Transcript Cloud Computing - Appraisal Institute

Real Estate Data:
What Will the Future Behold?
Mark R. Linne, MAI, SRA
CEO/Chief Analytics Officer
ValueScape 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
5,300
Lease Size (SF)
5,100
4,900
4,700
4,500
4,300
4,100
3,900
3,700
3,500
02
03
04
05
06
07
08
09
10
11
12
13
Average Lease Size (4-Qtr Moving Average)
Sources: CoStar Group, Inc.; PPR
As of 13Q1
SMALL TENANTS DISPROPTIONATELY DRIVING DEMAND
PPR54 OFFICE MARKET: NEW LEASING
60%
Share of Avg. Annual Volume
50%
40%
30%
20%
10%
0%
< 10K
Recent Avg.
10K to 49K
50K to 99K
100K to 199K
200K +
Prev. Cycle Avg. ('00 -'07)
Sources: CoStar Group, Inc.; PPR
As of 13Q2
Multi Family
Conventional Wisdom:
The Market is Getting Overbuilt
60
Atlanta
Chicago
Los Angeles
Inland Empire
Las Vegas
Sacramento
Philadelphia
Minneapolis
San Francisco
San Diego
Nashville
Tampa
San Jose
Miami
Charlotte
East Bay
Baltimore
Boston
Raleigh
Phoenix
Orlando
Washington - NoVA - MD
Austin
Denver
Houston
San Antonio
Seattle
New York
Dallas - Fort Worth
DEVELOPERS ASSUMING HUGE POOLS OF LUXURY RENTERS
CLASS A SUPPLY VS INCOME-QUALIFIED DEMAND (2010-2015)
Class A Units (000s)
50
40
30
20
10
0
2010-15 Class A Demand (Income Qualified)
2010-15 Class A Supply Additions
Sources: CoStar Group Inc.; PPR; Esri
As of 13Q1
Office
Conventional Wisdom:
Renewal Probability Is ~70%
IF YOU LAND AN ELEPHANT, IT STAYS
PROBABILITY OF RENEWAL BY TENANT SIZE
>200K
75%
100K-200K
76%
50-100K
72%
25-50K
52%
10-25K
41%
5-10K
36%
3-5K
34%
0%
10%
Sources: CoStar Group, Inc.; PPR
20%
30%
40%
50%
60%
70%
80%
Industrial
Conventional Wisdom:
Warehouse Buildings are Commodities
MARKETS HAVE LIMITED IMPACT ON RE-LEASE POTENTIAL
BIG & NEW ASSETS IN DISTRIBUTION MARKETS
1990+ & 400K+ Vacancy
100%
80%
60%
40%
20%
0%
1
2
3
4
5
6
7
Quarters Following Vacancy Shock
High-Bench-Strength Markets
Sources: CoStar Group, Inc.; PPR
8
9
10
Low-Bench-Strength Markets
As of 2012
IT’S ALL ABOUT THE MARKET
BIG & OLD ASSETS IN DISTRIBUTION MARKETS
100%
<1990 & 400K+ Vacancy
80%
60%
40%
20%
0%
1
2
3
4
5
6
7
8
9
10
Quarters Following Vacancy Shock
High-Bench-Strength Markets
Sources: CoStar Group, Inc.; PPR
Low-Bench-Strength-Markets
As of 2012
Chosen?
1
1
1
1
1
1
1
1
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
0
7
7
7
7
7
7
7
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
1,000
Quarterly Sales Volume ($B, SA, Index Year 2000)
Y/Y Growth
900
50%
40%
800
30%
700
20%
600
10%
500
0%
400
300
(10%)
01
02
03
04
05
E-Commerce
E-Commerce Sales Growth
Sources: PPR; U.S. Department of Commerce
06
07
08
09
10
11
12
13
Physical Retail Sales
Physical Retail Sales Growth
As of 13Q1
… BUT SO IS PRODUCTIVITY …
PHYSICAL RETAIL SALES PER SF OF RETAIL SPACE
$280
Physical Sales
per SF
$270
$260
$250
$240
$230
$220
$210
$200
00
01
02
03
04
05
06
07
08
09
10
11
12
13
Phys Sales/SF
Sources: CoStar Group, Inc.; PPR; U.S. Department of Commerce
As of 13Q1
… THERE IS SIGNIFICANT NOI UPSIDE BREWING
PHYSICAL SALES PER SF AND RENT LEVEL
$280
Average Rent
per SF
Physical Sales
per SF
$270
13-Quarter
Lag
$21
$20
$260
$19
$250
$18
8-Quarter
Lag
$240
$17
$230
$16
$220
$210
$15
$200
$14
00
01
02
Phys Sales/SF
03
04
05
06
07
08
09
10
11
12
13
Rent
Sources: CoStar Group, Inc.; PPR; U.S. Department of Commerce
As of 13Q1
Industrial
Conventional Wisdom:
Portfolio Premium Exists for Warehouse Assets
PORTFOLIOS ARE BIGGER THAN EVER
WAREHOUSE INIDIVIDUAL ASSET VS. PORTFOLIO PRICING*
14%
Cap Rate
12%
10%
8%
6%
4%
2%
00
01
02
03
Individual Assets
04
05
06
07
08
09
10
11
12
13
Portfolios
Sources: CoStar Group, Inc.; PPR
*Shading = Distance from trailing 90-day mean. Size = Price.
As of 13Q2
IF YOU BUILD IT…
WAREHOUSE INDIVIDUAL ASSET VS. PORTFOLIO PRICING
12%
Portfolio Premium
Cap Rate
25%
10%
20%
8%
15%
6%
10%
4%
5%
2%
0%
0%
(5%)
00
01
02
03
Individual Assets
Sources: CoStar Group, Inc.; PPR
04
05
Portfolios
06
07
08
09
10
11
12
13
Spread
As of 13Q2
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
40
Inventory by Year Built (Millions of SF)
Inventory Per Capita (SF)
35
3.5
3.0
30
2.5
25
2.0
20
1.5
15
1.0
10
5
0.5
0
0.0
1955
1960
1965
1970
1975
Traditional Grocery Stores
Costco
Sam's Club
Total Grocery SF Per Capita
Sources: CoStar Group, Inc.; PPR; SEC Filings
1980
1985
1990
1995
2000
2005
2010
Wal-Mart
Target
Traditional Grocery SF Per Capita
As of FY 2011
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Save-A-Lot
Fresh & Easy Nghbrhd Market
IGA
Giant Eagle
Piggly Wiggly
Food City
ALDI
Jewel-Osco
Bi-Lo
ShopRite
Grocery Outlet
Kroger
Walmart
Trader Joe's
Winn-Dixie
Food 4 Less
Sweetbay Supermarket
Save Mart Supermarket
Food Lion
Fry's Food & Drug Stores
Stater Bros. Markets
Von's Supermarket
Giant Food
Albertsons
Publix Super Market
Safeway
Ralph's Grocery
Harris Teeter
King Soopers
Stop & Shop
Raley's Market
Whole Foods
BUT SOME SAFETY CAN BE FOUND
SHARE OF GROCERY STORES IN GREAT AND TERRIBLE CENTERS
Share of Centers by Cohort
<5%
Sources: CoStar Group, Inc; PPR
>40%
As of 12Q3
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Data to Information
Mobile Technology
• Good-bye desktop, good-bye lap-top
• Hello tablet and iPad
• 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, 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?