In this episode of "Net Takeaways," BJ Feller and Isaiah Harsh dive into several timely topics in the commercial real estate sector, with a focus on the latest economic data, retail dynamics, and the evolving influence of technology in the industry. They kick off the discussion by addressing the concept of "zombie pharmacies" in New York City, analyzing the New York Times' recent article on the impact of closed big-box pharmacies on local retail vibrancy. The conversation shifts to the latest unemployment figures, interest rates, and the Federal Reserve's guidance, particularly how these factors might affect the commercial real estate market in Q4. The episode also features insights into the role of Placer.ai in real estate analytics, where BJ and Isaiah debate its growing influence and potential overreliance by industry professionals. They wrap up with a light-hearted discussion on desserts and personal experiences, blending industry insights with relatable anecdotes.
Introduction:
Zombie Pharmacies in New York:
Economic and Market Updates:
Placer.ai and Real Estate Analytics:
Closing Thoughts:
Listener Engagement:
This episode provides a comprehensive overview of current trends and challenges in the commercial real estate market, with a blend of serious analysis and entertaining banter.
On this week's episode of net takeaways, we cover zombie pharmacies in New York and the times latest reporting on some really specific facts. We get into the big news and unemployment, interest rates and the Fed's latest guidance, and we talk about the impact of a growing technology in commercial real estate. Placer AI join us for this week's episode of net takeaways.
Welcome to net takeaways with Feller and Harf, I'm BJ feller and
I'm Isaiah harsh.
Did you go to Lollapalooza last weekend here in Chicago?
Oh, yeah, I avoided it like the plague, let's be honest.
Well, I hear your voice and you know, I can only assume you're out there belting, uh, belting out. Mr. Bright 82 No, it was Mr. Brightside. I had you singing Mr. Brightside. No, I
definitely, I missed, I miss Lala for the 13th year running. Have
you ever been? I have I have never been. And I'm like, you've never been at this age. Can I go to Lollapalooza for the first time? I'm going to that
being said, there are some unnamed people in our industry, by unnamed meaning, I won't mention any names that I know that go to Lala every single year. They are, they mean, they're Die Hard music they're
regulars, yeah, well, no, they're
Die Hard music fans. I
mean, I'm a big music fan, and I've never gone you live in Chicago,
and you're not going to Lala, and you're a huge music fan, you're not a huge music fan.
What Act would it take for you to show up at Lollapalooza? There
have been acts that I've missed that you love Red Hot Chili Peppers. That's pretty good. I mean, you wouldn't go see red hot chili peppers with 100,000 people on Saturday night in 75 degree weather. I would. I mean,
I think there's acts that could get me out there more than Red Hot Chili Peppers, but that would be a good concert. Yeah? Like, who? I don't know. As I'm coughing, I don't know who would be for me, I feel like, if you two play Loll, and they wouldn't, because they're at the sphere, and they can bring in everyone, I feel like I'd have to see
that people either love them or people hate them.
I don't know how you hate you too. How do you hit YouTube? I feel like
he's like, the save the world music stuff.
It's just like, you know,
he's like, like, save
the world. Yeah. I mean, like, how can you hate Bono How can you hate their music? They're iconic. I don't know. We're both showing our age as we like name bands that have been around for 40 years
at this point of YouTube. Joshua Tree was that an album in your roster? Of
course, that's like, that's iconic. I mean, there, you know, I think there's like,
listen to it because it was kind of like iconic, not because I really liked it.
That's so sad. You're just like, This is sad. I'm sad. I mean, there's so much good, iconic music on there.
Yeah, are you a Pearl Jam fan?
You know, I I'll listen to Pearl Jam. I'm not. I'm not like a cult follower of Pearl Jam. I remember when I took one of my sons to a Cubs playoff game way back when I literally brushed shoulders with Eddie Vedder in Wrigley Field, as it was like a rain delay. So it was kind of a cool experience.
I had a guy take me to the airport once, and out of nowhere, like 15 minutes into the ride, he says to me, it goes, you know who the last person was that sat where you're sitting? Was it? Eddie Vedder? And I'm again, well, and I'm thinking to myself, like, somebody who, you know, was, like, profusely sweating, like, what was it, right? And he goes, he goes, Eddie Vedder. I was like, Oh, that's pretty cool.
So we've both been in close proximity. You you felt the warmth from Eddie Vedder in the suburban, correct? And I brush shoulders with him in Wrigley.
