Developing Market Knowledge, Part Two: Sector-Level Research

The previous article in this series described: how passion is necessary to succeed in an REPE career, how interviewers look to see how you demonstrate passion through knowledge, how knowledge can be separated between technical and market-based, and how technical knowledge is necessary but won’t set you apart from the competition. This article will focus on how you can set yourself miles apart from the competition with market knowledge. We will show you exactly how we as megafund REPE investors have learned to source market knowledge with our years of experience in our careers in repe. 

Where to find market knowledge

So, we’ve already covered that the number one way to succeed in repe interviews is to demonstrate a true passion for real estate. Yes, you need to know your technical skills. But really, you’re going to shine once you can speak fluently about current events in real estate. So how do investors source this information? There are four general avenues that I have followed throughout my REPE career: sector research, company research, company filings, and news. This article is going to focus on where you can find good sector research. 

Start High-Level with Sector Research

Let’s pick a random industry to use as an example. For instance, let’s say you want to make an investment in the self-storage sector. Or, as an interview candidate, you want to come up with a self-storage investment thesis to impress your interviewers. Either way, where is the first place you should start to develop your thesis on any real estate sector?

As you’ll learn throughout your career in repe, start with a 20,000 foot view. And the best place to get a 20,000 foot view is sector research. Before you start thinking about specific companies or even specific properties, what major themes best describe the sector right now? 

Focus on the theme, don’t get caught up in the weeds

Below are a few great places to get sector research. Note with a lot of this, you still need to be a self-starting researcher. But it’s usually as simple as googling something like “NKF self storage update” to quickly find a relevant report. Then, read the information quickly and don’t get lost in the weeds. Try to sniff out the high-level thematic trends (nationwide oversupply, muted rent growth, extreme delays in lease-up periods lasting ~4 years, etc.) and don’t get caught up with details like how much a specific asset traded for in a random Midwestern sub market. 

Great Sources for Sector Research

• Green Street Advisors (generally considered the top real estate research outfit) publishes quarterly sector updates on each of the major sectors. In fact, they officially cover 11 sectors (along with a few others that they periodically review): residential, industrial, mall, office, strip center, health care, lodging, self-storage, net lease, data center, and single-family rental. It can be tricky to get your hands on a Green Street subscription, but they do publish some good free information.

• Corporate Real Estate Property Brokers like NKF, JLL, and CBRE all publish troves of helpful data on the sectors they cover. Furthermore, they’re often the best source to consult since they’re the ones on the frontlines of nearly every major transaction in their respective sectors. For instance, NKF’s self-storage group publishes a quarterly update on the major storage REITs with a great narrative at the front in the 4Q19 edition. Here’s a similar report from JLL.

• Industry Associations such as the Self Storage Association are excellent aggregators of industry information. For instance, they have an entire magazine focused on the latest sector events. You might also note they have a major annual ski conference, perhaps you could google around that and find some interesting take-aways that are published online.

• Investment Banks publish great sector research through their equity analysts. Though a lot of this data can be locked behind a paywall, there can be easy ways to get the data. If you’re a student, and especially if you’re a business student, you likely have access to a free ThomsonOne, S&P Capital IQ, or Bloomberg Terminal subscription that could have equity research available. Speak with your library to find this out. Or if you’re currently working at a bank or real estate firm, you might already know how to get this data. If you absolutely can’t get your hands on this research, you’ll be able to figure it out yourself with any of the methods mentioned above.
  

• NREIOnline is a solid free resource -- they even have a page that covers the self storage industry specifically, though it skews a bit more toward daily news. However, it does have a few good thematic tidbits like this article discussing trends affecting self-storage. This website was a tremendous help when I was first breaking into my career in repe.