city data

Proliferation of Spatial Data Gives Tenants a New Negotiating Tool

For a long time data was the real estate industry’s main weapon at the negotiating table. Even large corporate occupiers only had a small, anecdotal amount of data to try to establish market rates while real estate firms could be armed with mountains of comparables and applicable data about any location. This put those in real estate in a favorable position, they were able to dictate what a location was worth and could then try to convince the tenant of that.

But the data landscape has changed dramatically. Now data aggregators have been able to pry leasing data out of brokers’ spreadsheets and layer on a list of other data sets like demographics. These datasets are then combined with geographic information systems to create a valuable tool for tenants to use when selecting and negotiating locations. One of the best examples of this comes from a publicly traded Russian grocery and retail chain called X5. They are in the midst of one of the biggest business expansions in the world, opening an estimated 2,500 stores in one year, and are using sophisticated spatial data to determine the profitability of each new store and negotiate their leases accordingly.

Here is an example of the types of visualizations that X5 is using to quantify an area’s demographics and psychographics and thus understand their best opportunities:

x5

This open access to location intelligence has some implication for the real estate industry. First, tenant reps will have to set up their offerings. No longer will they be able to use their access to data as a reason for a client to retain their services. Luckily there are plenty of other contributions that agents can offer like determining the best lease terms and advising on the best long-term leasing strategy. Second, leasing agents need to be prepared to go up against very well informed tenants during lease negotiations. Obviously, there are other parts of a lease besides just price so there is quite a bit of room for a good negotiator to make a deal.

The new era of open data is a good thing. It will help the entire real estate industry make better decisions. But there are implications of having property data be a commodity. All of us in real estate need to be prepared for a future where even the most inexperienced client will be able to access the data needed to make a smart decision. As data starts to open up to new use cases so too should the property industry professionals that have always relied on their knowledge to keep them ahead of the rest of the industry.

Propmodo is a global multimedia effort to explore how emerging technologies affect our built environment.

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