Yes, real life. So today we got a lot to talk about. Don't we
big day for net takeaways? Yeah, yeah.
I mean, I feel like, in the last 90 days, 120 days, it's been a slog. It's been a real slog.
You know, it's, it was a quiet June. It was quiet July. Yeah, we knew that going into those months, the market has been very challenging for everyone in the commercial real estate world. I think it was a quiet May, too. If we're being honest, I'm trying to limit the damage here, but it was a quiet May. And then, lo and behold, we the calendar turns to August here, and all of sudden, things get spicy. Everybody's talking, everyone's talking, everyone's ordering. Everybody so hot chicken.
Yeah? Everybody was so cold as ice on net lease and now, well, just
commercial real estate in general. Boom, yeah, boom. It's like, Starbucks,
O'Reilly's AutoZone. All the guys are back, all the girls are back. Everybody's back. Well, it's like, let's
talk about what happened three really big stories over the last week here. One jobs report came in 110,000 jobs for July, rather than the 170,000 that was projected. This comes after a string of jobs reports that just kept out performing expectations. Always
like, you know, they were always reporting anywhere between. Point 250 and 300,000 and then they would market, you know, they would, they would adjust. They would only adjust it to, like, 200,000
exactly, maybe 175 so this is the first miss in a while, pushing unemployment rate to 4.3% this news came on Friday, so scary, the day before Federal Reserve meeting. They didn't reduce cut rates in the last meeting, but they did come out and make it pretty clear that a rate cut is on the horizon for September.
What do you think of that? Well, I
think, you know, I think it's getting priced into the marketplace right now. We're starting to see this. And you and I are both like, ready to cough here. We're both like, getting away from the microphone as we're about to cough. But you know, the market has been expecting this for a long time, and and it looks like it's now actually here. And so that's really interesting. So you had that news, and then what was the other big news? Why am I for? What am I forgetting here? Feel like there's a third story. Did I just make that up? I don't know. I mean, I can think of a few big things. Well, I mean, there was big stories, but as it relates to the marketplace, but basically, we saw the 10 year treasury make the biggest swan dive that is made in quite some time. Yeah, from 420 down to about 380, 4050, basis point move and and people are, people are much more excited. I was commenting on a LinkedIn post earlier where somebody said, the irony of the commercial real estate market is that everyone starts cheering when bad economic data comes in, I think I commented on a LinkedIn post and, you know, reference the famous Wall Street quote, which is, it's like Larry Wildman going off the cliff in my new Maserati, mixed emotions, buddy. Oh, yeah.
So I got a question for you. What's your question? As our resident News correspondent does, what's going on in Russia and Ukraine, which we kind of already forgot about because of what's going on right now in the Middle East and Iran. Does any of that play into right I
think the impact of what's going on geopolitically in Europe, in in Israel is, is, is limited. I don't think it has a huge impact, per se. I think the biggest impact that you have there is some the uncertainty about a broader regional conflict in the Middle East, Iran decided to sponsor sending some rockets at a US military base yesterday. So there's stuff going on there, but I think the primary impacts on rates are all all in Washington and New York right now. It's all economic news and political news and government policy.
Well, thank you for that.
Yeah. So it's really interesting. What we're seeing right now, it's setting up for a q4 that I don't think people had anticipated was going to be that boisterous. I think everyone's thinking people are going to come back. There's going to be some more deal making. But now we're going to have rates that are, you know, like we were talking about 50 basis points better, very plausible that people can finance properties as 6% interest rate now, instead of 650 or seven, just just a few weeks ago. So that's big news. Yeah, I was gonna
say, so let's talk about that. So right now, right? And our market obviously screams to you're speaking retail specifically, correct? And our markets, you know, screams to write regional banks, credit unions, lifecos and CMBS, right? But I would even say, you know, especially when we talk about the three to $15 million purchase price, right, of assets, right? I mean, life goes, Are there, but life goes, aren't that there, right? I mean, they life cause want bigger product. I
mean, they're there for the right deals. And, you know, when you look at life goes, there's a very specific segment that like retail transactions, and for the for the 10% that fits the bill. For them, they love them, sure, but,
but let's talk about right? I mean, regional banks, right? We're lending money over the last year and a half at seven, seven and a quarter, maybe all the way up to seven and a half, with a very straight face, right? Absolutely, and obviously that created constants in the, you know, frankly, in the mid to high eights, and was creating a situation where, ultimately, our markets, really, you know, be became frozen, right? And maybe more so is because there was really no 1031, money in the marketplace driving any sort of multifamily activity,
right? Well, it's that, in combination with the with the backlog of inventory and sellers who really are just, we're not yet ready to meet the market in terms of where it's at, I
got a screaming quote two days ago, right around 6%
Okay, shoot it into the veins. Oh,
it's like, it's like, it's like, give
me the last product. It's
like, what's that Alaskan thing that come around with dessert? What is that? That Alaska? Alaska, the Baked Alaska. It's like, the Baked Alaska. Overrated dessert, completely. Yeah.
