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Commercial Department: Q&A: Hans Nordby, Property and Portfolio Research, a Costar Company: June 2013

 

Q&A: Hans Nordby, Property and Portfolio Research, a Costar Company

Hans Nordby, managing director, Property and Portfolio Research, a Costar Company

In the aftermath of the financial crisis, commercial mortgage brokers — as well as lenders and other real estate professionals — have become increasingly aware of the importance of having adequate resources that help them analyze and forecast the feasibilityof their deals. In response, research and analytics providers have polished their offerings to meet this market demand. We spoke with Hans Nordby, managing director of CoStar’s Property and Portfolio Research, on how players in today’s market use researchand analytics.

What is the commercial real estate market’s appetite for analytics and research?

The appetite for analytics and research has increased for a number of reasons. Over the course of the last decade the quality — the granularity — of the data has gotten better. So now it is worth having. We clearly can see it in our business that the demand for analytics is increasing. Also, the downturn taught us that analytics are important, that risk management is important, and underwriting something off the seat of your pants doesn’t get us to a good answer. In 2004, 2005, when we talked to prospective clients that they should sign up because we can help them manage risk, nobody perceived any risk. Now, people understand the importance for underwriting for risk. [In addition,] deal volume is way up, across the spectrum in every property type, but especially in multifamily. As a result, there is an increase in demand for analytics and research to underwrite those deals. 

What trends should commercial mortgage brokers be watching?

Deal volume is way up. That keeps commercial mortgage brokers busier because transactions create more demand for their business. But if we look underneath the fact that everyone is busy, we see an interesting fact which [in] effect is going to be important for all of 2013: That is, for the first time in more than six years, every capital tap is on. Every source of commercial real estate capital is flowing strongly. It is remarkable. It is not [like] 2007, but everything is up, and that impacts commercial mortgage brokers in a big way. Lastly, what we expect as a continuing trend is to have more deal volume in secondary and tertiary markets as a percentage of deal flow.

Which criteria should mortgage professionals look for in a research or analytics provider?

They should be looking for detailed, census-type data down to the individual apartment-community level, individual size of the suite being discussed — one- bedroom versus three-bedroom [apartment]. In the office sector, they should be looking for data that goes down to the type of space that is being leased on a specific building basis. The thing is, on average, the U.S. economy is not growing quickly. On average, we are not adding that many jobs, but that average doesn’t apply very well to any particular city, and within any particular city, there are dramatic differences in the take-up for different types of office space, for different quality according to the size of the suite. To analyze commercial real estate investments today, you need to make very granular data part of your analysis because the averages don’t tell you much.


 

Rania Efthemes is director of content strategy at Scotsman Guide Media. Reach her at (800) 297-6061 or raniae@scotsmanguide.com.

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