Commercial Real Estate Moneyball: Data-Driven Site Location, Real Finds Podcast #11 Transcript
Gordon Lamphere: Hi, I’m Gordon Lamphere with the Real Finds Podcast, the podcast series where we have in-depth discussions with key entrepreneurs, scientists, and activists who are shaping real estate and, as a result, our world. On today’s podcast, we have a long discussion with Sara Maffey. We discuss the speed of property technology adoption, the value add of a highly localized data set, placemaking, the siloed nature of our current property technology data, and a path toward a more data-driven society. It’s well worth a listen. Sara, great to have you on the podcast today. Could you introduce yourself to our listeners?
Sara Maffey: Thanks for having me, Gordon. I’m Sara Maffey, head of corporate strategy at Local Logic. I got started in the built world studying architecture and urban design at NYU, then worked in construction management on labs in New York City for a while. I got my MBA from Yale, then went into economic development, because it happened to be right after the market crashed in 2008. Great timing for making the transition from construction into real estate. I learned the public side of it, eventually made my way to commercial real estate at Cushman doing site selection, then to Transwestern doing a variety of consulting services. That’s where I was pitched Local Logic. I nerded out on their solutions and data, and two-plus years later, here I am.
Corporate Life Versus the Startup World
Gordon Lamphere: There’s nothing wrong with nerding out about real estate on this podcast. How was working at a firm compared to the entrepreneurial life? They’re distinctly different, and very few people in the real estate game have done both.
Sara Maffey: I think it’s almost a shame for people on either side not to have done both. It’s been incredibly valuable that I worked with so many different brokers in different markets around the country, and I use that experience every day in the work I do now. Working at a startup, you have the opportunity to move really quickly and try new things. It’s built into the culture of how you solve problems and discover solutions. There are lessons on both sides, but the main difference is the speed of activity.
Gordon Lamphere: Let’s talk about speed. Everyone in real estate has seen that the pace of proptech development is significantly slower than in a broad range of adjacent professions, whether manufacturing, hospitality, or healthcare. I won’t beat the dead horse, but from the proptech side, why do you think that is? We’ve had a lot of folks on with their own hypotheses, but you sit uniquely at the junction of the two.
Sara Maffey: A lot of folks have been successful for a long time doing what they’ve been doing. In moments of uncertainty, there’s an opportunity to start thinking about using more data or tech to remove some of that uncertainty. But proptech is also a relatively nascent world. You’ll see more adoption as proptech matures and finds product-market fit more and more. It’s two industries on their own paths, learning about each other and finding the right fit.
Quantifying Everything Outside the Four Walls
Gordon Lamphere: Going to market fit, we’re not just talking theoretically. You have a product. Can you tell us what you do?
Sara Maffey: Local Logic uses data to quantify everything outside the four walls of an asset. We’re asset class agnostic, though we’ve chosen to focus on more residential use cases like multifamily, single-family rental, and short-term rental, because our original suite of products has incredible and growing market share on the residential home search side.
Gordon Lamphere: There’s a lot of data in real estate, particularly residential, and residential has been overwhelmingly quicker than commercial to adopt property technology and data-driven metrics. What are the leading metrics driving traffic in proptech for commercial users?
Sara Maffey: On the residential side, we have proprietary location scores, proprietary algorithms built from many data sets that roll up to things like walkability, schools, or parks. On the commercial real estate side, as we build models to predict performance metrics, we’re discovering that it’s often the underlying data driving that performance. Market to market and asset class to asset class, everyone has their own investment thesis. The key is our ability to be flexible and customizable, with so many data points that we can meet a variety of theses.
Where we also add value is understanding the value of all those data points, so we can suggest where to begin. Because we’re early on the adoption curve for data and technology, it can be overwhelming to have so many options, especially around location characteristics. Everybody has their boots-on-the-ground things they look for, but how do you translate that into data? Because we’ve done so much modeling on real-world portfolios and use cases, we can help clients understand where to start.