Like that good.
Does anybody really like it? No, but it's got cache. For some reason you
ever been to that catch restaurant where you smack the you take the spoon and you smack that thing, and it took a tower comes falling down, yeah? And then you try to eat it and play jingle with it, and then you're like, the jingle block doesn't taste good. Doesn't even taste No, I do like that restaurant, though. Shout out to those guys, please make sure I can get a reservation. Hope I didn't. Hope I didn't just kill my juice.
I don't think they listen. I think who is good desserts.
Where are we? Where? Where are we at?
Joes, let's be honest. Yeah, I mean, we give a shout out to Joe's in like every third, every third episode, but it's for a reason. Yeah, it's for a reason. Isaiah, no question, the 6% coupon. Pretty good. Yeah,
as Larry David would say, pretty, pretty good.
I got one. I got I got a dark horse for you.
Are we still on desserts, or are we on 6% interest rates? I
got a dark horse for you. For all of you, let us entertain you, fans who still want to get your points on Saturday night. Remember, you can collect. You cannot use rpm. Steak has a like, carrot, gold leaf, whatever that, you know, crap you know, whatever they, you know, advertise it with. They have this dense chocolate cake. It's phenomenal. It's phenomenal. It's unbelievable. And I only discovered it a few years ago, but apparently it's been on the menu since day one. But they they got a piece of chocolate cake that is out of control. And everybody wants the big, the boisterous, right? They want to go to Gibson's and get the sometimes
simple as more, but
Gibson's everything is just literally. They say, Oh, you want a piece of chocolate cake, and you're getting a third of a cake. And not just a third of any cake, but like, a third of, like, a massive, you know, 24 inch cake,
I bet you that average, that cake, on average, does not get eaten more than about a quarter of it well.
And I think what ends up happening, if you're smart, right? And this is what I've been doing lately, is I tell them, I said, Listen, don't even bring me out everything, okay, cut me off a small piece and give me the doggie bag. When you give me, when you give me the the pie,
you know one of the best thing, one of the best things, well, one of the best things about dining with you, and people don't know this, is that, like you have 25 restaurants where, when you order an item, you have a very specific way of ordering it. Like, it will, like, give me the salad. I want it chopped. Yeah? If you're ordering a seafood tower, it's keep the keep the snow cone. Yeah, no, I love that. You literally tell them, cut me off 20% of it and put the rest in it to go bag.
I mean, I'm trying, you know, all we can do is great. The legend, if
I say, heart grows, yeah, yeah. But let's get back. Let's get back to
6% rates, which is good for closing dinners. Let's talk. Let's
talk. Oh, yeah. So what do you see happening for q4 for me, and I want to get your thoughts on this. You know, there's this torturous game that's going on. Sellers finally starting to acquiesce and saying, Yep, I gotta get the the interest rate. I gotta get the cap rate up, 5075, 100k right in the back of their head. They're having least decay. There's increasing motivation. We just wrote an article about this that I think is important piece. Now the question I'm sure you're getting from every single sell side client in the retail landscape right now is, Isaiah, how much better is my cap rate today? Are you getting smart? I
talked about this morning with with with a good friend and client. And you know, the news I give is that in the business, I serve. Right? Is that serving we have more sellers than buyers. When we have more buyers than sellers. Cap rates compress. When we have more sellers than buyers, cap rates expand. And ultimately we are we the perception is reality, and there's going to be just a lot of fuel in the fourth quarter to sell. Because right what low interest rate talk does is it gets people excited. It gets people active. It gets people wanting, frankly, to, in my opinion, meet the market. That's, in the end, what it's going to do. But you know what it's going to rob it's going to hurt just a little bit, because cap rates are still going to go up a little bit. They're going to go up to clear out all this inventory. But the clearing of the inventory, right? We are hitting this intersection where rates are coming down. Buyers are going to get decent cash on cash returns year one, right? There's been a little lease term to case you're buying 789, year deals, right on a 10, on a fresh 10 year deal, or a 12, 1314, year deal on a 15 year deal, right? And their returns are going to be pretty good, right? But ultimately, what's driving all of this is that sellers are at the tailwind of knowing that they can't refinance. Well,
