My guest today is Paul Fiorilla, Director of U.S. Research at Yardi Matrix. Paul oversees the production of research publications including detailed papers on multifamily, self-storage and office data properties in more than 130 markets nationwide. Paul is extremely well informed about the US commercial real estate industry and you are going hear some of his insights in this podcast.
Paul is a true pleasure to talk to and to get to know. It has been my great honor to be associated with him and I'm delighted to have him on the podcast today.
What You're Going to Learn
Using Data to Create Thought Leadership Publications
Using Data to Create Thought Leadership Publications
Adam: So I'm interested in understanding what is the process, what makes for really good commercial real estate conten?
Paul: As far as the process of creating, you know, commercial real estate content - so the first thing we did was we created a series of publications that involved Yardi's data. So, you know, one of them would be a national outlook where we do the beginning of the year, two or three times a year, we will write an outlook. Here's our view of the industry. Here's where we see rents going. Here's where we see occupancy, supply, all those kind of things. So what are the fundamental drivers of multifamily and where do we see them going? The other the other element of that is then we created monthly publications for, you know, we created a top 30 metros in terms of size and then a month to month report on how they're doing as far as rent growth and rent growth and employment. And so every month our people who, and it's not - our research is published openly. There's no you know, you just have to send an email address and you don't have to pay for it. But you know, what can we inform the market about that also involves kind of our expertise. Right? So we could you could write about anything. But we want it to be something that features our product, our data in our area of expertise.
Adam: Would it be fair to say that you. Put yourself in the mind of your reader and ask - think about what are the questions they are asking today? And then answer those questions, kind of preempting. Basically, putting yourself in the in the shoes of your readers, is that where you start when you think about a white paper?
Paul: Yeah, that's that's definitely one of the main things that we would think about. I also think about, you know. Sort of create a theory of what you think is going on and then try and run some data and see how that matches up to what your you know, what's going on. And sometimes you find that maybe the data doesn't say what you think was going on. And so you've got to figure out then. All right. Do I you know, did I just run the wrong set of numbers? Do, our, you know are my you know, my calculations - did I, am I looking at the wrong correlations here? Or, you know, maybe there's just something different that is going on then what I think about.
Building Brand Awareness with Content Marketing
Adam: I might use the term that they are lead generation materials. Would that be fair, that you're delivering them for free to read, is anybody that gives you that email address to showcase the data that you gather and therefore the content that you produce, the decision, what to write about and what kind of papers to write about is driven by the data that you gather. Is that a fair characterization of how you decide what to write on?
Paul: When we started this operation, our first goal was to produce, you know, again, brand awareness for Yardi's product. So that involves writing about the data that we have and that we that we that represents the core of our business. And then we went from kind of the monthly reports then we started doing Metro reports. So we have you know, we publish first we started with two a month and now we're up to 10 a month of Metro reports. So of the top, I don't know, 30, 40 metros, we publish about three times a year. So - people in those metros, you know, we send it to the newspapers and news outlets in those metros. So it gets they get highlighted from from there on the local level. And again, it's to, you know, to highlight our data, kind of like which I guess you would call content marketing.
Owning a Commercial Building Requires Expertise
Paul: I would consider my industry. When I when I'm talking about my industry, to be sort of the institutional commercial real estate market, so you'll be talking about pension funds and sovereign wealth funds and REITs, you know, and and, you know, I mean, the industry has a lot of phases. You know, there's you know, there's advisers, consultants, lawyers, servicers. You know, there's a whole battery of of different types of organizations that comprise that, not just the investors and owners. So that, you know, Yardi's main business is software for property managers. So, you know, that's another element of the industry.
Paul: It's one thing to own a property. But but managing is another. So, you know, somebody that has deep pockets has a better chance at being able to provide the capex needed when something happens to the building and in dealing with complex financial instruments, you know, being able to structure a complex mortgage that maybe is more appropriate for your needs, maybe so they can they have more expert kind of staff that's able to handle that kind of thing. Historically speaking, I'm not saying that retail that nobody involved in the retail world has that kind of expertise or is able to handle problems. But by and large, you know, there is a certain amount of expertise that goes with owning a commercial building.
Consider Your Audience When Creating Content
Adam: And so you've been able to identify themes and topics that the industry will be interested in. That requires a deep understanding of the industry. How do you decide on what to write about, what research to conduct. I know we talk about the foundation being the data itself, but for example, you talked about starting with a national overview of multifamily industry and then drilling down on individual locations and different cities.
Paul: We, I'll have discussions with my, you know, my team and we're looking at what's going on in the market at any given time. What's happening when you look at the real estate fundamentals, you look at the capital market conditions and, you know, I guess the foundation of the basic element in research that you're trying to get across or you're trying to help people with, people want to know how to run their right. People are interested in how do I run my business, how do I plan for the future. So the way I look at it, everything I write, it's what am I going to write that tells people what to expect and what they can conceive of and think about what what data, what trends will help them to kind of decide what's going on in the market and how that helps them manage what they're going to do going forward. I think that's basically, you know, research is a big part of the industry. And and when people I think, you know, click on the Yardi website and go to the research page, I think they're looking for things that help them to, "Hey, should I buy? Should I sell?" I mean, they're not looking specifically at, say, you know, I'm going to read this and then decide to buy or sell anything in particular. But, you know, to get there, they're trying to understand what's what's going on and where everything's going.
Big City Rent Declines
Paul: Before the pandemic, multifamily, pretty much all the markets rent growth is positive for seven, eight years and now post pandemic, suddenly there's a big divergence. Some metros are doing better than others. Some are negative. Some are still positive. Everybody's down, but some are still positive, somewhat in the negative territory. So what is causing that? And we ran some numbers to do with, you know, occupancies and demand and absorption, but the one thing that was with expense, right? So the more expensive the market was, the worse they did in terms of rent growth. The cheaper the market was, you know, the better they did.
Adam: Expense as measured by what?
Paul: Measured by average rent.
Adam: Not the relationship between rent and income?
Just the average rent, and so Las Vegas lost they their, they lost a greater percent of jobs than any other metro in the US, but their rent growth was positive, the second worst metro in terms of losing jobs was New York City. And this is between March and September. And, you know, they were minus like eight percent or something like that for rent. So so when we when we when we looked at what the correlation was, you know, the biggest factor was all the most expensive markets were pretty much the worst markets in terms of rent growth. And even so, there was a stronger correlation between that.
Now, there were pretty strong correlations to other things, like you said, but the strongest correlation for anything was with just expense. And, you know, when you think about it, it makes sense that we're at a period where there's a lot of uncertainty. People a lot of people have lost jobs and most people have lost jobs are mostly kind of on the lower end of the economic scale. So there's a lot more budget conscious renters out there. Once there's a vaccine, it'll come back. And, you know, when people feel safe, I think they'll eventually move back because, you know, I think that's what people want out of life. Right. You know you know, even the two big drivers of demand in urban areas were sort of the millennials, but also the baby boomers, the retirees who, you know, they don't need the four bedroom houses after their kids moved out. So and they didn't want to just go to Sarasota where there's nothing to do. So they would they're renting, you know, they might be selling their houses and renting a place in downtown Boston or downtown San Francisco because there's things to do and they're not ready to just sit back and spend the rest of their lives sitting on the beach or something.