Gordon Lamphere: I’d like to dive deeper into that. I’ll date myself: the first time I used computer code, it was C, so there have been transformations in the coding world. One of the biggest things for folks not used to modern data analytics is the volume of data. If you don’t know what you’re looking for, or you don’t have a good data scientist putting it together efficiently, it’s like bailing the ocean with a bucket. I know you can’t reveal proprietary metrics, but to throw out an asset class, what leading metrics do you think drive a retail user’s location, location, location?
Sara Maffey: We haven’t specifically focused on retail yet, but retail is essentially looking at the size and income level of the market a location can serve. Another use case we’ve seen with retail is a void analysis: where are your competitors, and where might you co-locate with other brands or retail types that help drive traffic to your location? There are synergies, and having access to all the data on rooftops and surrounding retail is super valuable.
It’s interesting, because retail really plays into site selection for multifamily, single-family rental, and build-to-rent communities. We hear all the time that people are chasing the Whole Foods or the Trader Joe’s. They want those amenities near the housing they’re building, because it drives the desirability of leasing to families and renters. And it’s really specific. Sometimes walkability is great; sometimes you’re actually looking for a car-friendly location. Depending on the unit mix, you might want to be near schools. All of that drives not only what you build but a go/no-go decision process.
So we have pre-packaged data for specific asset classes as a way to suggest where to begin. For short-term rental, you might want a vibrant, walkable area, but depending on the average stay, you might also want to be near grocery or convenience stores. Restaurants are usually important, and cultural things to do nearby. It depends on the individual investment thesis. It could be proximity to a commercial hub where people go for meetings or events. We could get into the weeds on every episode.
Gordon Lamphere: I’m a data-driven guy. I came into a phenomenal boutique brokerage that was using early-2000s technology in the late 2010s, and we revolutionized not only our brokerage business but our landlord leasing business through technological adoption. I’m fine getting into the weeds.
Sara Maffey: Isn’t it cool? When you’re putting together a survey for a tenant, I always found it challenging to qualitatively describe an area to a tenant coming to look at a market from out of town. They have no sense of context. That’s why we’re just getting started with use cases for this kind of data. Think about finding the cultural fit, the right neighborhood, the right corner in a submarket for that tenant, where they’ll really fit best. Location can get super granular. And you probably know this too: a lot of data is available at the wrong level of granularity. You’re looking at an aggregated census block, a submarket, or a zip code, and it can be hard to drill down and make the kinds of suggestions clients are really looking for.
Gordon Lamphere: In the Chicago market, I always joke that a few blocks can be the difference between walkable and totally not walkable. In any market there are granular chasms that divide people, whether transportation metrics, technological adoption, or maybe the block isn’t electrified to the level it needs to be, and that can be hundreds of thousands of dollars of an issue.
Sara Maffey: Chicago’s interesting too, because you have a river cutting through things. If you’re using tools that look at distance measurements rather than actual accessibility and walkability, without knowing the area and using the right data tools, it can be tough. I love that market example.
Gordon Lamphere: As the crow flies, walkability is very different in June than in February.
Sara Maffey: So true.
Learning From Past Decisions
Gordon Lamphere: What’s the most unique, granular example of how you’ve helped an organization find and locate? And this isn’t you pitching to me. This is you pitching to my 55- or 65-year-old investor who wants to use proptech. What’s the best example case?
Sara Maffey: I feel nerdy when I get into this, but I love dealing with a client who has a portfolio of prior decisions. They decided to invest in these properties at some point for some reason, and what I’ve found is that people don’t necessarily go back and reconsider that decision-making process. Once it’s done, you’re rolling with it for a certain hold period. But there’s so much information to be gleaned when you look at the performance of all those assets and layer in granular data points on location characteristics. Patterns start to emerge that you can use powerfully to make future investment decisions. That’s what gets me excited: you can actually learn from a client’s past decisions to make better ones in the future. Maybe outliers come out of that analysis where you realize you should probably divest from an asset, like yesterday, and you didn’t even see it because it was blending into the general portfolio.
