How Hodges Ward Elliott Uses Data Like A Crystal Ball
Last week, the MTA made an announcement met with dread by many New Yorkers: The L train will be shut down completely for a full year and a half, starting in 2019.
But not everyone minded when they heard the news. Last week, The Related Cos closed on a $60M rental portfolio in South Williamsburg—but the portfolio’s along the J, M and Z lines, not the L.
Hodges Ward Elliott’s Daniel Parker (second from the left, flanked by colleagues Will Silverman to his left and Tim Kiely. To their left is HWE president Mark Elliott) was vocal during the portfolio's marketing that the impending L train shutdown would lure renters and bump up values along the J, M and Z lines.
When Bisnow spoke to Daniel this past March, he said, “I don’t think we’ll see many bets along the JMZ till after the MTA announces their plan. That’s the way the market’s been acting, reacting to things after they happen.”
But what if you knew what was going to happen?
That’s the goal of Hodges Ward Elliott's NYC-based commercial team, which was launched about a year ago and is helmed by Will Silverman, formerly of Savills Studley, along with Daniel and Paul Gillen.
Instead of a crystal ball, these brokers are using data to tell the future. Lots of it. Daniel says it's enough that the firm has had to rent extra server space to handle all the number-crunching.
They’ve also brought on Tim Kiely, a data scientist who’d previously been with AIG.
In the case of the South Williamsburg portfolio (that's 164 Havemeyer St, now owned by Related), the team pored over the rent rolls of the 120 units and was able determine that 42% of the tenants were young professionals working TAMI jobs in Manhattan.
Since every tenant’s tax return wasn’t among the data to which they had access, the team relied on salary estimates for tenants' occupations, and painted a picture of the credit risk of the buildings’ total tenancy.
Will says it’s an approach they’re using to distinguish themselves in a market where everybody’s got some kind of new trick up their sleeve to edge out the competition. And Will isn't worried that revealing some of HWE's secret sauce could let their competition catch up.
“We’d be worried," he says, "if we planned on being a one-trick pony.”
One big addition to the team’s bag of tricks: taxi data released by the City of New York. The team used geocoded data that includes exact pickup and drop-off times to analyze who’s going where, and when.
Back to that South Williamsburg portfolio. When most people think of Williamsburg these days, they’re probably more apt to think of streets packed with revelers until the wee hours of the morning, or households of tattooed 20-somethings where everyone’s in a band and nobody wakes up before 11am.
But that impression may be a few years outdated, if the data are to be believed.
Tim looked at drop-off times in the area over the last few years and noticed that the bulk of nighttime drop-off times had shifted from around 3am to closer to 1am—just early enough to get to bed and get up for work the next day at, say, your high-five-figures-paying job at a tech firm.
Will calls it the “maturing hipster” theory. It wasn’t that they didn’t know a slightly older, more financially secure renter was starting to populate the area, Daniel says.
But he says data like that, which can render all the more real what a prospective buyer may have already suspected, can be enough to knock them off the fence and move them to push for a deal when it’s time to go before an investment committee to make their case for where to put money.
Daniel puts it like this: “If you want to get the attention of really smart guys, you’ve got to present them with smart stuff.”
Farther out in Brooklyn, the team found the taxi data could also be used to empirically show what commercial brokers try to show anecdotally all the time: which neighborhood is about to gentrify.
Upon some examination, they noticed that drop-off times in Ocean Hill have been trending very late into the night, especially on weekends, for rides originating in nightlife hotspot areas like Bushwick, Williamsburg and the Lower East Side.
Daniel says it’s the closest thing you can get to concrete evidence that early and mid-20-somethings—Millennials—are an increasing presence in the area.
“Most market research you see brokerages doing is backward-looking,” Will says. “But why look at the past when you can look at something actionable today?”
The taxi data have occasionally led the team to places they wouldn’t even have expected.
They analyzed drop-offs originating in front of the buildings in the South Williamsburg portfolio between 6am and 10am on weekdays between 2010 and 2014.
There was a 151% jump over those four years in the number of taxi rides people took to get to work, especially in Midtown South, the epicenter of the city’s tech scene.
On the slide above, you may notice an especially large yellow dot on the Upper East Side. It’s right on the location of Cornell University’s in-vitro fertilization clinic.
“You want an indicator of maturing professionals in an area, look at how big that dot is,” Will says.