In a recent article, David Marino, Senior Executive Vice President of Hughes Marino, discusses the issue of misleading statistics in the commercial real estate industry. Marino references the book How to Lie with Statistics by Darrell Huff, which highlights the potential for manipulation in interpreting statistical data. Marino specifically addresses the distortion of statistics in the commercial real estate industry, particularly in terms of measuring available space. He argues that traditional measures such as vacancy rates can create a misleading picture of the health of the market, especially during times of decline.
Marino uses a relatable residential real estate analogy to highlight the issue. He questions whether buyers would only want to see vacant homes for sale, or if they would prefer to see all available options, including bank-owned, remodeled, or under construction properties. Marino argues that a similar approach should be taken in the commercial real estate industry, where spaces may be available for lease or sublease but not officially vacant. This discrepancy can lead to inaccurate assessments of market health and impact decision-making for business owners and investors.
Marino emphasizes the importance of differentiating between vacancy rates and availability rates in evaluating the commercial real estate market. He provides examples from major U.S. markets, where availability rates exceed vacancy rates by a significant margin. Marino believes that this lack of transparency can be detrimental to business owners, lenders, and investors who rely on traditional vacancy rate metrics provided by brokers. By understanding the true availability of space, stakeholders can make more informed decisions and negotiate better lease terms.
For business owners and executive team members, Marino stresses the importance of being aware of the true state of the commercial real estate market. Knowing the reality of market conditions can empower tenants to negotiate more effectively with landlords and agents. By understanding the broader market trends and leveraging this information during negotiations, businesses can secure more favorable lease terms and make informed decisions about their real estate options. Marino cautions against relying solely on vacancy rates, which may not accurately reflect the full range of available space.
Marino criticizes the focus on vacancy rates as a historical measuring stick that often favors landlords over tenants. He warns that this bias can influence brokers’ mindsets and impact the negotiation process, leading to suboptimal outcomes for business owners. By highlighting the potential discrepancies between vacancy and availability rates, Marino aims to raise awareness of the importance of transparency and accuracy in evaluating the commercial real estate market. Ultimately, he advocates for a more comprehensive approach to measuring and interpreting statistical data in order to make informed real estate decisions.
