The market report era

Commercial brokerages are increasingly compiling data — but how good is it?

With commercial market data now more readily available than ever, a broker can no longer bank on being the first person (or the only person) with information. Enter the era of the market report.

“Information used to be one of a broker’s main tools,” said Peter Von Der Ahe, a vice president with Marcus & Millichap. “Now part of the service a broker provides” is deciphering the onslaught of data.

Along those lines, in the past two years, commercial brokerages — including Colliers International, Avison Young, Massey Knakal and Cassidy Turley — have all begun hosting quarterly breakfasts to tout their data.

“If you’re in the leasing world and you don’t have market data, you can’t be a player,” said a prominent broker who asked not to be named.

The above-mentioned firms join more established New York City brokerages, like CBRE Group and Cushman & Wakefield, that have been hosting events to debut their data for years.

But some say the bulk of this data is more akin to marketing materials than market data. “In reality, these are marketing pieces,” said one broker, who asked to remain anonymous.

Clashing methodologies

Indeed, the problem with this proliferation of data, sources said, is that it’s not all accurate.

While some sources said more niche coverage can be useful for brokers, landlords and investors, others noted that even the established firms tolerate a surprisingly large margin of error — perhaps as high as 9 percent, said David Schechtman, an investment sales broker with Eastern Consolidated.

Many brokerages pull data from third-party sources like CoStar Group, Loopnet, CompStak and Real Capital Analytics, and then cross-reference it with comps in their internal database, mostly self-generated by brokers. While most firms would not discuss their methodology in detail, some said that in the event of a discrepancy, they side with the information provided by their broker — even if the broker was not on the deal.

Of course, brokers may have a financial incentive to make one subset of the market look good. For example, tenant brokers may try to minimize rents, while landlord brokers may inflate them.

What’s more, despite all of these new reports, there are still major holes when it comes to key data points.

For example, “a report that needs to exist is an industrial report for the outer boroughs,” said Ben Thypin, director of market analysis at Real Capital Analytics. However, the dominant industrial firms often sell buildings through word of mouth and may not need the publicity a report provides, he said.

Brokerages also struggle to vet retail rents, brokers said. While Retail MLS, a website that tracks retail listings, provides strong asking rent data, sources said, comps for taking rents remain elusive.

“Retail [leasing] is particularly opaque,” said Pam Murphy, senior vice president for global research at CBRE.

“In some hot areas, there are two or three [comps],” added Nat Rockett, executive vice president at Cushman’s Capital Markets Group. “And that’s not really a market.”

Yet those few data points are continually used to decide how much a landlord should ask and how much a tenant should pay.

And every firm’s market report has its own style. For example, Colliers tends to take a stronger stance on market trends, recently attributing the uptick in office leasing to a boom in activity by hedge funds and private equity firms (see related story, “Behind hedge funds’ high-flying leases”).

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“We try to get above talking points,” said Colliers’ chief operating officer, Peter Kozel. “We’re trying to give a narrative.”

But one broker dismissed the company’s approach as an attempt to grab attention. “They take stronger positions just to get noticed,” he said.

Kozel denied that: “That’s not the intent. We are trying to give people some reasons to think about what they are doing. We’ve never said anything crazy or incendiary.”

Larger firms, industry insiders said, tend to avoid interpretive characterizations because they have a broader base of clients that might take issue with highlighting a negative market reality.


Despite the pitfalls, some brokerages are known for doing a better job in specific areas than others.

For instance, Massey Knakal produces reliable numbers for cap rates in the outer boroughs and for turnover rate, a statistic not many firms produce, one well-known broker at a rival firm said. “I know he gets those numbers from city tax rolls, so I don’t mind relying on Bob [Knakal],” the broker said.

Others point to Jones Lang LaSalle’s Hotel Investor Sentiment Survey and Colliers’ “Government Solutions” report as standouts. Meanwhile, Ariel Property Advisors also generates accurate data on multifamily trades in Upper Manhattan, brokers said. And one-man upstart Michael Rudder of Rudder Property Group has emerged as trustworthy on commercial condominium sales, said Schechtman, who also sells office condos.

“I don’t mind relying on his quarterly market reports and using them in my own work,” Schechtman said.

Still, all the reports must deal with certain challenges. How brokerages measure loss factor — which looks at how much space a tenant gives up for building necessities like elevators — and how they define “availability” are perennial problems.

“What’s [the definition of] ‘rentable’?” said Cushman’s Rockett. Some say, “space that’s being marketed,” while others argue that it’s “empty space, which can be occupied.”

There is also the question of what price points or geographic areas to include. At Cushman, deals under $10 million are not part of the capital markets report, a cutoff one insider said was chosen in 1999 and is now dated. However, each time there’s a push to change the number, the firm must contend with how to deal with the domino effect it would have on quarterly and annual comparisons. Cushman officials did not respond to a request for comment.

And then some stats — like vacancy rate — are almost always minimized in bad markets, one prominent broker said. “Higher vacancy rates are bad for you on both sides — tenant or landlord,” the broker noted.

Data dump

Many brokerages are expanding their coverage — for better or for worse.

In the coming months, Massey Knakal will premiere monthly white papers on topics that surface while it culls data, Adrian Mercado, director of research at Massey, told TRD. The first such paper will look at what’s driving industrial sales in Queens.

For its part, CBRE is looking to add Harlem retail to its reports — perhaps spurred by the massive retail project that investor Jeff Sutton is planning in the area. (Sutton has already signed national tenants like Burlington Coat Factory, American Eagle Outfitters and Whole Foods, but those deals currently fall outside the purview of CBRE’s reports.)

At the end of the day, all data should be taken with a grain of salt, sources said. “The data is only as good as the specific people compiling it, and the underlying data on which they are relying,” Schechtman said.