Gordon Lamphere: That’s one of the greatest challenges of the human mind in investing, the fallacy of sunk losses. Without data, it’s almost impossible to realize you’re past the point of no return and it’s time to bail. I’m always a fan of metrics that improve our human processing. On that note, and this is probably what I’m most interested in: say you have an investor who’s a late-stage adopter of proptech and you have to make a pitch. A lot of brokers and investors follow our content, and some aren’t as technologically advanced. Why is property technology worth investing in rather than another marketing campaign or another email list?
Sara Maffey: I can’t pitch all of proptech. If you’re a later-stage adopter, it’s important to find the thing that’s going to move the needle for your business. In the case of Local Logic, the way we improve the performance of financial modeling is where we add value. If you want to help your clients more accurately understand rent prediction, cap rates, or any host of performance metrics, the data can help you do that, and it augments what you’re already doing. I can’t speak for everything, but I know we add real value to processes you’re probably already doing in Excel, and we fit right into that.
Gordon Lamphere: You mentioned Excel. Beyond Excel, are there other standard data analytics platforms you integrate with, or are you relatively unique? How does it work?
Sara Maffey: We try to meet people where they are. Whether your company uses Power BI, desktop Excel, or an internal platform that knows how to integrate APIs, we can provide bulk delivery in CSV and you can do whatever you want with it, or your platform can automatically ping our APIs. It depends on where you are. We try to be really flexible with how we deliver our solutions.
Is Data-Driven Investing Only for Institutions?
Gordon Lamphere: Another question I always like to ask about proptech: it’s been adopted very much at the high end of the real estate venture capital and private equity world. For the average adopter, maybe it’s not in the cards, not a fully democratized platform. Do you think adoption of highly data-driven technology like yours is in the cards for every investor, or will we see stratification?
Sara Maffey: I don’t think it should be. You might be seeing that because institutional investors tend to come from a financial background, understand the value of data and modeling, and have that capacity in house. But you don’t have to do that today with our solutions. It’s pretty easy to run regressions, or ask us for suggestions and use our pre-packaged data to get started immediately. We have an alpha of a platform that literally anybody could use. So I think we’ll see more and more adoption of data, because with the right solutions you don’t have to be a large institutional player to access those insights. Ultimately, the whole Moneyball-for-real-estate idea, anybody can do that. We’ve got a variety of ways of interacting with people and making our insights easy to access.
Gordon Lamphere: Doubling back to Moneyball, and it’s a great film. Do you have any examples, without naming names or even metro areas, where folks have used your platform to really Moneyball the commercial real estate world?
Sara Maffey: The examples I’m thinking of aren’t in a specific market. They’re larger national or international portfolios. But the idea is using the data you have internally, marrying it with outside data, and drawing actionable insights from that. A lot of times there’s a disconnect, and firms don’t even realize how much data they have internally to help make decisions. Maybe that’s the starting place, and adding our data on top can really help.
The Final Four
Gordon Lamphere: We’re getting to that time. I know you have a lot to say, but I have a showing to get to and we both have tough schedules, so I’m going to break into our Final Four. I’m not much of a hooper anymore, and I certainly can’t dunk, but the Final Four is a great way to get to know people. One of my favorites, and you’re particularly adept at this topic: where do you see the future of proptech going?
Sara Maffey: I could answer that in so many ways. There’s going to be more crossover from people with real commercial real estate experience moving into proptech. As you said, proptech really started on the resi side. We’re starting to see more solutions beyond operational efficiency, risk management, and rental platforms, getting into so many more parts of the day-to-day of commercial real estate that tech can solve.
There are two pieces for me. One is that commercial real estate will hopefully get more of a handle on its internal data, and maybe proptech helps with this, and start using it across silos within the organization. Acquisitions is separate from asset management, from valuations, from all these different teams that could be sharing data internally and matching it with outside data solutions. There will be more accessible ways to do that, and it will become more prevalent. So when I think about the future of proptech, I also think about the future of commercial real estate, because they’re intertwined.
