There are three real estate private equity skills you need to master when looking for a job: networking, developing market opinions, and technical skills. This series focuses on #2, the market knowledge. The last post in this series explained high-level that you need to conduct your market research in four steps: (1) sector-level research, (2) company research, (3) company filings, and (4) news. This post will deep-dive into the first step: conducting sector-level research.
Start High-Level with Sector Research
To make this guide more impactful, let’s use self-storage as a specific example. Whether you’re interviewing for real estate private equity jobs or already have one, let’s assume you want to figure out how someone could make a decent return in self storage. Where is the first place you would start to develop an opinion on any sector, in this case self-storage?
I’m going to share perhaps the most important of all the real estate private equity skills: start with a 20,000 foot view. And the best place to get a zoomed-out perspective is sector research. Observing the cliche, it’s best to start with the forest (sector) before you start worrying about the trees (individual companies). This will allow you to most quickly identify the relevant themes impacting the industry, and how any particular company you choose to analyze might be under- or out- performing those themes.
Focus on the theme, don’t get lost in the weeds
Below, I’ve listed a few great places where I often procure sector research. Though I’ve shared my favorites, you still need to be self-starting as a researcher. Honestly though, it’s usually never more complicated than googling something like “NKF self storage update” to find a helpful report. As you read, don’t get caught lost in the details. Your goal is to identify the high-level thematic trends (nationwide oversupply, muted rent growth, extreme delays in lease-up periods lasting ~4 years, etc.). Don’t get too caught up with details like single asset pricing or a particular submarket’s performance.
Great Sources for Sector Research
- First, Green Street Advisors is ranked among the best real estate research firms. They publish quarterly sector updates on each major sector. In fact, Green Street officially covers 11 sectors: residential, single-family rental, warehouses, net lease, malls, strip centers, data center, office, self-storage, lodging, and healthcare. The only issue is actually getting a Green Street subscription, though they do sometimes publish good content that is free.
- Corporate Brokers publish troves of helpful data on most sectors. The largest brokers include names such as NKF, JLL, and CBRE. Brokers are especially helpful since they’re involved in nearly every major corporate real estate transaction. For this reason, it’s important to secure strong relationships with brokers soon after you’ve begun your real estate private equity job. Using our specific self-storage example, NKF’s coverage group publishes a quarterly update on the major storage REITs. It includes a helpful narrative at the front in the 4Q19 edition. JLL also publishes a similar report.
- Industry Associations are non-profits funded by participants (REITs, brokers, REPE funds, etc.) that aggregate industry information. For instance, the Self Storage Association has an entire magazine focused on the latest self-storage sector events. You might also notice their major annual ski conference. Perhaps you could google headlines around that event to find major take-aways and notes from keynote speakers.
- Investment Banks with equity research divisions also publish great sector research. Even though you’ll face a paywall, you can get their information pretty easily if you’re in the right position. For instance, business students usually have access to a free ThomsonOne, S&P Capital IQ, or Bloomberg Terminal subscription that could have equity research available. If you’re not sure, ask your resource administrator or business school librarian. If you’re currently working at a bank or real estate firm, you probably have an internal contact that receives free research reports that you can contact. Don’t worry if you cannot get your hands on equity research, they aren’t necessary so much as convenient.
- NREIOnline is my favorite resource for news. For our specific example, they even have a page that covers the self storage industry. It’s worth noting that 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.