or lack there-of).
RM: You have been in the commercial real estate industry through some major highs and lows. Looking ahead to the future, what segments of the (Texas) market do you see having the most opportunity for growth over the next few years?
DA: Single-family lot development in Austin and Central Texas has been hot and will continue to be so. Suburban office is a trend that’s gaining a lot of steam right now. In Austin especially, people are looking for higher-value office opportunities close to the Central Business District. There is a big desire for people to office downtown, but rent’s too high and there’s no parking. I think you will see value office options get completed on the eastside of I-35 that will offer a lower price point to the CBD, free and abundant parking and still be within close proximity to the amenities and living options that the CBD has to offer.
RM: Could you speak a bit about what you have described as the current commercial real estate environment’s lack of transparency and how could it be made more efficient?
DA: Number one, it’s a trust issue: There’s always been this lack of trust between landlords and the tenant representation brokerage community. Landlords feel like the information they provide to a tenant rep broker doesn’t get communicated fully and properly to the end user tenant. Tenant rep brokers feel like landlords don’t give them all the information that they need to fully qualify and analyze the particular opportunity their client may be interested in.
Secondly, there is an issue with the quality of the data that’s available to landlord reps and tenant broker reps: it’s old and inaccurate. The intuitiveness of the market does not get captured in the data.
RM: What are some of your greatest challenges in advertising and leasing your properties?
DA: In every other industry, the data is much more readily available to consumers than in commercial real estate. For instance, if I want to buy an airplane, I can look at numerous data points to gather information about my purchase. Then, (if I want) I can find a third party go-between to help me evaluate what my choices are and make my final decision. In commercial real estate, there is a large pool of potential tenants who want to understand the market but have no access to transparent information. In order to find information about a property, a tenant has to drive around and look at signs, write down numbers, etc., and can’t easily gather all the particulars about a property he or she might be interested in. It’s always been a frustration for me.
RM: Websites such as Zillow, Trulia and Redfin have greatly impacted the residential real estate market in the way that consumers locate property and make informed buying decisions. What has kept similar tools from finding their way into commercial real estate?
DA: Good question. It doesn’t make any sense. Because of the size of the assets and the value of the assets involved, we should be doing a better job as an industry of getting the data to our end users and to the professionals in our industry. I think it goes back to that trust factor. I’m really more of a landlord in that I don’t want a tenant rep broker or a tenant to have to make assumptions or interpret the data that I’m able to provide, without having a direct line of communication to me. I want to give enough data to my customers so that they know where the building is, that I have space available and I want to be able to talk to them and explain the nuances of a particular building. For example, I would want to explain a published rate we may have and what may affect that as it relates to the type of tenant, the term of the tenant’s lease, what the other tenants are doing in the building and so on. There are a lot of nuances and I don’t think people trust that they will get communicated properly. From a landlord’s perspective I want to talk to my prospective tenant as soon as I can.
RM: What is the biggest challenge tenants face when trying to find viable commercial real estate investments or leasing opportunities?
DA: I think it’s just a runaround. There’s a sign in front of a building that’s got a guy’s name on it, the tenant calls the number and plays phone tag, for three or four days sometimes. The property owner is sending out email fliers that probably get deleted 80 percent of the time because they’re not relevant to a broker at that moment. It’s almost just blind luck to get the right email to the right tenant rep at the right time. The biggest challenge for us is: we need to be more open with what we have available to sell and lease. We need to put price, terms, everything we know about a property we’re selling and make it available to everyone. Once that information is out there, it will speed up the transaction process quite a bit.
RM: Do you think big data will be disruptive to the commercial real estate industry and how and/or why?
DA: No doubt about it. It will speed up transaction times, which will increase profitability. You know, if I have a space that sits vacant for only 3 months versus 6 months and it’s 20,000 square feet, I just a made a $70,000 profit. Vacant space isn’t doing me any good. The more accurate and timely the data, the faster the transaction cycle is going to be. That’s going to benefit me as a landlord, and that’s going to benefit the tenant rep broker. Tenant rep brokers will be able to do 15 separate transactions per year as opposed to, say, 11. The way things are currently, a tenant rep broker drags it out for so long because he thinks he knows where the space is; he thinks he’s found the one he wants, then lo and behold he’s 80 percent through the process and a new space pops up. Either the landlord didn’t get the information to him or he didn’t do a thorough mining of the available information. Now the tenant rep broker has to restart the whole transaction process because he’s found a better space for the tenant. By the end of it, he’s wasted 4 months for the landlord, the tenant’s in a hurry and it makes our industry look sloppy.
RM: What are some of the biggest roadblocks to efficiency in commercial real estate transactions?
DA: A big part of it is just the timing and how long everything it takes. Then there’s the inefficiency of data on the front end. The more efficient the data on the front end, the less time it will take to get to the end user. Information should be apparent to everyone involved in the transaction from start to finish. The tenant rep broker shouldn’t feel like he has to shield his client from particular facts about a particular space…to try to hide something that will come out later anyway. If all the facts and information are available to everyone in the transaction right from the beginning, the transaction can be completed more quickly and smoothly. We need transparency from landlord to tenant broker to tenant in order to make a much smoother and more efficient process for everyone involved.
RM: Is there anything else you’d like to add based on our conversation?
DA: In general, the way I look at RealMassive versus some of the other platforms that we’ve used for years is the real-time aspect of the data that RealMassive offers. We need to get to the point that when we lease a space and it goes off the market, the market knows about it immediately. Or, if we know a space is coming on the market, that information gets to the tenant or the tenant rep broker (or whoever else wants to know about it) the day it happens–not 60 days later or 90 days later, which is the way it works out now. This kind of real-time data information exchange can only benefit the professionals in the industry, and more importantly, the end users of our product, i.e. the tenants that are going to be in our buildings. That’s going to make the process of leasing or locating space that much easier for them. And I get paid rent sooner, which is what I like.