Blissful Harmony Can Be Profitable: The Market and Business Intelligence Approach to Retail Real Estate

In retail real estate, professionals are often forced to operate in ways that aren’t efficient or cost-effective when choosing sites.

For example, maps and reports, at least during the first round of market tours, tend to come from brokers and are unique depending on who has done the preparation—so they’re usually inconsistent. And though you probably won’t believe it, some brokers will exaggerate trade areas in an effort to make sites look more attractive (yeah I’m being sarcastic). Traffic counts may be embellished, and other problems and issues may be ignored. Real estate reps are then put in a position in which they must determine what the truth is and which sites are a waste of time, energy, and money.

Inconsistent and erroneous information also prevents real estate reps from developing a cognitive approach for judging the merits of a site early on in the process. The result is that time, money, and resources are devoted to investigating bad sites just to learn they are indeed bad.

Research professionals don’t have it much better. Although their maps and reports are superior—more consistent and free of brokers’ spin—the data they typically must use is far from 100 percent accurate. Because, researchers usually don’t visit the market or site that is under consideration, they rely on third-party data to determine where competition and other significant retail is located. The data they use is, at absolute best, 85 percent accurate (and is usually far worse) because it’s too costly for the data vendor to keep it completely up to date. So although researchers possess consistent and unbiased information, they don’t know what’s actually on the ground.

The problem with both of these methods is reps and researchers will eventually face off at a real estate committee meeting. They’ll find themselves with different opinions about new sites—opinions that in both cases were formed using inaccurate information. Some will argue that this kind of adversarial system gets better results, but I think this is true only when it is done right. The results might be better than either group could achieve alone, but in reality we can do better—much better.

We must arm both groups with each other’s strength: Let’s give reps the consistent, realistic maps and reports with analyst insight, and let’s provide analysts with information about what’s really on the ground at these sites!

If we did this, a few things will happen:

  1. Real estate reps will focus on the best opportunities sooner in the process. The process becomes faster, and fewer bad sites enter the pipeline. This saves loads of money on dead-deal costs and focuses attention and resources on the best sites early.
  2. Analysts will no longer analyze potential sites using bad intel about what is on the ground with respect to competition and other retail. Their analysis will prove more accurate.
  3. Most importantly, both the real estate reps and the research people are more aligned to seeing the sites in light of the company’s real estate strategy. This means better results and more alignment at the real estate committee meetings. Therefore, more good sites are approved quicker!

The question is, will this shift in information sharing actually produce meaningful results? Well, I can give you an example of a company that has two divisions: One has a market and business intelligence system for real estate-implemented, and the other doesn’t.

Amazingly, the division with the market and business intelligence system has an approval rate that’s four times higher than the one that doesn’t! The outcomes are good in both cases, but the numbers make it obvious that one is much more efficient than the other. This efficiency reveals itself on the bottom line in the form of significantly lower dead-deal costs and faster deal cycles.

The moral of the story? When accurate market and business intelligence gets into the hands of your real estate reps and your research people, they’ll see sites from a much more aligned perspective—one that aligns better with your real estate strategy. Provide them with this information and you can prevent bad deals from even getting within the vicinity of your pipeline, thus leaving people more time to focus on good sites. This will improve outcomes, get better deals done faster, and drastically reduce dead-deal costs.

Author
Joe Rando
Chairman