What Role Will Big Data Play for CRE in 2018? Part III for CREs

Posted on: Tuesday, March 6th, 2018, under Data, Open Data, Real Estate Investing, Research, Technology, Thought Leadership.

Commercial Real Estate Skyline

Having more accurate market big data has always been a distinct competitive advantage in Commercial Real Estate: it gives us the ability for better informed site selection, improved floorplan design, and the ability to provide more value to our clients than anyone else can.

Because of this, it’s understandable that CREs are wary of making any technological change. They’ve been building their data-gathering system since they entered the industry and it’s one of their most valuable assets. This is a large part of the reason why big data, which has revolutionized countless other industries, has been slowly adopted in Commercial Real Estate.

The thing is, technological change happens regardless of whether the industry, as a whole, wants it. And as tech makes it easier to gather and analyze market data, what was once a competitive advantage quickly becomes a liability. As real-time market data becomes the norm in Commercial Real Estate, early adopters will be able to seize market share with better information gathered more cheaply.

We have high expectations for the role of big data for CREs in 2018. New, easy-to-use software is giving us new ways to receive and interpret actionable data – in real time. We can now see how a given market is performing right now so you can spend less time gathering and analyzing market data and more time building relationships with your clients.

Here’s our prediction for big data’s role for CRE in 2018:

Assessing Opportunities

CRE companies will invest heavily in data and analytics platforms, which means data-centricity is quickly becoming the strategic choice among CRE executives. We’re beginning to use CRE data to shape our opinions and to come up with actionable strategies to use. Big data allow us to monitor trends in our industry as they develop, so we can stay one step ahead of the newest topics giving us the advantage to spot opportunities in leasing trends.

Improving Site Selection

With software to analyze big data, you can map out locations for your clients based on minimizing their employees’ average commute. Then, with real-time market information, you can look for properties that are available within that area and give them the most up-to-date pricing information: we can use real-time data to strategically pair the right space with the right tenant.

Being Able to Give Your Clients More Actionable Data 

Being able to see your market in real time means you can see if one building in a particular area is leasing at below-market rates before their Owner Rep realizes it and increases their price per square foot. You can also see if the market is about to start a downturn and make sure they don’t sign a long-term lease and wait for better options down the road.

Building a Competitive Advantage

Today, utilizing big data and the newest tech available will give you an advantage over your competition. Today’s market intelligence platforms allow us to make informed insights on current value, risks, and opportunity costs. But, as more and more CREs adapt their intelligence-gathering to focus on real-time data, the value will shift from grabbing market share to just keeping up.

What Role Will Big Data Play for Commercial Real Estate in 2018: Part 1

What Role Will Big Data Play for Commercial Real Estate in 2018: Part 2

NAI Hunneman Q2 Market Recap Now Available

Posted on: Thursday, July 20th, 2017, under Commercial Real Estate, Guest Authors, Research.

Bob Samiiby Liz Berthelette, Director of Research NAI Hunneman. Liz is a seasoned CRE researcher with a penchant for maps, graphs & data; providing insights on the local Boston market and beyond.
While build-to-suit activity propped up absorption, Greater Boston’s commercial real estate markets ended the second quarter with mixed results. Overall market conditions remain positive, however, growth has slowed to a more moderate pace.

Pharma R&D

  1. In the office market, vacancies were flat compared to last quarter as both the Downtown and Cambridge markets posted negative absorption. Biogen’s vacant sublease at 105 Broadway, Whole Foods’ relocation to Marlborough and the demolition of 145 Broadway led to higher vacancies in Cambridge. In the suburbs, the delivery of SharkNinja’s new headquarters in Needham and two large owner-user sales helped the office market post more than 400,000 square feet of demand. Despite a softening in fundamentals asking rents continued to increase; surpassing $33/SF metrowide in the second quarter.
  2. Given how tight Greater Boston’s lab market has been, any movement in either direction can impact fundamentals. This quarter, positive absorption in East Cambridge was driven by the delivery of the fully-occupied 50-60 Binney Street. Takeda’s now vacant space at 26 Landsdowne Street and former BIND Therapeutics space at 325 Vassar contributed to negative absorption in Mid Cambridge. In terms of construction Alexandria broke ground on 399 Binney Street and King Street Properties is moving forward with a speculative lab building at 828 Winter Street in Waltham.
  3. Overall demand remained positive in Greater Boston’s industrial market, with build-to-suit construction and owner-user sales bolstering absorption. That said, modest speculative construction and negative absorption in the north markets kept vacancies elevated compared to last quarter. In one of the largest deals of the quarter, 47 Brand purchased the 465,000-square-foot 140 Laurel Street in Bridgewater and plans to occupy the space, which has been vacant since 2009. Asking rents are nearing $9/SF metrowide, with Flex/R&D space within the Route 128 belt garnering top dollar from tenants.

