Browse Tag: coy davidson

Coy Davidson: Tech’s Great But Isn’t The Point

English: A pile of mobile devices including sm...

Has technology in support of commercial real estate been a little oversold historically?  Coy Davidson thinks so.  At least, he says, it has to the degree that CRE listing services, apps, mapping and the like are touted as “disruptive”.  In The Tenant Advisor, Colliers International Senior VP Davidson makes the observation that the last fifteen years of the commercial business has seen major advances and important efficiencies brought to the industry, but that these have not, as sometimes has been touted or warned, turned the basic business on its ear and made brokers, reps, consultants and the whole cast of professional characters obsolete.

Well, it is 2013 and corporate tenants are still using brokers to select properties and structure transactions and property owners are still using brokers to market their real estate assets for lease and sale despite the fact that relevant property data exists and is accessible on the web. Furthermore, who is in the market for property both tenants and investors alike is no longer a brokers best kept secret.

I contend that little has changed and the demand for brokerage services will not diminish anytime soon, if at all because of one simple fact.

The reason is that commercial real estate deals are relatively complex transactions that involve multiple disciplines and participants: owner and user, consultants (brokers, architects, attorneys, contractors.) Leases and Purchase and Sale Agreements are complex legal instruments that can involve hundreds of thousands to millions of dollars.

I think Coy’s right, but I’d say that the issue centers more on marketing of technology than actual technology.  “Disruptive” is a loaded word and technology offerings that propose to up-end the basic process of commercial real estate are almost always to be taken with a grain of salt.

If brokers, consultants, reps and the like suddenly found themselves without access to the internet for a month, that ringing phone and the face to face meetings hashing out the complicated features of unique deals wouldn’t stop.  Users of space, owners of space, shapers of space would all remain, and the need to own, to use and shape remains.

That said, while nobody doing deals would be out of business, it would be a nasty month to be sure.  Particularly because prospecting and research would be thrown back into the stone age.  We’d never want to willingly give up our favorite listing services.  But the fact is trillions of dollars worth of commercial property deals happened in the stone age. Some things in this business are eternal: space, users, owners, buyers, shapers and consultants.  People.

 

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Corporate Real Estate Veteran To Younger Brokers: Ditch The Spreadsheets

Picture of a legal padIt’s not possible to patrol the commercial RE beat online without finding Coy Davidson. A Senior VP at Colliers with twenty years in the business, Coy writes The Tenant Advisor, one of the better blogs dedicated to commercial property markets with a focus on corporate real estate and tenant representation and office solutions.

His recent post is titled Know Your Numbers.  And when he says “know”, he’s not kidding.  His advice to agents is to embrace the math in the financial analysis spreadsheets by learning it away from spreadsheets — old-school — to the benefit of everybody at the table. He writes:

Today, computer software makes it easy to crunch the numbers and produce impressive looking reports.  However, I am often surprised at how many agents even with a few years experience lack the financial expertise to speak the CFO’s language and effectively advise their clients. 

I learned the economics of a lease transaction with a financial calculator and a legal pad and I think young brokers should do the same.  If you are going to lay that impressive spreadsheet on your client’s desk, you should be able to explain what the numbers mean and more importantly “why they are what they are.”

Mr. Davidson’s not wrong.  In fact, in a financial era marked by disasters rooted in financial opacity, “innovation” and outright fudging as could only be enabled by Excel and its like, any call to get back to the math underpinnings in finance is a refreshing voice of sanity.

The good news about spreadsheets is they simplify presentation and provide incredible flexibility and customizability.  The bad news about spreadsheets is…they simplify presentation and provide incredible flexibility and customizability. What’s good for presentation is often no good for content.  It’s too easy to copy and paste blocks of cells from one deal template into another without ever considering the applicability of such terms to the specific client or to the investor. The ends might not even come close to justifying the means, but whether the user chooses a method either out of a shaky grasp on the fundamental math, or worse, out of a single-minded focus on the bottom line, the spreadsheet dutifully represents and enables.  Which is both a shame and a warning to not do all your work in a spreadsheet.

Opening up, as Coy suggests, a legal pad and a financial calculator before opening a spreadsheet brings real understanding to dealmaking by teaching principles of valuation, and more importantly, teaching how to arrive at valuation principles – not just taking them as a given as inherited from cells D26-36.

To help fight financial innumeracy, Coy laid out three of his earlier posts on financial analysis. Pick up one of these  and one of these and check them out

 

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