Q&A - Jeff Card, Earth Vision - What's next for CRE?
What’s next for Commercial Real Estate? Experiential Retail may be a winner.
Real World Graph recently interviewed Jeff Card, President of Earthvision, a GIS and market solutions provider in the Dallas area, to talk about threats and opportunities the Covid-19 pandemic is presenting to commercial real estate. Here's what Jeff had to say.
How have things changed for you and Earth Vision since Covid-19 took hold? Has this experience led you to approach your work or the market differently?
We are redirecting everyone to our cell phones with VOIP and working from our home offices right now. We have remote servers and our team can log-in and work as if nothing has happened. In the near term, there are still too many unknowns to say how this has affected our business.
Early on in my career, a respected professional made a comment that ‘As long at the market is moving up, or moving down, we can make money. When it’s flat and nothing is happening that is when we worry.' Right now, there isn’t much momentum in either direction.
There has definitely been a transformation of the industry and the competitive nature of retail real estate. Who is leading and who is following - and whom is getting left behind - time will tell. Right now, the key is creating momentum, even where it doesn’t exist.
What is the single greatest impact the Covid-19 pandemic is having on the commercial real estate markets you're watching? Are there other impacts to the market that are being overlooked just now?
Most retailers are not paying rent right now. But for clients that are pursuing deals, we are using this time to respond quickly. We are also using this time to retool and recalibrate, focusing on future revenue lines. GIS is just a part of our toolbox and we are considering any and all new revenue streams after we emerge.
Talk about a deal that has been disrupted by Covid-19 -- How terms changed, how the different parties were affected. Talk about innovative ways Earth Vision is keeping the market engaged during physical distancing measures.
Rent needs to be paid, because mortgagers and investors need to be paid! The short term rent risks should not be discounted against the larger risk to the financial markets, primarily the CMBS market and the ripple effects to the disruption in that sphere.
What does this mean for the financial markets if we see commercial real estate default and the majority start to go south. I don’t think that is getting enough attention.
Our industry is full of eternal optimists. At Earth Vision, we were ahead of the curve and able to work remotely. We do 20 to 30 transactions a day and bigger projects where our clients have said, 'Keep charging forward. When this thing clears, we are going to be charging 110%.’
We are also more consistent in communicating solutions that are relevant and actionable, not just generic, semi-spam content that every other vendor is sending. I want Earth Vision to generate content that is meaningful, like this blog!
We have also cut our prices, not just because it’s good PR, but because it is the right thing to do. Our clients are struggling. And, just like the landlords, we are seeing any receivables from the national retailers for work completed go unpaid. They are not going to pay until this is cleared. We are all in this together and we are here to serve our clients.
Name a CRE investment market in America that stands to benefit in the wake of Covid-19 and/or pick a Proptech segment that is positioned for rapid growth.
Well the PPP is a disaster right now. I know very few that received a PPP loan, except Shake Shack, J Alexanders and Fiesta Restaurants -- thanks Wall Street!. I question if the next round of federal funding will even be enough, considering that small businesses employ 48% of America’s workforce. I think the future will play out interestingly enough.
The one asset class that I believe will benefit is the industrial sector. Traditional retailers are not focused on warehousing. They are focused on foot traffic. But if foot traffic is non-existent, or severely limited, how does the traditional retail model adapt?
We very well might see retail stores begin to look more like distribution centers and warehouses, rather than a traditional retailer. The traditional model is grounded in foot traffic and on site purchase metrics, but if you have to limit foot traffic, that model may no longer be financially viable.
New distribution models and more spread out footprints might very well be the new trend. The potential for on-shoring could also blow up the traditional retail model, as existing retail space is fairly expensive distribution space.
We have heard the term retail apocalypse. That term actually means price war. So, if you are looking to win by selling at the lowest price, you will lose, since you cannot compete with Amazon. The retailers that were succeeding were providing experiences. You have to have the movie experience, the laser tag experience, or bowling, or gaming experience. It cannot be Amazon-ed. Unfortunately, this crisis is impacting the current winners in the media-declared retail apocalypse.
Time will tell how landlords and tenants work out their differences. Time will tell how lenders will handle the market disruption. But the ultimate variable is the consumer. The consumer’s preference dictates the retail market. For now, we wait.
Earthvision LLC is a commercial real estate marketing firm that specializes in the retail commercial real estate industry, including customer analytics, trade area analysis, spatial analysis of demographics and/or market potential, advanced aerial imagery presentations, and property marketing fliers. Our clients utilize our products to secure approval for real estate deals, update current investors on current development situations, and lease/sell existing real estate projects.