Real Estate Modernized: From Conventional Wisdom to Data-Driven Insights

Real Estate Modernized: From Conventional Wisdom to Data-Driven Insights

REAL ESTATE MODERNIZED: FROM CONVENTIONAL WISDOM TO DATA-DRIVEN INSIGHTS

INTRO:
Welcome to the Esri and the Science of Where podcast. Everyone thinks they know a good real estate deal. Realtors, sellers, landlords, and tenants want to trust their gut even when they're wrong. By using the sophisticated tools within location technology, Will Parra is changing minds. At the New York-based commercial real estate firm RIPCO, he's showing people how this technology helps them better understand stores, houses, and neighborhoods.

WILL PARRA:
What's most important is that the insights we're generating are spurring conversations and challenging some of the anecdotal things that might be discussed about a given market, a given neighborhood, or a specific site, where we can now start to quantify some of these things and say, "Oh, what we thought used to be true might not be true anymore."

INTRO:
Will Parra talks to Esri's John Lenahan about how location intelligence has helped double the business of RIPCO Real Estate.

JOHN LENAHAN:
Hi, Will, and welcome to Esri's The Science of Where podcast.

WILL PARRA:
Thank you for having me, John. I appreciate it.

JOHN LENAHAN:
In your role, Will, how are you working with commercial realtors? What services do you offer, and what does your firm provide?

WILL PARRA:
Sure. Our two main business lines at RIPCO are tenant representation and landlord representation. What that means is our real estate agents team up with retailers who are looking to either open locations or expand their existing portfolio into new locations. On the flip side, we work with landlords to help them get their vacant commercial space leased.

You can imagine that there are a lot of decisions that go into these transactions, and location decision-making is a big part of that. Our geographic information systems team helps our real estate agents understand the dynamics of markets, and we try to provide quantitative answers based on spatial data and spatial intelligence to help them make the best decisions possible.

JOHN LENAHAN:
Okay, so it's really about the facts selling the vision for itself. But do you think it also has an element of how the information is presented?

WILL PARRA:
Absolutely. I think spatial analytics gives us the assistance we need to help convey the facts of the demographics or the market analysis that we're doing.

Being able to present this information in map form or detailed reports using charts and good visuals, the presentation is just as important as the information in it because it allows people to quickly absorb the data that we're showing them. When we're talking about some of our clients, like Chipotle, for example, they really need to know a few key metrics that they look at for every piece of site selection. So we provide those for them.

But we also use it to inform our brokers on growing trends in markets. Are populations changing? Are markets gentrifying? Is there a wave of new businesses opening or development happening? Those are all sets of data that we create maps or reports out of and provide to our brokers for their knowledge, because brokers do a tremendous amount of research into the markets they operate in.

They have a tremendous amount of market knowledge and relationships, so the data we provide helps them continue that knowledge and continue to stay an expert on the markets they operate in.

JOHN LENAHAN:
Will, in my experience, experienced realtors don't like to be told they're missing something in one of their markets. Is the request for additional or more analytical information about a location coming from buyers or realtors, or a little bit of both?

WILL PARRA:
It's certainly a little bit of both. We have teams that operate in specific neighborhoods of Manhattan, specific boroughs of New York City, and specific markets across the country. It's really important that they stay up to date with the trends in their given markets.

A lot of that information is gathered through their own market knowledge, the relationships they have, and understanding vacancies and the comings and goings of tenants. But it's also important for us to keep them up to date with more quantifiable data about the trends in a given market, whether that's changes in population, changes in demographics, or so many different data sources. We're able to provide reports to our real estate agents to help keep them abreast of the trends in a given market.

It's also important for them to have access to this material so that when they're evaluating potential sites, they have all the information they need at hand to make the best decision. So it is kind of twofold.

JOHN LENAHAN:
So Will, you mentioned you identify some trends that maybe the local broker isn't aware of. What kind of trends do you identify or surface for the realtors?

WILL PARRA:
The most common is demographics. We're always providing insights and reports about what the demographics and consumer base of a given market look like and how those are evolving over time. We look at trends for things like foot traffic to help understand how certain intersections or storefronts are seeing either increases or decreases in traffic. That helps with the site selection process.

We also look at some internal data we're collecting about what vacancies are coming on the market. Is there an increase or decrease in vacancy and/or price?

JOHN LENAHAN:
Do they like the information you're providing? Do they have more questions? Are they pushing back?

WILL PARRA:
We're getting overwhelmingly positive feedback from our brokerage team and our management team. I think what's most important is that the insights we're generating are spurring conversations and challenging some of the anecdotal things that might be discussed about a given market, a given neighborhood, or a specific site, where we can now start to quantify some of these things and say, "Oh, what we thought used to be true might not be true anymore."

JOHN LENAHAN:
You mentioned, and I like that idea, real estate being very anecdotal. I think of personalizing that, right? In the residential market, let's live on this nice street. Let's live in this neighborhood that has these good schools. But in commercial real estate, how does that really apply?

WILL PARRA:
Sure. A good example, at least in New York City, is the neighborhood of Williamsburg, Brooklyn. Williamsburg 20 years ago used to be an industrial neighborhood. It's now kind of the new SoHo of New York City. All the luxury brands are now in Williamsburg. The demographic has completely changed.

Anecdotally, our brokers can come to us and say, "Well, this neighborhood or this site is going to be the next Williamsburg. This neighborhood is the up-and-coming neighborhood." So how do we quantify that and start to understand: Is this neighborhood anecdotally an up-and-coming neighborhood, or is it truly an up-and-coming neighborhood by all the measures that we look at?