more and more people are getting close to those refinances, and that's what we talk about. Motivation, for me, is the greatest dynamic in the marketplace, even more so than interest rates. It's right. I think if you look at the impact of this interest rate move across the entirety of commercial real estate, let's focus on three sectors, multifamily, retail and office. Oh, for office, in my opinion, this interest rate move has no impact. Office is still more bound because of people's feeling about the segment. They're still not over post covid. They still don't think there's a stabilization there. So this move, if you can finance an office, which I think you can for the right deals at the right terms, I don't think that this does anything to cap rates on Office. Let's look at the other end of the spectrum, multifamily. The only
thing it might do is it might make a an insurance company be willing to finance an office deal if you're willing to put 40 50%
down, yeah, primarily because of debt service coverage ratios, because rather than the 150 at a 60% LTV, you might not be up to a 175 correctness, right? Let's go the other end of the spectrum and talk about multifamily. I think this has a huge impact on the multifamily segment, because we've been seeing more transactional volume in multifamily than any other asset class this year, and deals we're still working with interest rates at 70% the luckiest people in the world right now are people who have deals under loi under contract, but hadn't locked their rates yet, because they just cashed in five to 10% additional value on The property, and they locked
in sellers to pricing, thinking they were getting high six, low seven rates, right? Especially, especially on the tweener deals, right? And now all of those tweener deals with tweener lenders are coming back to them and saying, I got good news for you. Exactly, I got good news for you. Your DCR, so much better. So
much. Everything's working now, right? By the
way, not and by the way, I mean, I mean, let's just call it what it is. Real estate is multifamily. It is, well, sometimes we don't
appreciate the magnitude of the total capital amount of multifamily relative to other every other segment. And I don't have that stat right now, but I bet it's two to two and a half times all the other segments. So the point being on the multifamily end of the spectrum, I think the 40 basis point compression in interest rates probably being brings cap rates down in the near term, 20 to 30 basis points. I think there's a very high correlation of interest rates to cap rates there. So those
who kept holding off the brokers and saying, I'm not selling, I'm not selling,
they should be, they should be in the market today,
and now we're like, I'm selling, right? They, they are looking like the smarty pants, right? You know, Mr. And Mrs. Broker, you're wrong. You were wrong. You thought you were right. See, I'm a genius. This is my property. That would always be my problem. Now
bring me the off market offer, right, right, right, right. Now, don't expose
your please. Don't expose my property to the market and and just bring me the unicorn, right? And let me, let me lose five, 10%
sales proceeds because I'm not doing my job. That's
a whole separate podcast, yes. But let's talk about in the middle. Now. Let's talk about retail. We're off market. For me, retail is between that office segment, where there's no benefit from these interest rates, and the retail and the multifamily segment. I think that we were seeing in retail, certainly single tenant, but also multi tenant. I think we were seeing an incremental rise per month in cap rates and the magnitude of about eight basis points, I might even say 10 basis points, agree, and that's just to try and bring the market back into equilibrium. For me, this does not compress cap rates at all. For me, this takes that eight to 10 basis point increase per month and makes it more like four or five. It stems the bleeding that we're seeing in cap rate expansion, right?
I mean, and I think that there's a bunch of subsets, right, within multi tenant retail, right? The unanchored multi tenant retail, right now, especially if you had Starbucks, Chipotle, or some, you know, cash, a tenant accompanying you, right? You were still, you were fighting a good game in the seven, you know, in the seven cap range, right? And with really shiny retail, maybe that got down to 675, but I can tell you, I really agree with you. I think those cap rates that were starting to inch up because people were just like, Okay, $5 million deal size $6 million deal size $8 million deal, size right, like it needed debt, you know. And if debt was staying the same, right, eventually the buyers were going to run out, and so the cap rates were going to have to come up just a little bit in order to clear that product. Right? The key lime slice, though, okay, of this market segment is the grocery anchored space. And the grocery anchored space, I think, really maintained, you know, pricing levels held up pretty damn well all things considered. Low sixes, yeah, right. All day long. Pubs, anchored center, low sixes, all day long. In the southeast, all day long. So guess who's really liking these rate cuts? Those guys?
