What is real estate research for?May 4, 2012 / By
Jones Lang LaSalle sets the industry standard for research on the Australian commercial property market. Our Real Estate Intelligence Service (REIS) subscribers are a checklist of REITs and institutional investors, growing numbers of global investors, major commercial and international investment banks and the policy-making ministries of State.
In real estate research, consistency is everything. Every asset is different. A systematic, rigorous basis for assessing rents, yields, capital values is essential. Tracking markets is labour intensive – you need a team of specialised researchers. Jones Lang LaSalle fulfills all these conditions. That is why through the Global Financial Crisis the REIS subscriber list has expanded. Investors demand the insights and evidence that professional market analysis provides.
What do REIS subscribers want?
Requirements are surprisingly diverse. Some subscribers want only market data and transactions evidence: they do their own modeling, forecasting and analysis. On the night when our quarterly data are released we get 10.00 pm calls from data-hungry clients – how much longer before our data will be published on the web?
Other subscribers drill down into market commentary and forecasts. Why have our vacancy forecasts for the Brisbane CBD changed? Why did sublease availability rise in Adelaide this quarter?
Who reads our research?
With some subscribers we communicate directly with the in-house researchers. They digest our data and commentary, package it and pass it down the line to decision makers. In other cases our reader is the CEO or the Chief Investment Office. We are often invited – sometimes at very short notice – to front the investment committee or the Board, and to expand on our views. Why are incentives in Sydney still so high? When will shoppers return to the malls?
In this job, there’s no place to hide.
How best to integrate our research into the decision making process?
Here are two alternative perspectives:
An investment manager can be compared to the captain of a sailing ship. Neither wind nor tide is controllable. You cannot ignore these forces; but you can negotiate. A skilled captain will get you to your destination close to time and safely, albeit not always travelling in a straight line. In this decision model you researcher is your meteorologist. Information about the current weather and likely future conditions is vitally important.
The second approach to integrating research is more inclusive, but also more confrontational. Good decisions often come out of a competitive process of challenging and testing ideas. Some of our subscriber clients use us for this purpose. The views of independent research analysts can be a useful counterpoint to the in-house perspective. A well-managed round-table debate leaves everyone much the wiser. New ideas are ignited; preconceptions revisited.
Which approach works best?
In my experience the second approach is best. But probably there’s no single right answer for all investors and for all situations. One thing is for sure. There’s no substitute for quality information. Black swans are everywhere. Nor can you discount the occasional iceberg and, sometimes, a wandering albatross.