JOHN LENAHAN:
Going further with the idea of these anecdotal perspectives, how does location intelligence help disprove maybe a romantic perspective that a buyer might have on a certain neighborhood that the data proves isn't accurate?

WILL PARRA:
For sure. The anecdotal nature of commercial real estate is always an interesting one, and as spatial analysts, we have the ability to actually quantify some of these anecdotes that commonly get thrown around. Spatial analytics allows us to look at things like building permits, changing demographics, increases in population, all these attributes that can help us quantify whether a neighborhood or a site is what people think it is.

It's very common for people to say, "Well, this neighborhood is going to be the next Williamsburg." Williamsburg historically is a neighborhood that has gentrified tremendously over the last 20 years. Things like looking at building permits and ingesting those into ArcGIS, looking at population trends, and looking at the increase or decrease of retail vacancies are all indicators we use to understand and quantify whether an anecdote is actually true or not, and then, in turn, relay that message to our brokerage teams.

JOHN LENAHAN:
Earlier, Will, you mentioned that some of your main customers are retailers trying to determine locations and where to grow their market. How do you help retailers determine what they're missing in their market analysis?

WILL PARRA:
Most retailers have a general idea of who their customer is. We can leverage the data and the tools we have to help them hone in on who that customer is. It also depends on the life stage of a specific retailer.

For retailers that are more well-established, that have a larger footprint or a longer history of data, we're actually able to integrate their data to understand who their customer is directly. Then we can start to use some of the geospatial tools to, number one, identify where their customer is, and also where there are gaps in the market for them. From there, we can develop a strategy for expansion, relocation, or just general site selection.

JOHN LENAHAN:
One of your largest customers that I've seen mentioned in some of your online articles is Chipotle. Everyone knows Chipotle, so can you dive into that and help us understand the work you've done for them?

WILL PARRA:
Yeah. Chipotle is one of our bigger clients. Obviously, they have a very large footprint nationally. We represent them in the New York tri-state area, and we do a lot of work with them helping them understand where those gaps are. GIS technology allows us to help them visualize that and allows us to guide our brokers as to where they should be looking.

Another example is a supermarket retailer we've been working with named Uncle Giuseppe's. They have around 10 locations in the Northeast, and they're slowly expanding. They have a long history of operating in the supermarket business in the Northeast, which means they do have lots of data, and they're able to transfer that data to our GIS team.

We're able to ingest that and understand exactly what makes a successful Uncle Giuseppe's location. We can match up some of their performance data with some of the other data points we have to understand the derivative attributes that make up a successful store. Then we can start to look for that in new places where there might be a void of supermarkets and things like that.

JOHN LENAHAN:
I'm sure, Will, in the case of Uncle Giuseppe's, they have probably really good local market knowledge in their 10-store vicinity. But as they look to grow nationally or even super-regionally, they're probably flying a little bit blind.

WILL PARRA:
Yeah, absolutely. The way it works is they will hand us data, and they will ask us to essentially do an exploratory study to understand what is affecting performance.

We can start to look for correlations between performance and certain things, whether that's performance versus average household income in a market, or performance versus competition, the number of competitors, or the distance to competitors. Those are all things we'll look for to identify whether they play a role in performance.

Once we understand what those derivative attributes are that drive performance, we can start to model for that in new markets. Then we're able to say, "This site in Pennsylvania, which we have not been to, we don't really know the market, but the data shows that this is very similar in terms of these four or five attributes to places that we know are performing well."

JOHN LENAHAN:
And by attributes, you could mean it's a ZIP code with a high population of single-earning families with children between the ages of 10 and 15, and you're at least 15 miles away from your nearest large competitor.

WILL PARRA:
Exactly. It could be just like that, and we do the work to figure out exactly which one of those attributes matters in terms of driving performance. Then we look for that in new markets.

JOHN LENAHAN:
Taking a step back, using geospatial tools with your brokers, what difference have you seen in terms of time and money that you're providing, but also that the brokers are spending on researching and bringing new sites to market?

WILL PARRA:
Absolutely. I think the first thing that jumps out to me is the efficiencies in which we operate that the Esri platform has allowed us to achieve.

If you think of a broker who is trying to research availabilities, they're now able to interact with applications that we build to visualize and quickly search and research properties for their particular use case. Taking it a step further and performing analytics on the data we're collecting has, number one, saved lots of time, but it also generates great insights for our company as well.

JOHN LENAHAN:
And your business has more than doubled.

WILL PARRA:
Yeah. I joined RIPCO in 2021, so it's coming up on five years now. Since I started, we've grown tremendously in our brokerage space. That's attributed to great leadership, but we can also lean on the scalability of the infrastructure we've built to support a growing business like this.

If we were to onboard a brokerage team in the middle of the country, an area that we've never worked before, we have all the tools at our disposal to perform the same types of spatial data analytics that we are now.

JOHN LENAHAN:
I wanted to ask you about AI and the growing influence of AI and geospatial AI in all markets. I think an appropriate way to close is to ask for your perspective on what the future holds for realtors and their interaction with AI and AI-based tools. What's that dynamic look like?

WILL PARRA:
For us, we know that AI is never going to replace a real estate broker or agent. AI does a really good job, in certain use cases, of identifying patterns and trends that might not be seen otherwise. That's another big thing for us, allowing it to look into certain data sets and tell us maybe some things that we've missed or insights that we should be quantifying or aggregating.

JOHN LENAHAN:
Well, Will, thanks so much for taking the time to join us. I'm sure the audience is going to love the information you shared and your insight on the commercial real estate market. Thank you again.

WILL PARRA:
It was a pleasure. Thank you for having me, John.

OUTRO:
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