Click here to access Market Recap.

A Breakdown of NAIOP’s Mid-Year Market Roundup

Posted on: Thursday, July 20th, 2017, under Commercial Real Estate, Guest Authors, Research.

Bob Samiiby Liz Berthelette, Director of Research NAI Hunneman. Liz is a seasoned CRE researcher with a penchant for maps, graphs & data; providing insights on the local Boston market and beyond.
This morning NAIOP Massachusetts hosted its annual Mid-Year Market Roundup. The expert panel presented to a packed-room of real estate professionals; covering topics related to the economy, local and national property markets as well as capital markets. A common theme throughout the presentation was “slower, but not slow.” Below are just some of the key takeaways from today’s event:

Pharma R&D

Putting their heads together to boost productivity

Economic Overview – Hans Nordby

  1. In terms of a recession, it’s not if but when. Leading real estate forecasting and analytics firm; CoStar Portfolio Strategy, is predicting a recession will occur within the next three years. However, the impending downturn should be much milder than the Great Recession of 2009.
  2. Several economic indicators remain positive. Corporate profits have been positive in the last three quarters, the unemployment rate is at a 17-year low and real wage growth (accounting for inflation) is as good as it was in the previous two cycles.
  3. CRE prices are bobbling at new peaks. While prices are not rising, they aren’t necessarily falling either. Locally, the tide is going out very slowly in Boston so values should remain pretty solid.

Pharma R&D

Cambridge/Lab Market – Evan Gallagher

  1. Biotech has seen a renaissance and Cambridge is the new Florence. Moreover, the epicenter of biotech (Kendall Square) is shifting and expanding to meet the needs of tenant demand.
    The market is seeing some consolidation in the pharmaceutical industry; as one company expands another contracts. Other challenges include the soft IPO market, FDA scrutiny and lack of talent.
  2. The Cambridge office market is cooling and the breakneck pace of rent growth is likely behind us. Tech companies have gotten squeezed by the lack of space and rising rents; leading tenants that remain in Cambridge to downsize by 20-35% upon renewal.
  3. While there has been some success in the suburban lab market, one major roadblock remains: hiring. The lack of amenities and transit, compared to Cambridge, make recruiting difficult.

Pharma R&D

Retail – Andrea DeSimone

  1. Is this the death of retail? One might think so given the store closure watch list continues to grow, but it may not be time to hit the panic button yet. Leases will happen; they may just take longer and require more creativity.
  2. E-commerce continues to thrive, as its share of total retail sales remains on an upward trajectory.
  3. Innovative experiences, fitness, the restaurant scene and food halls are active retail sectors right now.

Pharma R&D

Downtown Office – Ben Heller

  1. Over the last 10 years, the office market has experienced disruptive changes – driven by technology and changing workforce demographics.
  2. How has Boston evolved in the past decade? The city is now on the global HQ map, premium locations have shifted and the definition of core product has changed.
  3. Downtown office asking rents are 11% above the previous peak and vacancies are still near 15-year lows.

Pharma R&D

Multifamily – Sue Hawkes

  1. The Boston multifamily market is still seeing price appreciation, but the pace of growth has slowed.
  2. Transit is hugely responsible for the success of multifamily product in more tertiary markets (i.e., Somerville and East Boston).
  3. Amenity wars are alive and well while some tenants are moving every year in order to take advantage of concession packages offered in the newest buildings.
  4. Affordability is a major factor in Boston; lack of affordable housing will most likely impact Boston’s labor market.

Pharma R&D

Capital Markets – Edward Maher

  1. The capital markets are not as quiet as you think. While sales volume is down 18% year-over-year in Boston, these levels are still solid compared to previous years.
  2. Foreign investors perceive Boston to be one of the best places to do business. However, there is very little inventory available for purchase.
  3. The buyer pool is thinning and overall pricing is flat in Boston.
  4. Looking to the future, the action will be concentrated in the suburbs. With that said, the suburbs remain untested waters. Moreover, foreign capital remains “snobby,” and likely won’t stray too far from core, downtown assets.

Overall consensus on the Boston market was still positive despite some risks to the near-term forecast.

Massachusetts’ Big Pharma Cluster and Its Impact on Commercial Real Estate

Posted on: Wednesday, June 28th, 2017, under Commercial Real Estate, Guest Authors, Research.

Bob Samiiby Liz Berthelette, Director of Research NAI Hunneman. Liz is a seasoned CRE researcher with a penchant for maps, graphs & data; providing insights on the local Boston market and beyond.
Massachusetts, anchored by Cambridge, is home to one of the largest biotech clusters in the world. With many of the leading “big pharma” firms maintaining a presence here, this industry has become a key driver of commercial real estate demand throughout the Bay State. In fact, 16 out of the top 20 pharmaceutical companies investing heavily in research and development operations lease and/or own space in Massachusetts. In looking at the potential future demand for office and/or lab space these heavy investors will likely play a key role, especially if their current presence in the marketplace is minimal.

