Real Estate Data What Will the Future Behold

Real Estate Data: What Will the Future Behold? Mark R. Linne, MAI, SRA CEO/Chief Analytics Officer Value. Scape Analytics, Inc. Jack Huntress Managing Director-Residential Environmental Data Resources Rene Circ Director of Research-Industrial Property Portfolio Research

Some of Today’s Themes

The Appraiser of Tomorrow • Jared Schlaes-1995 • Two kinds of participants in the real estate analysis profession • Collectors of Data • Analysts of Data • Who prospers most? • Who is the professional and who is the para-professional? • What is the vision for the profession?

The Appraiser of Today • Inadequate technology • Residential-imprisoned by the form • Primitive Technology • • Real Estate Industry being left behind All tech for appraisers is desktop Not web Not even laptop Not Mobile As an industry we still think within the box that is the form The solution remains how to fill out the form No “real” tools-all tech is focused on form-filling We are spending 80% of our time typing data into forms or into Word. docs-We are not analyzing a we could if we had the tools

The Trends to Watch For • Cloud Computing • Big Data • Mobile Technology • Social Networks • New Analytics • Augmented Reality

The Rise of Databases • UAD • Fannie • Freddie • 100 Million Property DB in 10 years • Knowing more about the market than appraisers-what do you do?

Cloud Computing • Seeing through the hype to discover the potential • Its not just for storage • It’s all about analytics • Leveraging the analytics in the cloud provides significant improvement in the field • Analyze everything in real-time • Analytics that were never before possible at the device level

Big Data • More data on virtually everything • How is the data analyzed? • What is the benefit? • Data availability will only accelerate • Where are the tools to analyze? • What you need to look for • What you need to do The Three Four V’s

Office Conventional Wisdom: Lease Are Getting Smaller As a Result of Shrinking SF/Employee

TYPICAL LEASE SIZE FALLING 70 SQUARE FEET PER YEAR OFFICE LEASE SIZE IN SF--ROLLING 4 QTR AVERAGE

SMALL TENANTS DISPROPTIONATELY DRIVING DEMAND PPR 54 OFFICE MARKET: NEW LEASING

Multi Family Conventional Wisdom: The Market is Getting Overbuilt

DEVELOPERS ASSUMING HUGE POOLS OF LUXURY RENTERS CLASS A SUPPLY VS INCOME-QUALIFIED DEMAND (2010 -2015)

Office Conventional Wisdom: Renewal Probability Is ~70%

IF YOU LAND AN ELEPHANT, IT STAYS PROBABILITY OF RENEWAL BY TENANT SIZE

Industrial Conventional Wisdom: Warehouse Buildings are Commodities

MARKETS HAVE LIMITED IMPACT ON RE-LEASE POTENTIAL BIG & NEW ASSETS IN DISTRIBUTION MARKETS

IT’S ALL ABOUT THE MARKET BIG & OLD ASSETS IN DISTRIBUTION MARKETS

Retail Conventional Wisdom: The Best Days for Retail Are Behind Us – Blame it on E-Commerce

NET GAINING GROUND… ONLINE VS. IN-STORE SALES VOLUME AND GROWTH

… BUT SO IS PRODUCTIVITY … PHYSICAL RETAIL SALES PER SF OF RETAIL SPACE

… THERE IS SIGNIFICANT NOI UPSIDE BREWING PHYSICAL SALES PER SF AND RENT LEVEL

Industrial Conventional Wisdom: Portfolio Premium Exists for Warehouse Assets

PORTFOLIOS ARE BIGGER THAN EVER WAREHOUSE INIDIVIDUAL ASSET VS. PORTFOLIO PRICING*

IF YOU BUILD IT… WAREHOUSE INDIVIDUAL ASSET VS. PORTFOLIO PRICING

Retail Conventional Wisdom: Grocery Anchored Center Are a Safe Bet – Immune to E-Commerce

BIG BOX EATING GROCERS’ LUNCH GROCERY SPACE AND EQUIVALENT BY RETAILER

BUT SOME SAFETY CAN BE FOUND SHARE OF GROCERY STORES IN GREAT AND TERRIBLE CENTERS

Data to Information

Mobile Technology • Good-bye desktop, good-bye lap-top • Hello tablet and i. Pad • This changes everything • Three monitors is not the solutions • Going smaller and going mobile • Completing the appraisal in the field while you are at the house • The inspection corollary • Efficiency, efficiency

Social Networks • Appraisers don’t play well together • We don’t share well • We don’t take advantage of the opportunities that collaboration allows • Sharing • Talking advantage of each person’s expertise and opinions and experience • You cannot leverage data unless you share • Real time sharing in the field with your peers

New Analytics • Regression Analysis • Geographically-Weighted Regression • Monte Carlo Analysis • Non-Linear Modeling • More Data-Better Models

“Bloomberg Terminal”

Augmented Reality Not just what you an see But what you cannot see Linked together based on geography Think layers of a cake The Landscape of Valuation EVERYTHING about a property demographics Economics Trends Legal Zoning

What Should You Do? • Some of these technologies are here • Costar • Some are being developed • Looking for industry adoption • Over the next 24 months the world changes • Be aware and be ready

Too Big to Fail…Too Small to Comply There are 6500 FDIC Banks…. thousands that do less than 500 residential mortgage originations a year.

Appraisers – THE eyes and ears of the lender

Data Now Readily Available

AMCs to Self Management • The pendulum swings back • New rulings make using AMCs (potentially) a business risk • There are benefits to both sides – Appraisers get paid more (potentially better service) – Better appraisers and appraisals • But…Banks need good technology (processes) and audit capabilities to prove “arms length” and remain in compliance What data and technology is going to be used?

Discussion and Q&A

Questions for Consideration • With the consumer having access to more information than ever before, what effect do you think that will have on the appraisal process? (Zillow, transaction histories) • Why should I care about the secondary market creating a data warehouse? • What is the role of AVMs as we go forward? • I’m not an environmental expert (as an appraiser) I’ve never offered that information and I don’t plan on it. Why would I? • How do I understand “big data” in the context of how it will affect my job?