The second piece is that there’s so much conversation right now around what boils down to the human experience in spaces, whether the workplace or housing. That’s another place proptech will continue to add value, potentially allowing us to have assets that are healthier, more environmentally friendly, and all of those things. When we start using technology to actually solve for those needs, it’s going to be an exciting place to be, literally.
Gordon Lamphere: A quick follow-up. As we see more data, and I think data will drive the future, what I’ve seen in real estate is individuals becoming increasingly hesitant to share it. There are other ways to get data, like cell phone data and publicly available sources, but do you think we’re heading toward a world of more siloed data, with folks using data within their own silo, or a more open data future for real estate?
Sara Maffey: Since you work in commercial real estate, you know how much of the value proposition is holding that close to the chest. It’s hard for me to imagine more open sharing of market data. But my hope is that things break down within firms. From my own experience of the silos that exist within large firms, if you start to share data across teams, even just internally, we could see a huge shift.
Gordon Lamphere: Very interesting. I’d certainly hope we start to see more sharing of data, but as anybody knows, there are those CoStar reps calling you for comps, and it’s hard to get broad comps on the market.
Sara Maffey: Your guess is as good as mine. That’s real crystal ball territory.
Gordon Lamphere: Instead of the crystal ball, let’s take the history book. This is a favorite of mine. Sara, if you could talk to young Sara in high school or college, what advice would you give her?
Sara Maffey: I’ve done so many different aspects of the built environment, and early on I felt like I had to choose one route in this larger industry. I’ve actually benefited from finding my way through it. And not to age myself, but when I was young, proptech didn’t exist to go into. The AutoCAD I was trained on is really different from what we’re doing today. The world is changing, and as we’ve talked about throughout this conversation, this industry is really changing. The solutions and the kinds of jobs available today are going to keep evolving. So, stay curious.
Gordon Lamphere: Staying curious is a great thing, and it leads into our third question. What’s your favorite real estate or business book? I’m a voracious reader of business and nerdy real estate content. What would you recommend to our readers and listeners?
Sara Maffey: This ties in with the open data and breaking down silos we talked about. One of my old professors at Yale, Barry Nalebuff, wrote a book called Co-opetition, and I reference it in conversation all the time, because the idea of co-opetition, especially in this industry, is really important. From a real estate perspective, if your listeners haven’t run across Dror Poleg, his book Rethinking Real Estate is another favorite. In general, the content he puts out is really forward-thinking about real estate, and I get a lot out of it.
Gordon Lamphere: There’s a phenomenal movement going on, particularly the new urbanism movement. I haven’t read that one, but I’d be fascinated to pick it up over spring break. The last question is the most important, and I won’t let you dodge this one. I know you tried to dodge a couple. It’s the whole reason we created the podcast: to find important voices, particularly ones not necessarily getting recognition within the industry, and learn more about them and the future of the industry. Who would you recommend to hop on the podcast next?
Sara Maffey: I’m going to recommend Cal Inman from ClimateCheck. Especially in commercial real estate, there’s going to be increased focus on reporting on climate risk. We partner with them, and Cal is a great person to talk to about how that plays into all the aspects we’ve discussed today.
Gordon Lamphere: I’m very interested in a conversation about climate, particularly as the world gets more climate conscious, or even just more economically conscious about energy usage. That’s a great topic. Sara, the second most important question: if our listeners want to reach you and find out more about what you do, what’s the best point of contact?
Sara Maffey: I encourage people to follow me on LinkedIn. Just Sara Maffey, pretty easy to find. That’s the best way, and I’m pretty responsive to messages there. Start there.
Gordon Lamphere: Sara, thank you so much for hopping on the podcast today. We’ll have to have you on again and drill deeper into the data.
Sara Maffey: Just let me know, and I’ll come prepared with all the breakdowns. Thank you so much for having me, Gordon. It was great.
Gordon Lamphere: Thanks, Sara. Thanks again to Sara. We appreciate her insights. If you enjoyed the podcast, please give us a like, a five-star rating, or a review. Your comments, interactions, and subscriptions truly matter and help us continue to provide quality guests. You can follow us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere with the Real Finds Podcast. Thank you for listening.
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