David Marino, Senior Executive Vice President of Hughes Marino, highlights the issue of statistics manipulation in the commercial real estate industry. Marino references Darrell Huff’s book, How to Lie with Statistics, which emphasizes the importance of being cautious when interpreting statistics to avoid being misled. In the commercial real estate sector, Marino believes that vacancy rates often overstate the health of the market, especially during declines.
Marino provides a relatable analogy to explain the distortion in measuring available space in the commercial real estate industry. He compares looking for a home with a residential real estate agent to the approach of only considering vacant commercial spaces. He argues that to make informed decisions, all available spaces that meet a tenant’s needs, including bank-owned, remodeled, or under construction spaces, should be evaluated.
The complexities of measuring available space in the commercial real estate industry are highlighted by Marino. Spaces that are available for lease or sublease but not currently vacant may not be accurately captured in vacancy rates. This discrepancy can lead to misinformation about the true health of the market. Marino emphasizes the importance of considering all available options to obtain a more accurate representation of the commercial real estate market.
Marino provides examples of how spaces listed for sublease or under construction are not included in vacancy rates, further illustrating the need for a more comprehensive approach to measuring available space. He stresses the importance of transparency and comprehensive information for business owners, lenders, and investors to make informed decisions in the commercial real estate market.
Marino discusses the current office market conditions in major U.S. cities, noting the significant differences between vacancy rates and availability rates. He highlights that availability rates can surpass vacancy rates by a significant margin, indicating a softer market than what traditional vacancy rates suggest. This information is crucial for business owners and executive team members to understand the true health of the market and leverage it in negotiations.
Marino urges business owners to consider the discrepancy between vacancy and availability rates when engaging with commercial real estate agents and brokers. He emphasizes that understanding the true market conditions can impact bargaining power and lease terms. By being informed about the actual availability of spaces in the market, business owners can push for better deals and terms that align with the current state of the commercial real estate sector.
