The Nashville market is hot, and everyone wants to have a presence in Nashville, which has brought in a lot of corporate investors. As the restaurant and retail industry consolidated in the last six years, another side of the industry has also changed – the role of real estate directors and brokers. The role for many was to know the territory and the industry has moved to the increased reliance on analytics.
As Private Equity (PE) firms have acquired concepts and brands, some people have lost their jobs in the corporate real estate world, and some have changed jobs completely. Often the big PE firms have their own leadership teams in place, and they put the acquisition into their processes and go from there; hence, they no longer need the existing leadership from the acquired business.
Along with the takeover of brands by the PE firms, there has been a shrinkage in the number of directors of real estate. The directors that stay must cover a larger territory because there are less deals coming in than in 2007 and 2008, and their role has also changed significantly. Now a director of real estate spends just as much time doing renewals, extensions and terminations as they do new deals, which used to be a completely separate job.
Advertising and marketing also play a role in the changes, as these tools help capture a wider audience. With the increased reach from advertising, there is a decrease in the need for more stores which previously had gone up to help with brand visibility. The money is being reallocated to marketing the business instead of building additional stores. Now brands can have 3 stores instead of 5 and get the same reach. This is good for business owners, but not great for the broker who wants to bring in more deals.
In Nashville especially, we are experiencing the decrease of sites for selection. As we enter an established market and the established brands don’t have that many holes left, the number of people doing site selection has decreased. In addition, site selection is being done through analytics. There is an influx of new directors of real estate using analytics as their primary tool and we are losing the experience in this field. The new directors cost less than the person who has been there 20 years with market knowledge.
As some real estate directors are given larger and larger territories to cover, they may be encouraged to use analytics as a crutch, which puts more on the brokers to sort through. Though you can purchase a shopping center unseen it is recommended to see the property and have traveled around the area to fully understand the property and its surroundings.
Analytics help to set the picture for a deal but do not take into consideration the past or future; analytics are a snapshot of today. If you are doing a long-term lease, you need to worry about what it will look like in 30 years, not just today. Analytics don’t take away the need to go out and see and feel dirt. If you are just using analytics you are going to end up making mistakes. Just because the rent is low doesn’t mean there is an upside. While analytics have their place, I predict that we will see a shift away from analytics being used in place of directors of real estate.