Yeah, grocery anchored centers certainly behave as close to multi family as anything in the retail world. Agree, and they're going to benefit just like the multi. Family space will for the rest of it, for the power centers for single tenant properties. I think what we're seeing here is, like I said, it's stemming the bleeding of that cap rate increase, but I do believe we're still gonna see it in it. Yeah,
no, I totally agree. And I think the power center space really correlates well to the single tenant space, in the sense that these sellers are very dependent upon financing, right? It's right. It's a financial instrument for the other end of the spectrum, right? They say, look, there's actually a fair amount of credit risk, but we have large nois, right, which translate to large purchase prices. We are a very, very debt fueled business, right? And we have the same answer that the other end of the spectrum, right, the single tenant space, which needs debt for a completely whole, you know, whole host of different reasons, right? Says, And they are very dependent upon these rate movements. And these rate movements are helping them tremendously, because now all of a sudden, a buyer goes from not wanting to buy it at all to absolutely wanting to buy it. Because there's a 300 basis point spread between cap rates and interest rates.
That's right, yeah, Boom.
There you have it. That's the key lime slice.
Serve it up.
Are you eating key lime? Still?
Key Lime used to be my go to I know I'm kind of getting back into it. How do you like this? It's like a once, once every six months type of thing. Joe's
is serving gluten free crust now for everyone. Dana choice, oh, I flex that. My wife is she like, hear me out, gluten free crust no
matter what. And the peanut probably don't even notice. On
the peanut, no, no one notices. That's why they're doing it on the peanut butter pie and on the chocolate fudge pie at Joe's gluten free crust only you're eating it. You don't even know you're eating a crushed gluten free Oreo
crust. See, no, don't even know. You don't even know, still delicious. Joe smart just says, we're gonna, we don't want to deal with this gluten free thing we'll deal with in terms of, like, having extra items Exactly.
Joe says the consumer is not gonna know the difference that the pie tastes the same. Okay, we're just gonna put two more items on the gluten free menu for these people and create a better world. See doing their part. Shout out to let us entertain you.
I'll be at wildfire this Friday night. Let's get this
man some extra points. Oh, I don't need extra points. Your fault the points you need. No, my liver, I give points. We have to get on to the next topic. New York Times, brand what I thought was one of their best real estate articles I'd ever seen. I believe it was this morning, entitled The zombie pharmacies that are holding back New York City retail. Kind of sounds like a horror movie title, but this article, I think, was wonderful. It was a great analysis of some of the themes we've been talking about, but the times took it much further and really got granular with some of the dynamics in the New York market specifically. So I wanted to talk about it. They went through and they actually identified all of the dark big box pharmacies in New York. Were they and were they right? I mean, are they factually right? I assume they're factually right. I would have assumed this is pretty fact checked. But they identified 222, big box pharmacies that closed post covid that are still closed in New York as of today. Of that 222, pharmacies, 64 them in Manhattan, 29 in Queens, 27 in Brooklyn, 16 in the Bronx, and two on the best borough of all, Staten Island. Have you ever been to Staten Island? Staten Island, yes, should I just slaughter the Princeton? I said it's Stanton dinner. It's not Stanton. Oh, my God, I just slaughtered that Staten Island. You're the New Yorker here. Staten Island, anyhow, Island world Realty, have
you seen that guy? Oh, my God. Island wide Realty, sorry, oh, yeah, of course, yeah, he's, he's, he's, he's, tick tock and Instagram famous. I got three beautiful apartments, one commercial space, the most beautiful building you've ever seen. Come to Staten Island, 1,000,001 5.92 cap won't last. Come get it. It's like he's, he's selling, he's selling an eggplant parmesan mixed with all mixed with, like a Jeep Grand Cherokee, mixed with a little real estate with, it's pretty good.
Shout out. Sorry,
no, you're wide Realty. I'd love to get that guy on our podcast. Let's
get him on our podcast. But 64 farm, I'm struggling. I'm pulling you through today.