The chart below highlights each firms’ research and development investment dollars in the fiscal year 2015-16 and its estimated real estate footprint in Massachusetts. Novartis ranked first in the European Commission’s 2016 EU Industrial R&D Investment Scoreboard and occupies more than one million square feet in Greater Boston. Due to its MA-based headquarters operations, Biogen boasts one of the largest footprints in the market despite ranking among the bottom of this list for investment dollars.

Pharma R&D
*Occupied by Roche subsidiary, Iquum.
Sources: EU Scoreboard 2016 (World 2500), Costar, NAI Hunneman Research

There are a handful of firms that made the list that have little to no real estate presence in Massachusetts such as Roche, Eli Lilly, Johnson & Johnson and Bayer. With that said, many are planning to expand in Cambridge or are already collaborating locally:

• Reportedly, Eli Lilly and Johnson & Johnson have fairly large requirements out in the Cambridge market.
• Novo Nordisk has been collaborating with MIT on next generation drug delivery devices since 2015.
• Bayer is opening its East Coast Innovation Center in Cambridge.
• Boehringer Ingelheim’s venture capital arm opened in Cambridge in 2013 in order to invest in early-stage biotech companies.

One of the area’s largest pharmaceutical companies, Shire PLC, has continued to expand and currently occupies more than two million square feet in Greater Boston. However, the Lexington-based firm only invested $872 million in research and development last year; ranking the company 30th on the list. With that said, Shire recently agreed to lease 343,000 square feet at the Genzyme Center building in the heart of Kendall Square; establishing a hub for the research and development of rare diseases. This new innovation hub will house roughly 1,000 workers by 2019 ― after Genzyme relocates to its new headquarters nearby. One would expect Shire’s investment dollars to increase once this new R&D facility is operational.

Looking at revenues as opposed to R&D investment in the chart below, 14 out of the top 20 global pharmaceutical companies maintain a real estate presence in Massachusetts. Interestingly Johnson & Johnson, Bayer and Roche top this list as well. Other major pharmaceutical firms lacking a Massachusetts address include Sinopharm Holdings, Medipal Holdings and Alfresa Holdings. Could one of these companies be the next to set up shop here?

Pharma Revenue
*Occupied by Roche subsidiary, Iquum.
Sources: EU Scoreboard 2016 (World 2500), Costar, NAI Hunneman Research

While growth from companies currently located in Massachusetts will remain an important driver of commercial real estate, firms not-yet established here likely offer greater potential for future demand.

Greater Boston Property Markets Start Year on a Positive Note

Posted on: Wednesday, June 28th, 2017, under Commercial Real Estate, Guest Authors, Research.

Bob Samiiby Liza Berthelette

Positive absorption was seen across all property types in Greater Boston. Metrowide office absorption totaled more than 300,000 square feet with the suburbs leading the charge. The lab market, particularly Kendall Square, remains as-tight-as ever. And fundamentals continue to improve in the industrial market as vacancies have reached new lows.
The New Year has brought continued uncertainty in the marketplace. However, many signs are still pointing to a stronger macroeconomic outlook in the near term. In January, the International Monetary Fund revised its U.S. growth forecast up slightly for both 2017 and 2018. A more solid economic outlook would likely bolster the commercial real estate property markets. There are still several trends worth keeping an eye on in the coming quarters that could result in up or downside risks to Boston’s outlook. Proposed budget cuts to NIH funding and concerns surrounding inflation are two to watch.

Below are some highlights from NAI Hunneman’s Q1 2017 market reports:

The Greater Boston lab market remains hot. Net absorption totaled 219,492 square feet metrowide in the first quarter, with the Cambridge markets accounting for roughly half of this space. Metrowide vacancies are nearing 3% and East Cambridge vacancies are just a mere 0.2% as demand for space remains heated. With little new product on the immediate horizon and strong demand for space, look for market conditions to remain favorable in the coming quarters.

The Greater Boston office market posted another positive quarter with more than 300,000 square feet in net absorption. Results were mixed with East Cambridge, Route 128 West and the Back Bay posting some of the strongest absorption. Metrowide vacancies inched down to 11.2% in the first quarter and direct asking rents grew to nearly $33 per square foot.

The Greater Boston industrial market absorbed more than 500,000 square feet of space in the first quarter of 2017. Vacancies are sub-8%; reaching levels not seen in more than 15 years. Demand drivers remain vast and varied. E-commerce, housing and building-related firms, drug manufacturing, third-party logistics, breweries and medical marijuana facilities are all bolstering industrial demand in the marketplace.

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