One need not dig very deep these days to find useful research on Greater Boston’s commercial real estate universe.
Once covered by a cloak of secrecy, the past 15 years have seen an explosion of data being produced to make industry professionals, investors and users aware of market fundamentals and trends that ostensibly can help when buying, developing or leasing commercial properties. The advent of public capital into the sector has been a key driver for such information, required by institutional sources such as pension funds, insurance companies, real estate investment trusts and similar vehicles.
“There really has been an increase in the sophistication (level) of the investor,” said Craig Thomas, director of research and research systems at Torto/Wheaton Research Inc., noting that the Boston-based firm also services such arenas as the Commercial Mortgage Backed Securities field that was non-existent prior to 1990 and supports the emerging real estate derivatives market. Among numerous other products delivered for the industry, Torto/Wheaton supports underwriters assessing the risk levels associated with a CMBS property or pool, and can now customize reports to help an individual investor evaluate their own portfolio performance even when spread across multiple markets.
The demand for research and growth of technology are certainly global phenomena, but Massachusetts arguably is a leader in providing expertise, with most top Hub real estate companies offering a measure of research for customers. Meanwhile, independent shops are harvesting a steady crop of data on a national scale, among them Property & Portfolio Research Inc., which sports a diverse team of research specialists from their downtown Boston headquarters. Torto/Wheaton has become the research arm for industry heavyweight CB Richard Ellis, and also assists the National Association of Realtors in its quarterly commercial real estate report. Other clients include real estate advisory firms, plan sponsors, opportunity fund managers, banks, insurance companies and rating agencies
International buyers streaming in from Australia, Ireland and the Middle East are also relying on firms such as PP&R and Torto/Wheaton for cogent information and analysis. “They don’t know Omaha from Orange County, and so they do need help [deciphering] where and what to invest in,” said Thomas, whose firm is headquartered at 200 High St. in the Hub’s Financial District. Having tracked data in more than 50 U.S. markets for 20 years, Torto/Wheaton has the arsenal to assist overseas capital in decoding most of the U.S. market, with the firm counting itself among the leading research companies in North America following its founding by namesakes Raymond G. Torto and William C. Wheaton.
Spaulding & Slye of Boston has also long been offering commercial real estate information, with the firm’s quarterly reports on the office, flex and industrial markets dating back to the 1970s. That legacy continues today, so much so that some observers cite the firm’s research capabilities as a factor behind the firm’s acquisition last year by global real estate services concern Jones Lang LaSalle. Vice President of research Robert Kasvinsky was not willing to go quite that far, but did acknowledge that the division of a half-dozen analysts headed up by principal Benjamin Breslau has not gone unnoticed by JLL. “They are very interested in how we have operated in the past, and are taking a hard look at how we do things,” said Kasvinsky. “It’s very encouraging.”
When Kasvinsky began doing research for the erstwhile Leggat McCall & Werner in 1982, typewriters and white-out were integral tools used in the painstaking process of gathering and disseminating real estate information. Researchers leaned heavily on brokers in the field to provide a pulse on market trends, recalled Kasvinksy, while a minor panic would ensue whenever a client requested extra copies of a report. As recently as a decade ago, producing quarterly reports could be a chore, said Kasvinsky, who joined Spaulding & Slye five years ago after several years at Leggat McCall & Werner’s successor, Grubb & Ellis Inc.
The arrival of computers, spreadsheets and the Internet has super-charged not just the ability to produce information, but has altered the way researchers are utilized, according to Kasvinsky, who indicated that clients have begun seeking interpretation of the data versus just receiving raw statistics. The group also backs Spaulding & Slye divisions such as its construction group or investment sales team to help their clients determine investment or development strategies. “It’s intellectually stimulating to work in this environment,” said Kasvinsky, while Thomas explained that Torto/Wheaton provides value to clients by developing its own technology and applications to further isolate information to create winning ventures.
“I tell a lot of people that we really are a software company,” said Thomas, with about one-third of the firm’s staff of approximately 40 people focused on technology. Another third are real estate analysts with specialists covering the gamut from multi-family and retail to hotel, office and industrial product. “We’re not afraid about what our clients are going to ask us, because we’ve got it covered one way or the other,” said Thomas.
Spaulding & Slye is also using technology to spread the word, as evidenced by its monthly real estate intelligence report, for which Kasvinsky is managing editor. The e-mailed missive, which this month is in its 52nd edition, reaches 20,000 people and offers a mix of market reports in Boston and Washington, D.C., with survey questions and analysis from Spaulding & Slye officials such as real estate brokers. “The changes are incredible,” said Kasvinsky of the new ways research is being applied and distributed.
When Richards Barry Joyce & Partners was founded nearly five years ago, the Boston-based real estate services firm included a top researcher in former CoStar official Katie Kelley, and upon her departure, the company lured Brendan Carroll away from Grubb & Ellis Inc. According to RBJ President Robert B. Richards Jr., the ability to give clients a real pulse of market conditions and opportunities has assisted the company in its rapid ascension in New England.
“For us, it is of critical importance,” said Richards. “Our clients rely greatly on the information we provide.” Not only does Carroll deliver a huge volume of data, with dozens of reports produced annually, Richards said the insights go far beyond simply identifying available inventory or common indices such as vacancies or general trends on rental rates. One of the firm’s most anticipated reports, for example, is its twice-yearly BioStatus overview which offers an in-depth look at the regional life sciences market. Also, the RBJ Index focuses on premier office buildings in a given area to isolate the upper end of the real estate spectrum.
“I’m ecstatic with a capital ‘E’,” Richards said of Carroll’s performance. “Brendan does a fantastic job of working with our clients to innovate the research metrics in a meaningful way that can help them make informed real estate decisions in a timely manner Â… It has become a big differentiator for us in [retaining] clients and for bringing in new business.”
Cushman & Wakefield of Massachusetts also made a significant investment in its data capabilities with last month’s hiring of Rick Cleveland as research director. While the firm has traditionally provided market reports on New England, the information was largely compiled from the firm’s New York headquarters. Following stints with FleetBoston Corp. and Brown Brothers Harriman & Co., Cleveland had most recently been analyzing multi-family development and acquisition opportunities for Boston Capital’s Market Rate Housing Group.
“Investing in a heavy hitter like Rick just makes good business sense,” Cushman & Wakefield Executive Managing Director Thomas Collins said in a release announcing Cleveland’s arrival earlier this month. “Our Boston real estate expertise is built on a foundation of strong qualitative and quantitative data, and with Rick in place, this is a core capability that will only continue to expand.”
Other Boston real estate firms sporting experienced research professionals include Meredith & Grew, which last year hired Mary S. Kelly as chief research officer to tap into her background assisting such firms as AEW Capital Management, Lend Lease Real Estate Investments and the National Council of Real Estate Investment Fiduciaries. Emily Schwartz serves as research director at the Hub office of Lincoln Property Co., producing a series of market reports including extensive quarterly overviews that cover every facet of the Greater Boston leasing and investment markets.
Looking into the crystal ball, Thomas said the improving economy bodes well for commercial real estate overall, but warned that the crush of capital has bid pricing up so high and has picked the best deals off already that investors should be especially cognizant of market trends and data when pursuing a venture. “All the easy calls have been made,” he said. “It’s no longer a game for the novices where every decision is the right decision, and that is when [research] is most valuable.”