I got a lot to talk about today,
but 64 pharmacies vacant in in Manhattan, which was a really big number. That's a lot. Um. And you know, this article is a lot of good data points. We'll talk about a few more of them, but for me, it really, it brought forward one of the biggest themes that we don't really talk about in pharmacies. And I think this is a little true, more true in urban environments, but I think it's true everywhere. And basically the the, the central theme in this article is these dark pharmacies are really bad for the economic vibrancy and the retail vibrancy of urban environments, absolutely. But there's a perverse irony here, and that's that the landlords who have the leases are still getting that rent, as we know, and there's no and these rents are above markets. They actually quoted some good leasing brokers in here to talk about that, and they didn't really go all the way with this trend, but it struck me that they started to get to a really interesting point, and that's the fact that there's a triangulation here between the interests of three stakeholders. Two of them are really obvious, landlord and tenant. We know that the third is the municipality. The cities actually have a really big motivation to get these properties re tenanted. First of all, for the vibrancy of the city. We know there's a whole dynamic there, but also because of sales tax revenue that's not getting paid when, when Walgreens, Dwayne rate read CVS or Rite Aid go dark on the locations, and I'll
take you to one. I'll take that one step further, right. And what happens when you take what was once a very vibrant retail corridor, right, that had, you know, that was producing high sales tax revenue from these tenants, and then you think about what that does to all of the neighboring tenants as well, once these tenants go out, right? So it's sales tax revenue from the specific site, but it's also sitting right the tenants next door aren't doing as well. Either there's less traffic being
driven. And what's really interesting about this is, in the height the pandemic, New York hit about 27% vacancy factor for retail, now down to 14% vacancy factor. So there's been a lot of compression. Just fundamentally, when you look at the retail, the other really interesting thing that I think the Times did a good job of pointing out is that what you've actually seen in New York is a big increase in smaller pharmacies opening more independent pharmacies. There's been a total of 1000 new local pharmacies that have opened, with 80% of them being within a three block radius of the pharmacy that closed. Oh, very interesting, which is interesting, I know that, and it suggests that there's actually a lot of demand, but the major pharmacies just aren't quite able to figure out how to really take advantage of that.
Well, the generations, right? That are, that are that are filling prescriptions, I think still would prefer to do it in person than do it online,
and as long as actually really hard to fill a prescription online, I know Mark Cuban is trying to change that. He's, and he's, he's doing God's work. He's
doing some impressive stuff with drug prices. But,
but, but, yeah, I mean that that makes sense, right? Because, you know these, these big conglomerates, right? I mean CVS, Walgreens, I mean they, they, they're a cluster to get a prescription filled. They really are. Well then, then, and then, the worst part is, is that they hit you with 18 text messages right after you fill your prescription. Like, would you like the refill? Would you like the refill? Would you like to refill? And by the way, even if you hit the button and you say, I want the refill from your text message, your doctor still has to approve it. It's not like it's just like this, like some like, easy, seamless transaction. It's a joke. It's a joke.
They're totally they're they're failing the system.
Interestingly, of those 222, pharmacies that closed, uh, 40% of them have actually been back filled. Do you know who the most common backfills of them have been 4040. Out of I guess it's 40 total back fills that they tracked. I
mean, I think there's a range of tenants, obviously that back fill, pharmacies, just two categories hit me, auto parts,
no, really, no, but good. Deaths, yeah, not all auto parts, not dollar stores,
health care or schools, grocery
and convenient. So, yeah, that makes sense. I think that's really interesting. I think it's produced, yeah, exactly. I
think this is New York.
This is New York specifically, yeah, if we were talking nationally, that'd be very different, as we used to call them, appetizer stores, appetizer stores. So I just found this to be a really great analysis from the times, not known for being, you know, great, thorough real estate reporting, but I thought this was, I thought this was really well done. Let's get on to our last topic of the day, placer. Ai,
I like placer. Ai,
you like placer? Ai, yeah. You know, I posted on LinkedIn this morning, and I want your take on this, because I don't think you and I have talked about it. I think the market is starting in the retail investment world to become a little too dependent and a little too centric on placer being the definitive guidance for how to think about real estate. They're
probably thrilled to hear that.
Well, maybe they are. No, I
think they're, I think they're very thrilled to hear that. Yeah, certain reason to be thrilled by that. But I think description based model business Exactly.
But I think there's a downside. You know, one of the things that people don't realize about Placer, and maybe you don't even realize this, they've gotten more complex, but at their core, do you know how they get their their data, cell phone things, it is, but it's really kind of tricky, because what happens is that you know how when you're on your iPhone, I think the true, same is true on Android, you have to choose how often to share your location data with a particular app.
