Why you can’t trust the Fox guarding the Chicken Coop.

Implications: When major service providers manipulate their statistics to paint a different picture than what is true reality, how can that benefit anyone in the industry or better asked the uneducated commercial real estate consumer? It also provides a disservice to their client base that rely on honest and objective information and advice.   No wonder we are in a world of hurt, and just because CBRE the largest Commercial real estate service provider says so doesn’t always make it so.   Just take a look at what is currently going on with the rating agencies in which it was announced today in the WSJ that after a 10 month investigation it has been discovered combing through 2 million emails that several analysts were concerned about the quality of their ratings they assigned to bonds backed by sub-prime mortgages...no doubt that has carried over into the commercial CDO/CMBS world.  

Analysis: The business world needs to regain a level of integrity...what is going on now is making the halcyon days of the 1980’s look amateurish.

The problem with statistics which this writer has brought up before is they often times can paint the wrong picture. That is not to say statistics aren’t valuable. However, accurate and objective statistics are what is needed.

When looking from the outside most non-real estate folks have no idea how the market stats have been derived. Most do not even understand what they mean. The problem is when a company such as CBRE skews its stats in contradiction to known reality by everyone else in the business it is bad because of their status as the biggest and broadest service provider.

So what’s in it for CBRE to skew stats one must ask? If you predominately represent property owners, you want to paint as rosy a picture because it helps their clients the property owners in lease negotiations. And since CBRE represents so many more landlords than anyone else in almost every market area it’s in their best interest to portray a rosy picture.

The problem with stats especially coming from a brokerage service is they don’t disclose how they arrived at their figures. Most brokerages although they use common data sources don't always publish the same results...For example some brokerages only report on office buildings 20,000 sq ft and up, while others go from 10,000 sq. ft and up.


Another example, in a different article on the same topic, one of the CBRE’s head researchers talked about the positive absorption in DC proper. They actually used, according to the statement made in the article, a large space lease renewal in the absorption number. That is just wrong methodology. The space never came onto the market and therefore never came off the market, so its a neutral number and should not have been factored into the absorption rate. By using the renewal it makes it seem as there is so much more leasing activity than there really is.
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n addition its nothing to get excited about that a 276,000 sq ft renewal took place in a market as large as DC. 

The subject article further speaks to how the new "construction pipeline is pretty positive for Northern Virginia," Marianne Swearingen, research manager with CBRE, told CPN today. "It has actually stabilized the market because properties are being built specifically for companies. And the way the market has gone, developers have started to hold back on plans if they can, so there's a more balanced pipeline in Northern Virginia.” The problem with that statement is the fact there is over 4 million square feet of new construction underway to be delivered this year into the beginning of next, and only 20% has been preleased. That is a stabilized pipeline? I don’t think so. Never mind the new construction that is taking place in DC proper of 16 million sq. ft. again with only a 20% pre-leasing ratio. Of course there are not going to be any “new” projects to be built in the foreseeable future. And this is not a stabilized pipeline by any means.  

At least they are being accurate about the Suburban Maryland market, as it would be hard to paint a rosy picture on that since there are no amount of stats that can be manipulated to say otherwise.  


People within the industry are always asking themselves why brokers have such a bad reputation with the general public, usually one degree higher than used car salesmen, this is a prime example of why the perceptions are bad.  


When even the large firms begin to sacrifice their integrity for the sake of self preservation, its time the buying public stand up and take notice. There is a reason that CBRE’s stock price has plummeted, its due to their decrease in overall sales and leasing activity. They can’t skew those numbers. So how does their deal volume jive with their own market stats...they don’t.