Looking forward in a backwards facing industry

If there is any single industry that depends on data trends to provide indications about the future, it’s real estate. Brokers, investors, and tenants all love to look at recent history and use it to provide a prospective on where the industry is headed going forward. Data points such as vacancy rates, rental rates, absorption, comparable deals, and loan rates are all used as evidence to prove where the market is heading.

While these data points are useful, they hardly tell the whole story. A perfect example would be using comparables to indicate where a deal should get done. Just because a particular landlord or tenant agreed to a certain pricing structure three months ago doesn’t mean that they will do that particular deal again.

Another example is using vacancy or availability rates to indicate the health of a particular market. Vacancy rates could be trending up, but if there are a couple of big tenants in the market, those vacancies could get filled quickly. Or vacancy rates could be high, but they are all small spaces and a large tenant would have few choices. Looking at the historic trends and current data points wouldn’t tell you that part of the story.

That’s the value of the broker… Helping to make sense of the noise and provide counsel that will help the business make a sounds decision.

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