LightBox General Manager Rich West was recently a guest on the Commercial Real Estate Pro Networks podcast hosted by J. Darrin Gross. This podcast focuses on commercial real estate investment and risk management strategies, and Rich was invited on to discuss lending volume trends and technology tools used for lender platforms.
First, a quick background on Rich. Rich has been working in real estate since 1991, mainly in investment and valuation. Prior to joining our team here at LightBox, Rich spent 13 years at CBRE. He was most recently running the Americas valuation business, the largest valuation firm in the world. Now at LightBox, Rich oversees our lender and valuation business.
Rich and Darrin’s conversation is rich with insights and information on how data can be leveraged to support commercial lending decisions. We’ve pulled out 3 key takeaways from their conversation, but definitely recommend giving the full interview a listen!
1: Combining Data with Personal Experience is the Key to Success
As LightBox General Manager, Rich obviously believes data-driven decision-making is essential in commercial real estate. However, the data is only one part of the picture. Experience, creativity, and knowledge of the local market all play an important role as well.
Rich has found that the most successful commercial real estate professional combine their knowledge of the market with the data. For example, great brokers paint a complete picture of a listing and the surrounding market backed up by data. They accurately disclose risks, and lean on data driven strategy to mitigate those risks. “One of the beauties of real estate is that two people can look at the same piece of real estate, the same deal, and come up with totally different conclusions, and perhaps an offer price or what they see the value as or the opportunity,” Rich says.
2: You Don’t Have to Be a Data Scientist to Use Location Data
Sophisticated technology companies like Amazon or Microsoft have widespread capabilities and resources to gather, track and manage location data. Commercial real estate professionals are accustomed to using data for decision-making, but many question whether they can and should use a data platform if they don’t have a dedicated data scientist. The answer, of course, is yes.
LightBox offers a range of solutions making data widely accessible and actionable for beginners and experts alike. Businesses and government agencies can then focus their expertise on what they need to, while having the data they need to support them. They don’t have to worry about security, encryption, and overall management.
Different jobs use property data tools for different reasons, and location technology platforms enable everyone in real estate to uplevel for smart decision making. Appraisers lean on location technology for precise environmental and property condition assessment reports. Lenders tend to be very sophisticated users of location data, relying on it for due diligence and to monitor their loan portfolios. Brokers use it to find opportunities for their clients and to best understand how properties align with clients’ business needs.
“One of our customers operates in a super high-density market,” Rich explains. “They had 25 square blocks that they were focusing on, and literally had the rent rolls for every building, including knowing the owners. They had close to perfect knowledge of this market area. They were very effective, and anyone trying to get a sale done in this area went to them. Gives you a sense of what a great broker can do with the right data.”
LightBox provides CRE professionals with the sophisticated data and location tools they need. You can use data from the application itself, and you can also import your own data. LightBox aggregates data, and also disseminates it via the SpatialStream API. As an example, Rich offers a case study of a state government that was already using mapping data. They wanted to identify broadband availability based on zip codes. They accomplished this using SpatialStream to overlay data from the telecoms to get a granular view of what the broadband availability is and how strong potential signals could be.
3: COVID Had a Minimal Impact on Commercial Real Estate
Despite a challenging year resulting from the COVID-19 pandemic, data shows that commercial real estate remained relatively strong. Even with an initial down period during the early months of the pandemic, the industry recovered throughout the United States.
“I pulled year-end listing data from our platform and the impact of COVID resulted in a 65% decrease in commercial listings between January and April of 2020,” Rich says. “I was able to compare the data in our platform to the year prior, and saw that the drop was primarily from hospitality, which makes sense. But then things started to climb back up again, and was mostly comparable to the year before by June of 2020.”
Additionally, Rich found that 2020 commercial appraisals were up by 4% compared to 2019. From the first quarter of 2020, by the 3rd quarter, volume was up between 15-23%. Everything swung down in March and April of 2020 when everyone was trying to figure out what would happen, but was up 32% by October and still up 17% in November.
Rich discovered that hotel appraisals were up 25% in 2020, while industrial was up 8%. He attributes this to hotel value uncertainty due to COVID lockdowns. Industrial on the other hand had a lot of ecommerce gains and was already benefiting from the macro trends occurring prior to the pandemic, and then found that the pandemic accelerated those trends. Industrial was in demand.
When looking at market trends over the last year, in the largest 5 markets of New York, Los Angeles, Chicago, Houston and Dallas, appraisal volumes were up in 2020 by 8%. Then the next 5 largest markets of Miami, Seattle, Washington, DC, Atlanta, and Philadelphia, appraisals were down 7%.
Overall, Rich observes that once people recognized there was some stability, the market moved forward.
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