Presented By: VTS
How VTS Assists Companies in Designing Forward-Thinking, Data-Enabled Strategies
Future Of Tenant Demand, brought to you by VTS
Partner Insights spoke to Ryan Masiello, Chief Strategy Officer and Co-Founder at VTS, to talk about some of the report’s most impactful insights, and other recent trends in companies’ use of data.
Commercial Observer: The commercial real estate industry has historically relied on backward-looking data to inform leasing and investment decisions. From your perspective, what is the state of the market today regarding that, and how has that changed over the past two years?
Ryan Masiello: Commercial real estate is one of the last industries that’s still making its biggest decisions based on lagging indicators. Every other modern industry quantifies what’s happening now, then develops a strategy and implements it from there. We’ve seen some progress over the past two years, but we’re still a long way from other industries like finance and tech.
CO: What kind of investments are you seeing landlords make when it comes to data and data infrastructure?
RM: They’re making massive investments in either cleaning up or completely rebuilding their foundational portfolio data. Many people realized they’ve turned a blind eye to these problems for too long. These problems compound over time, and then you can’t do even the simple things you want to with data.
We’re also seeing people invest heavily in talent, bringing in data scientists or analysts from other industries.
CO: What is the risk for owners who do not invest in data and data infrastructure today?
RM: The risk is losing your best people. Smart companies are looking at who’s doing the best among our peers, and how do we hire that talent so we can do the same thing.
CO: Describe some of the most prominent aspects of VTS Data and its capabilities.
RM: VTS Data enables you to understand what’s going to happen 12 months from now, because our data leads leasing activity by anywhere from nine to 12 months. So it gives our customers the ability to touch and feel what’s going to happen in the future, from who’s going to end up driving tenant demand to where deal economics will end up, and even what their future competition will look like. Our customers use this new foundation to develop and implement their leasing and investment strategies.
CO: How do those capabilities affect what the VTS Platform can accomplish?
RM: Our customers don’t want to bounce between different platforms to get different pieces of information and then stitch them all together. So our mission is to take the most valuable data points from across the different products we offer and bring them all together into one cohesive platform. This gives our customers real-time insights that fuel faster, more informed decisions and connections throughout the deal and asset lifecycle.
CO: And how does that ultimately serve VTS’s clients and their tenants?
RM: The better you understand what tenants want, the quicker you can invest to deliver it. So both our customers and tenants win, because the landlord gets the right tenant, and the right tenant gets what they want in a new space.
CO: What has VTS research uncovered about what prospective tenants are looking for in office space?
RM: Our customers have been focused on the flight to quality. The average rents across the top 10% of buildings are 12% higher throughout the eight core gateway markets across the U.S. We’re seeing a massive differential in what tenants are willing to pay for highly-amenitized buildings, because the competition for the right employees and to get people back to the office is so tough today.
That’s the data point a lot of our customers have been tracking. But if you look at markets like New York, the top buildings there are achieving 89% higher rents than the balance of the market. That’s all happening in highly-amenitized buildings that are very close to public transportation. We think that’s going to drive a massive shift in the way capital is allocated over the next couple of years.
CO: Tell us about the VTS Green Shoots Report.
RM: We’re big believers that markets in a downturn create the most opportunity, and in terms of the return to office, the headlines don’t match the reality in our data.
We see a lot of opportunity in investing in office. This is our way of trying to help our customers understand, in real-time, where those opportunities might be, either at a macro-market level or at the submarket level.
CO: What are some of the report’s most significant findings?
RM: Flight-to-quality is numbers one, two, and three on everyone’s list. Tenants have to be in better buildings with better amenities, and in a better experience overall.
Landlords will invest more in their buildings and spaces over the next two years, creating a modernization boom, than they have over the past 10. It’s a winning situation for both tenants and the industry. We’re starting to see some real creativity in how buildings and spaces are being delivered.
CO: One key finding in the report is that office searches are up in 2022. What does this mean for owners?
RM: I think it’s an extremely positive sign of confidence in the future of office space. The data is the earliest signal that the office has a long-term place in the future for every company. The companies that lead the market might be saying one thing publicly, but we see them doing something very different. The largest companies in the world are taking down space well in advance of the space they have today being full.
CO: From your perspective, what are some of the top shifts the industry will see in terms of how organizations access and action data?
RM: “It feels like” and “we’re seeing” are the two most overused phrases in commercial real estate. Moving forward, you’re going to hear a lot less of that, and instead, you’ll hear, “this is what the data is saying.”
Every decision, large or small, will be backed by totally new sets of data. If you’re working in commercial real estate, it’s going to be a super exciting time.
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