Yeah, are we going to get a cease and desist letter, by the way, from this? Hopefully
not. That would not be good. Obviously. I think most people, sensibly would say, I only want to share this data when I'm using the app itself. That's
the button I always hit correct unless, unless the app says right, gives you sorry Isaiah, unless you turn Location Services always on, you are not going to be allowed to use this function. Yeah.
So most people will choose the choice you make, but some people because they're not, you know, for whatever reason, they don't care, or they don't understand the explanation, or they slip they say, up, share my data out the whole time. So what these apps do, and people don't realize it with the apps, is they actually monetize that data. So even if they only have 10% their users who are sharing it all the time, most of their user policies will say, we can sell your data to third party services. So now placer and other companies will come in and actually buy from these apps the data regarding cell phone pings. Oh, very interesting that they can track their movement at all times. So it's a very lucrative source. I believe it's the largest source of income for many of these apps. And then, you know, services like place or take that data and then sell it to folks like us in commercial real estate or in other businesses. Makes sense to be able to see traffic and human traffic patterns. So
how is the data potentially wrong?
So this is where it gets really interesting, and this is kind of what I was getting to in my post on LinkedIn this morning, is that we've gotten to a point now where the questions people used to ask about real estate, where is there unit level sales performing, sales reporting. I'm sorry, what are the rent comps relative to the market? What are the comps for other similar properties that have sold in the market? Those are kind of the three biggest questions folks would ask. I think we've gotten to a spot now where the first most common question that's asked in that kind of category, what's the placer? It's like, show me the Carfax, right? But it's show me the Placer, right? And it's like,
well, what? What it right? And I see what you're saying. It's like, what does the place or matter if you have a $4 rent in a $12 foot market?
So that that's my biggest concern, is that people are really overlooking fundamentals. But even more than that, I've seen, and I've noticed a lot of variation in the Placer numbers relative to when we actually have store level performance data. And I've seen stores where we know, based on looking at the store level data, top line sales, that we're looking at a store that's in the upper quartile, but oftentimes that placer data will say it's not in the upper quartile, say it's only in the upper half. And how does that happen? So I think there's a few things going on that people may not appreciate about how variation can create. If you're in an urban environment and you're looking at cell phone data, you're not going to be able to see and understand the impact of somebody who is waiting for a bus next to a Dwayne reed in New York relative to somebody who goes into that Walgreens and shops for five minutes and gets it good. So that's
what I was gonna say. I was gonna say, so how many people walk by Sally Beauty, but go into the Nordstrom Rack? Exactly, right? And so and so. In theory, Sally Beauty gets counted for traffic, but really, those people are spending their hard earned dollars and creating sales tax revenue at Nordstrom Rack Exactly.
And that's another thing. When you have closely adjacent retail, tough to know exactly where that spend is going and how it's being being tracked. There's another dynamic that I think is under appreciated, and that's when you're in areas that the cell phone coverage is a little less, you know, specific. If you ever use something like Find My Friends, sometimes people show up in a much wider radius if they're in certain areas, relative to really high coverage, 5g area where you can see kind of to a pinpoint where someone's at. So there's a dynamic there.
It doesn't detract from the fact, though, that if you want to buy retail real estate, right, whether you know whether it's really Upper Court, right, like I want to buy real estate that obviously is heavily trafficked, right? So it's not denouncing that in theory, right? It may be. It may it may be a little misleading on performance of actual stores, but it's not necessarily denouncing the fact that there aren't 100,000 people a month, you know, pinging the area.
That's right. And I think this is not to say that there isn't a place for Placer, per se. This is to say that I think there's a there's a. Growing over reliance, and I think, I think we're going to see a segment of assets where the baby's being thrown away with the bathwater, because people are not understanding that placer is not definitive. Cell phone data is not definitive. It's one tool in a broader kit that needs to be considered
fair. Very fair point. Yeah,
I like the tool, though, I'm here shout out to placer AI. We're here for you. We like you rather. We'd rather have it than not have it. Yeah,
we'd like the tool. No, I
don't know. I'm skeptical about that. Okay, it's certainly, it's a part of the suite of the evolution of, you know, technology. We without question. We welcome your
questions, comments and feedback at all times here at
Net Lease takeaways, at net not least takeaways, just net takeaways. I got a little got a little careful. We'll get it right next week. Yeah, awesome. Well, thank you to everyone for joining today, and we look forward to you joining on the next episode of net takeaways. Take care. You.